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Upscale Memphis Investment Firm Goes Bankrupt
You had to be somebody to invest with Hemisphere Trading Company. The Memphis investment firm’s clients included an ambassador, a lawyer for Vice President Al Gore, a former cotton baron, a Wall Street Journal reporter, Ivy League college alumni, and several lawyers and doctors. But Hemisphere Trading is now in U.S. Bankruptcy Court, and this week some expensive legal talent will meet to try to figure out what to do about millions of dollars worth of claims. Hemisphere Trading Company was founded by Memphis insurance agent Eddie Felsenthal. His wife, Gloria Felsenthal, is listed as president of the firm and sole stockholder. Bankruptcy Court records list nearly 200 creditors, including U.S. ambassador to China Jim Sasser, former Tennessee attorney general and now Gore counsel Charles Burson, former cotton magnate Julien Hohenberg, Felsenthal and his son,Wall Street Journal reporter Edward Felsenthal, several local doctors and lawyers, and the Memphis Pediatric Anesthesiologists Pension Plan. The amount of individual claims is not disclosed in documents available at press time. Court filings list assets of less than $100,000 and claims of $1 million to $10 million. The number of creditors may shrink, however, because some investors either recovered some of their losses or want to avoid the publicity of bankruptcy proceedings. An attorney familiar with the case says there may be fewer than 50 active claims. Creditors, however, don’t think the case will be easily resolved. An investor who asked not to be identified says claims may exceed $10 million, based on discussions with other creditors and their attorneys. Most of the creditors are wealthy, but the fact that they have hired lawyers indicates they are not simply going to write off the losses. Jack Marlow, a Memphis attorney representing some of the creditors, says he hasn’t yet been able to determine how much money Hemisphere had under management or how it was lost. The case is scheduled for a hearing before U.S. Bankruptcy Court Judge David S. Kennedy at 9:30 a.m. on March 12th. Apparently not all of those listed as creditors were equally affected by the bankruptcy. “As far as I know, my account is intact,” said Burson. “I would assume they just listed everyone who ever had an account there.” Hemisphere’s downfall was leveraged trading losses in small-company stocks in the volatile stock market of 1998. Clients, who apparently received only sketchy periodic reports, found themselves owning thousands of shares of obscure companies and so-called penny stocks that lived up to their billing. Penny stocks, which trade on the loosely regulated over-the-counter (OTC) electronic bulletin board, are often the focus of wild rumors and tips that can send their price soaring or crashing. Hemisphere also invested in private placements, which are companies that offer stock but are too small for underwriting firms to deal in and therefore are not available to most investors. Creditors and their lawyers from Memphis, Washington, D.C., New York, and Atlanta have been meeting since last December to figure out how to proceed. Hemisphere apparently has offered around $2-3 million in a settlement, but clients think that would do little more than pay their legal bills and leave them a few cents on the dollar. So they are looking at other options. The trades were executed through Charles Schwab, a discount broker that does not offer investment advice. Another focal point is Hemisphere’s top trader and stockpicker Brad Arberg, who was hired by Felsenthal and terminated in August 1998. Arberg’s computer hard drive and e-mail files were reconstructed and searched by financial investigator Ian Ratner of Atlanta, according to court records. Ratner and his associates have claims of $33,971 against Hemisphere. Calls to Ratner were not returned. Creditors include Stacey Arberg of Whitestone, New York, and Lee and Carol Arberg of Greensboro, Georgia. Carol Arberg said she would give a message to Brad Arberg, but he did not get back in touch. Most other people involved with the case are not talking. Eddie and Gloria Felsenthal did not return calls. His background is in insurance and estate planning, where he is a top producer for New England Life. Callers to Hemisphere Trading’s office get a recorded message that says Hemisphere is “no longer operating as an investment adviser.” Edward Felsenthal Jr., who works in The Wall Street Journal’s New York and Washington offices, confirmed that he is a creditor but otherwise referred questions to attorney Al Harvey, who is representing Hemisphere. Harvey was in court this week and could not be reached by press time. Sasser is in Beijing and also could not be reached. A Neon Facelift?
The signs would bear the Memphis Convention and Visitors Bureau’s slogan, “Memphis: Home of the Blues; Birthplace of Rock-and-Roll.” The signs facing west and south would be neon, while the other two would be painted. “I’ve been wanting to do this for years,” says Kevin Kane, president of the CVB, one of several groups joining with the county in covering the estimated $140,000-$150,000 cost. “Not necessarily Lone Star. But I’ve been wanting to put our logo up there by the interstate so that people coming and going can see it.” — Mark Jordan Ecologists To Study ForestThe Memphis chapter of the Audubon Society is planning to bring in a pair of North Carolina ecologists this month to do the first comprehensive biological survey of the Overton Park forest. “We’ll be doing inventory of all vegetation, from wildflowers and grasses to canopy trees,” says Kevin Caldwell of Appalachian Ecological Consultants. He and his partner Paul Myers are scheduled to be in Memphis March 21st through 28th. “The purpose of the inventory is so we’ll know how many species are within the park and what the current ecological status [of each] is,” Caldwell explains. “We’ll also be listing exotic or introduced species and perhaps making recommendations for their removal or management.” Overton Park has attracted attention from researchers because it’s a rare example of an old-growth climax forest surviving in the middle of a city. The consultants will take Audubon Society members through the forest and point out the “hot spots” — areas where a high concentration of species are found. They also hope to take a few school groups on tours, and to make suggestions for implementing educational programs. Scott Banbury, local Audubon Society president, says the consultants’ work will complement a tree survey that local horticulturist Don Richardson has already been compiling. “We hope to publish a report of the results and use it to generate interest, maybe get more volunteers out there,” he adds. — Debbie Gilbert Tickets Downtown — A Moving TargetIf you’re coming downtown in the afternoon or evening, you need to know that the friendly Memphis Police Department officers at the Beale Street station are working harder than ever to give out tickets for moving and non-moving violations. The statistics tell part of the story. Last December, officers issued 160 moving violations. By February, that number had increased by 52 percent, to 243. The number of parking tickets issued by officers on the evening shift jumped even higher: There was a 109 percent increase, from 775 tickets to 1,618. Major James Krepela says the evening, late-night, and early-morning shifts have been beefed up with more officers, who have all been given orders to be more productive. But Capt. Steve Brown of the Memphis Police Association says the motivational tactics could spiral out of control. At least three patrol officers who have failed to keep up with the “monthly average” of moving and non-moving tickets are being written up, according to Brown. According to the law of averages, some officers will always be above average and some officers will always be below average. If the officers want to avoid being below average, they must write more and more tickets every month, Brown says. They won’t know until the end of the month if they stayed above average or not. “The average keeps going up and up,” the union president says. “You’ve gotta take into consideration, what else did the officer do during that shift? Sometimes an arrest can take two or three hours.” Krepela says the officers’ other duties are being taken into account. He says the write-ups that shift lieutenants are issuing are nothing more than “administrative tools.” “An officer who’s doing nothing or very little needs to be reminded [to work],” Krepela says. The police union has protested, but they have yet to receive a response from the department, Brown says. — Phil Campbell Some Airport Residents Oppose Settlementby Debbie Gilbert When Southaven survivalist Bill Cockrell was dramatically evicted from his now-bulldozed home last week, the incident refocused attention on the plight of residents living in or near Memphis International Airport’s buyout area. But Cockrell was one of the lucky ones; at least the Memphis and Shelby County Airport Authority had offered him money (which he refused) for his home. Thousands of other people with homes in the vicinity did not receive such offers. After spending $120 million to buy about 1,400 homes, the Airport Authority claims the program has run out of cash. In 1993, a class-action lawsuit was filed on behalf of 12,451 residents affected by noise pollution and declining property values. Last November, a settlement was approved that would grant each party $500 to $4,200, depending on length of residency. But some home owners disagree with the settlement and are trying to reverse it on appeal. “We were never involved with those people who filed the lawsuit,” says Jacqueline Jenkins, spokesperson for Citizens For Fair Treatment, an organization formed to fight the settlement. “We were never asked to be part of the class; we were just all lumped together.” Two years ago, a booklet was sent out to area residents outlining the terms of the proposed settlement. According to Jenkins, the document was written in “legalese” and most people didn’t understand what it was, so they discarded it — not realizing that unless they specifically requested to opt out, they were automatically included in the settlement. As a result, only about 50 people stated their opposition. But Jenkins believes as many as 2,000 would have opted out if the consequences of the settlement had been explained to them. A key point of contention is the “avigation easement” that the settlement would grant to the Airport Authority, giving aircraft the right to fly over the home owners’ property, “together with the right to cause in said airspace such noise, vibration, odors, vapors, particulates, smoke, dust, and other effects as may be inherent in the lawful operation of aircraft.” Jenkins says it’s hypocritical for the Airport Authority to claim, on the one hand, that its aircraft operations present no harm to the public, while at the same time asking residents to agree to a statement absolving the Authority of liability for any damages caused by such effects. Her group opposes the settlement because it would prevent home owners from suing the airport for damages to their property or health, and because it would make it more difficult for them to buy insurance for their homes. Jenkins and her neighbors feel as if they are living in a no-man’s-land, abandoned by city government. They’ve complained that the buyout area, where houses have been removed, has become a haven for criminal activities such as dealing drugs and stripping stolen cars. “The [Memphis] police say they can’t do anything because it’s airport property,” says Jenkins. “And airport police say they don’t have the manpower.” The settlement case is now with the Sixth District U.S. Court of Appeals in Cincinnati. “If the appeal falls through, we’ll take it all the way to the Supreme Court, if necessary,” says Sam Carroll, a resident who believes the Authority should either pay to soundproof their homes or make it possible to sell them at appraised market value. “We feel pretty confident that we can win the appeal,” he says, “even though we can’t get an attorney to represent us. They all say it’s too political, and they don’t want to touch it.” With much of Memphis’ economic fortune tied up in the airport’s two biggest users, FedEx and Northwest Airlines, the odds appear slim that local politicians will side with a group of dissatisfied home owners. But the activists are preparing for a fight. “Many people in the community did not really know what they were giving up,” says Carroll. “So we’ve been trying to let them know what’s going on.” |
On Wednesday, March 10th, county officials were expected to
appear before the Center City Commission’s design review committee to get permission
to install four signs on top of the Lone Star cement plant near the Riverside Drive exit
of I-40.
The 45th installment in Absolut Vodka’s city
series ad campaign, which begins appearing in national magazines this month, puts the
spotlight on Memphis. The Absolut Memphis ad, pictured here, features a pair of blue suede
shoes with the image of the brand’s distinctive bottle where the slot on a
penny-loafer usually is.