Lawsuits of OC’s Rich and Famous
By RICK REIFF
Anticipation is building for the New Majority’s “Signature Gala” at the St. Regis Monarch Beach this Friday.
And the anticipation isn’t just because Arnold Schwarzenegger and Republican gubernatorial candidate Bill Simon are set to join the local VIPs making up this socially moderate GOP fundraising group.
Much of the suspense is over who will say what to whom,assuming certain people speak to one another at all, or even bother to attend the black-tie affair.
For the past week, Orange County’s civic and charitable circles have been abuzz over a $50 million stock-fraud suit by prominent philanthropists against two even bigger philanthropists, Henry Nicholas and Henry Samueli, and their Broadcom Corp.
The suit prompted Samueli and Nicholas to resign from the board of the Orange County Performing Arts Center, where Samueli has given $10 million of the $96 million raised so far for a concert hall.
The two have made calls to reassure art center fundraisers and other groups that they will honor their pledges. But they also have expressed shock and dismay at what they consider betrayal by people who, as Samueli put it, they thought were friends.
The art center’s incoming chairman, Tom Tierney, is one of the plaintiffs in the suit.
The suit is one of several against Broadcom in the wake of its stock plunge, a pattern common to other technology shares. It makes arguments about aggressive accounting and insider stock sales that have a garden-variety feel to them. The suit also plays to public distrust of corporations and executives fueled by the Enron Corp. scandal and tech-stock bust. And Broadcom did have its own accounting issue to deal with.
But this situation appears different. Based on interviews last week with people involved in the social scene, the reaction has been strong,against the plaintiffs and in favor of Broadcom. While Broadcom and its brash Chief Executive Nicholas have their detractors, many said they see the suit as frivolous.
Even those who conceded there might be grounds to sue felt that those involved should have let the matter drop for the community’s sake.
Moreover, there was a strong sentiment that the group, which includes entrepreneurs, a venture capitalist and a securities lawyer, should be the last people to “turn on their own” by filing the kind of lawsuit they have decried in the past.
Outgoing arts center chairman Mark Johnson has decried the suit, despite that several of those suing are longtime associates. One of them, Thomas Tucker, is among his closest friends.
“What about the 60 to 70 people who are working in anonymity in the Performing Arts Center, the symphony, the opera, South Coast Repertory?” Johnson asked. “Or how about the 4,000 volunteers who worked so hard to build the Performing Arts Center for the benefit of the whole community? These litigants are only thinking selfishly about their own myopic interests.”
The reaction appears to have caught the plaintiffs off-guard and put them on the defensive.
The normally talkative Tucker referred questions to the group’s lawyer. Tierney made an initial comment discounting the impact of the suit and board resignations on fundraising, but declined to talk later in the week. A publicist said Tierney “does not feel under siege.”
But the uproar has worried local fundraisers, complicated questions about who should serve on boards or be invited to events. It’s also clouded the outlook for some groups.
The prospect of dissension in the ranks of the New Majority, for one, follows the demoralizing defeat of its candidate Richard Riordan.
The close-knit nature of OC’s charitable community has many worried about how it could impact future fund drives. There is speculation that it was just such concerns that prompted Larry Higby, chief executive of Apria Healthcare Group Inc., to drop out of the suit.
(At the New Majority gala this weekend, Higby is set to succeed Tucker as chairman.)
A look at just four organizations,the New Majority, the arts center and two major fundraising arms of the University of California, Irvine,show how closely tied the two sides in the suit are.
Tucker was among Broadcom’s boosters, touting the stock to friends at the arts center and extolling the talents of his stockbroker, Derek Clark of JP Morgan Chase & Co. Clark himself became a fixture on the local charity circuit.
Interestingly, sources said Samueli and Nicholas took pains to avoid touting their stock, even when pressed.
One who avoided the siren call was Johnson: “I joked with everybody that I was the village idiot. I was the only guy to not buy Broadcom, or Emulex, or FileNet, or Procom, or any of them.”
While most such suits are settled, several people, citing the combativeness of Broadcom’s Nicholas, suggested that this one could grind on.
“What were they thinking?” said one incensed socialite. “Broadcom fought Intel. They aren’t going to give in.”
