By Sean Pendergast
By Sean Pendergast
By Sean Pendergast
By Jeff Balke
By Richard Connelly
By Jeff Balke
By Casey Michel
By Craig Hlavaty
ecent polls have Peter Wareing leading a packed field to replace retiring Congressman Bill Archer in the silk-stocking, rock-ribbed Republican 7th District that includes River Oaks. Wareing, a past chairman of the Texas Business Hall of Fame, prides himself on his entrepreneurial acumen. But opponents are spotlighting two bankruptcies involving the candidate, which cost the University of Texas $10 million and left Wharton County owed nearly $70,000 in unpaid property taxes.
Opponent Ron Kapche claims, "some of Wareing's business practices don't sound like that of a successful businessman." He adds, "He's campaigning on the notion of running the federal government like his business, but based on the facts, that might not be such a good idea."
Wareing denies any responsibility for the failure of the businesses and the loss of public dollars. But the circumstances surrounding the deals raise questions about who does bear the blame.
The biggest bankruptcy involves the brief life in 1991 of International Cargo Network, which planned to build facilities at the Port of Houston to store and distribute imported Chilean fruit. Wareing was a member of ICN-Bridge limited partners, an investor group that provided seed money to start International Cargo. Philadelphia-based LFC Financial Corporation got in on the action by putting up $20 million. The University of Texas also invested $10 million.
Wareing, who earned his B.A. degree from UT, is the son-in-law of Jack Blanton Sr., who was a UT regent at the time of the investment. And the executive officer of International Cargo was Don Holloway. He is the son-in-law of Jack Trotter, a prominent Houston businessman who was on the UT committee that advised the university on investing during that period.
Nine months after International Cargo opened its doors, the company declared bankruptcy. The university lost its entire investment. Losses to LFC were severe. But records reveal that the investment partnership that included Wareing recouped its entire $640,000 loan in a payout before the bankruptcy filing.
The UT financial fiasco came to light in 1997 when The Dallas Morning News published an investigation of the secretive investment practices of the university.
Wareing says his share of the investment was $200,000. He claims he retrieved half and exercised an option to purchase equity in International Cargo, which he says he lost when the company flopped. "I wasn't part of the management," says the candidate. "I'm like a shareholder in General Motors. I don't pay attention to what they do every day. I was just a limited partner who had no say-so in the operation."
What does seem puzzling is why UT would get involved in such a venture, particularly when university officials at the time expressed doubts about Holloway's management abilities. According to the Morning News, a UT investment analyst who evaluated the project in 1989 noted "Hassles for Blanton/Trotter/Us."
Wareing says that he was unaware at the time of UT's involvement in the venture and that his father-in-law was equally in the dark.
"I had no contact with them," says the candidate. "I never knew they were in the deal." Holloway told him later that LFC officials evidently went to UT and sold the school part of the LFC equity interest without informing Wareing's investment group, Wareing says. "They didn't call me and ask permission -- they didn't need it. They just did it."
Wareing says he found out about UT's $10 million loss much later. "The first time I heard is when somebody writes this article in The Dallas Morning News six years later, [saying] something about how I'd lost the University of Texas all these millions of dollars."
His claim is echoed by Holloway, who says his own father-in-law played no role either. Holloway admits he discussed the possibility of a conflict of interest with Trotter, and decided there was none. Oddly, he does not recall bothering to tell Wareing about the UT money, and claims he was not aware Blanton was on the UT Board of Regents at the time.
The idea that UT just happened to seek out a fruit import venture that included the sons-in-law of two prominent businessmen involved in the administration of the school's investments -- and that Wareing was unaware of the connections -- strikes political opponent Kapche as implausible.
"It would be logical to me to assume their relationships played some role in that deal," says Kapche. "Blanton's one of the most respected Democrats in this city, and I would expect he would be influential in a number of Wareing's business practices. I know he's played a major role in his campaign."
About four years after International Cargo went belly-up, Wareing assumed control of a children's clothing firm with Merrill Athon, who now appears in the candidate's TV ads praising his partner. The company, ICM Inc. of El Campo, employed 200 workers and had a record of success when they took over in 1995.
Wareing says the loss of important accounts, including Wal-Mart, pushed ICM into Chapter 11 bankruptcy in the fall of 1997. After several failed attempts at reorganization, the company eventually went into Chapter 7 bankruptcy and closed its doors.
"We turned the company over to the bank and filed Chapter 11 to allow them to reorganize the company," recalls Wareing. "At that point we basically stepped aside [and] said, 'We've lost our money. Bank, you can take it over and operate it with the management, do whatever you want to do with it.' "
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