Rebirth of Some Fallen Angels

The torrid stock market of the 1960s produced dozens of "hot issues"--young companies whose stocks soared on dazzling dreams of instant wealth. Many collapsed just as quickly, falling victim to mismanagement, unrealistically high expectations or, in some cases, outright fraud. Some survive only as names in the memory of angry investors. Stirling Homex (modular housing) no longer exists; King Resources is still in bankruptcy proceedings; and Bernie Cornfeld's Investors Overseas Services is in the terminal stages of liquidation.

But a few of the fallen angels have risen again under new managers and sometimes new names. They have cleared up lawsuits, paid off creditors --at least in part--and are actually earning a profit. Four reincarnations:

FOUR SEASONS NURSING CENTERS OF AMERICA INC., now Anta Corp. Record high stock price (1969): $91. Low (1970): 6-c-. Last week: $7.25. Like many of the highflyers, Four Seasons was built on a solid idea: cashing in on then new Medicare and Medicaid legislation and the growing need for facilities to care for the nation's ailing aged. The company actually built 45 centers in 35 states, but its earnings figures were inflated. At one point, one part of Four Seasons was lending money to another part to enable the company to "buy" nursing centers from itself. In 1970 the company declared bankruptcy, coincidentally a week after Penn Central did the same. Jack L. Clark, founder and president, spent nine months hi prison for his role in defrauding shareholders of some $200 million; he now runs a cattle ranch in Oklahoma.

In charge now is James R. Tolbert III, a strapping (6 ft.) former football player who lights his pipe with a chrome-plate cigarette lighter engraved "June 26, 1972"--the day Four Seasons emerged from bankruptcy after two years of ax wielding. Tolbert fired many employees, slashing the ranks at the Oklahoma headquarters from 500 to 26. Unprofitable nursing centers were closed and sold off, and acquisitions were made in new fields: aluminum and packaging. During its most recent fiscal year the company earned $2.8 million on sales of $75 million. The Four Seasons name lives on, as a subsidiary of Anta--a Choctaw Indian word that means "rest and abide."

EQUITY FUNDING CORP., now Orion Capital Corp. Record high stock price (1969): $86. Low before suspension of trading (1973): $14. Last week: $5. Los Angeles-based Equity was a darling of the insurance industry until March 1973, when Ray Dirks, a Wall Street insurance analyst, was told by a tipster that many of Equity's outstanding policies, perhaps $1 billion worth, had been sold to people who did not exist. In three wild weeks, Dirks raced around the country, confirmed the tipster's story, and told clients to get out of the stock. Equity declared bankruptcy, and 19 of its officers either pleaded guilty to fraud or were convicted of it. Former Chairman Stanley Goldblum is serving an eight-year sentence in a California federal prison.

A three-year reorganization was run by a court-appointed trustee, Robert Loeffler, a lawyer and former senior vice president of Investors Diversified Services, a mutual-fund complex. Loeffier supervised the settling of $400 million in claims, appointed a new board of directors, and resigned. The company, operating under the name of Orion, is now based in New Jersey and run by Alan Gruber, a former Xerox executive. It still sells insurance through two healthy companies acquired by Equity. It emerged from reorganization in March, and last month its stock began trading publicly again after a long suspension. The company turned a profit even during the reorganization--$4.6 million during this year's first nine months, on sales of $55.5 million. In a way, Equity/Orion has also earned money for Analyst Dirks. He faces a Securities and Exchange Commission hearing on charges, which he denies, that he failed to tell the SEC or the public about the fraud before he informed big stockholders. But he co-authored a book, The Great Wall Street Scandal, that has sold 25,000 copies and is being made into a movie.

WESTEC, now Tech-Sym. Record high stock price (1966): $67. Low (1974): 37-c-. Last week: 75-c-. Westec was a Texas-based real estate-mining-drilling equipment conglomerate that collapsed in 1966 after officers had inflated earnings and assets to drive up the price of the stock. Its founder, Jim Williams, served three years of a 15-year sentence, and is running a counseling service in Houston. Orville Carpenter, a court-appointed trustee, sold off subsidiaries and liquidated debts; managers took pay cuts of 10% to 15%. The company got out of bankruptcy in 1969 and changed its name in 1970; it is now run by Chairman Keith Beeman, who headed a company bought by Westec. Tech-Sym is not out of the woods yet; though it earned $371,511 on sales of $13.6 million in 1975, it was in the red for the first nine months of 1976. But, says Vice President Robert E. Moore, "we've operated within the bounds of what is possible, and we've overcome a lot of the old bad feeling."

NATIONAL STUDENT MARKETING CORP. Record high stock price (1969): $74. Low (1972): 88-c-. Last week: $1.25. NSM mesmerized Wall Street with its dazzle, its ideas for selling a variety of products to young adults (mostly college students), its youthful executives who smiled wholesomely from the company's glossy annual reports. "Synergy" was their watchword: acquisitions would create an entity more profitable than the parts tallied individually. But to fulfill its projections NSM faked sales, earnings and assets. Its founder, Cortes Wesley Randell, now about 40, spent several months in prison, and today is an "acquisition consultant" in Washington.

NSM did not go bankrupt, a fact noted proudly by Chairman Joseph Cottrell, 52, who joined the company in one of its acquisitions in 1969 (he took NSM stock in payment for his own company and "lost almost everything I made for 25 years"). Cottrell sold off half of NSM's 20 companies and pulled out of the college market. The Chicago-based company now runs school buses in four states and sells shirts, insurance, and travel services. NSM lost $6.7 million as recently as 1974, but it earned almost $1 million last year and in the first nine months of 1976 reported a record profit of $4.3 million on sales of $35.9 million.

Though these companies survive, no one on Wall Street expects them to command anything like their former stock prices. The crash of the highflyers left a bitter legacy of investor disillusionment. "Those stocks did more damage than people realize," says William LeFevre, an analyst with Granger & Co. Indeed, small stockholders have pulled out of the market in droves, leaving trading largely to institutional investors who deal mostly in blue chips. It is currently a dull market, but no one misses the excitement once built on false hopes.

This file is automatically generated by a robot program, so viewer discretion is required.