The Shell Game


Who says crime doesn't pay?

It did if you were on the right side of the Capital Consultants debacle, one of the biggest pension frauds in U.S. history.

The scandal, which played out over several years, often seemed to bog down in impenetrable details. But the basic story was, in fact, appallingly simple. Sheet-metal workers, laborers, letter carriers and other blue-collar folks entrusted their hard-earned savings to their union leaders. Their leaders turned the cash over to Jeffrey Grayson, a Portland financier who ran an investment firm called Capital Consultants. Grayson lent some of the money to financial whiz kid Andy Wiederhorn, who specialized in high-risk mortgages.

In the end, they all betrayed the workers, leaving them holding the bag for $350 million.

Here's how it worked:

Starting in 1995, Capital Consultants mounted a campaign to persuade local unions to invest their pension funds with Capital. Hiring Dean Kirkland, a former offensive lineman for the Denver Broncos, as a salesman, Capital lavished tens of thousands of dollars in gifts and vacations-including hunting trips to Canada, Africa and South America-on union trustees.

The strategy paid off. The union trustees (one of whom just happened to be Kirkland's father) "regularly made decisions and took actions that benefited Dean Kirkland and [Capital Consultants]," declared U.S. District Court Judge Anna Brown.

In addition, Grayson, Capital's founder and CEO, made secret payments of almost $200,000 to union leader John Abbott, the secretary-treasurer of the Laborers District Council of Oregon, Southern Idaho and Wyoming, who helped to control three pension and benefit funds. In return-surprise, surprise-Abbott steered the union money towards Capital.

Meanwhile, Capital used the money to make iffy loans, including a total of $160 million to a high-risk mortgage-loan company named Wilshire Credit Corp.

Wilshire's president was Andrew Wiederhorn, an aggressive young financier who sat on the board of the Citizens Crime Commission (mission: "advocating for businesses and mobilizing citizens to reduce crime").

Over the years, Wiederhorn and Grayson traded various financial favors. But Wilshire never got around to repaying Capital's $160 million. As a result, Capital collapsed, winding up in bankruptcy court in September 2000.

Since then, the U.S. Department of Justice has convicted nine defendants involved in the fraud, including union leader Abbott; Capital salesman Kirkland; Capital CEO Grayson and his son, Barclay Grayson; Wiederhorn and Wiederhorn's business associate Lawrence Mendelsohn.

Of the nine, Jeffrey Grayson may have received the most severe sentence: In 2002, he suffered a debilitating stroke that left him unable to appear in court or testify against his co-defendants.

But it was Wiederhorn who attracted the most outrage.

On June 3, 2004, he pleaded guilty to charges of bribing Grayson and fiddling his taxes. He was sentenced to 18 months in prison and ordered to pay $2 million in restitution.

The next day, his current company, Fog Cutter Capital Group, made a surprise announcement. It would pay Wiederhorn's $350,000 annual salary while he was behind bars, plus a $2 million "bonus"-the precise amount of his fine.

The AFL-CIO went ballistic. "Mr. Wiederhorn's actions caused union members and other workers to suffer significant losses of their retirement assets," it told Fog Cutter. "Your company's payments to [him] appear to have rewarded his actions and set a deplorable standard for corporate responsibility."

Wiederhorn has been able to bear up under the strain, however. He was able to consume enough water to move his West Hills property up to third place on WW's annual list of Hydro Hogs (see WW, Sept. 8, 2004).

Meanwhile, the best the union workers can hope for is to recover 70 cents on the dollar, from lawsuits, settlements and insurance payouts.

They do have one small consolation. Wiederhorn no longer sits on the board of the Citizens Crime Commission, where he once mobilized working stiffs in the fight against crime.

The End of the Club


When the Satyricon closed its doors in May 2003, the event was more than just another shift in the ever-changing landscape of the Portland music scene. The sale of the venue at 125 NW 6th Ave. by longtime impresario

George Touhouliotis to the former owners of Moody's, who would turn the club into a Top 40 disaster called Icon, marked the end of an institution.

During its 20-year history, Satyricon made a definitive mark on the city's nightlife, providing an intimate and comfortably soiled place to watch up-and-coming bands change the face of music. Some of the most influential bands of the era, from Mudhoney to the Jesus Lizard to Nirvana to Pearl Jam, played the room. During its stint as the longest-running punk club on the West Coast, Satyricon also became the setting for some of Portland music's most mythic tales-from the one about Kurt and Courtney wrestling in front of the jukebox to the "Satyricon Riot" of 1990. Not bad for a club that held a scant 200 people.

While the Satyricon thrived in the '80s and early '90s, the club's later years found it suffering from poor booking and a music scene that fractured into distinct genres that found homes in other Portland clubs. The club made one last push to return to form, enlisting the help of Blackbird booking agent Chantelle Hylton, but within a few months it became clear that Satyricon's time was up.

Recently, the club reopened under new management. We wish it success-but it's got a tough act to follow.

* Speeding at 70 mph, a van plows into three cyclists on Southeast Belmont Street. Killed instantly are Orion Satushek, 27, and Angela Leazenby, 26, both of the Spooky Dance Band. The driver is pulled over after cops notice him dragging a bicycle frame under his front wheels. Prosecutors say he had a blood-alcohol level three times the legal limit.

* Local protesters shut down four bridges and two freeways when President Bush orders the invasion of Iraq. Two years, $200 billion, roughly 1,500 U.S. deaths and an estimated 16,000 Iraqi deaths later, the dreaded weapons of mass destruction somehow fail to materialize.

* WW reveals that Lewis & Clark College President Michael Mooney lent $10.5 million of the college's money to an Idaho oil-processing venture that went belly-up. The loan-equivalent to 10 percent of the college's operating budget-was made without the trustees' knowledge to a company that didn't meet the college's credit standards. Worse, it turns out Mooney owned more than 100,000 shares in the company. He resigns three weeks later.

* Former state schools boss Stan "Sticky" Bunn says he's ready to settle the 1,433 ethics charges lodged against him-so long as Oregon taxpayers pay his $25,000 fine and his $40,000 legal bill! Hey, Stan, we'd be thrilled-if you'll hook us up with your angel-dust connection.

* Tragedy strikes local power-pop faves the Exploding Hearts when their van overturns on I-5 north of Eugene. Adam Cox, 23, Jeremy Gage, 21, and Matthew Fitzgerald, 20, perish in a heartbeat.

* A city quakes in fear while a vicious killer destroys innocent lives. The victims of this psychopath? Dogs. Eleven canines perish in mysterious series of dog poisonings in Laurelhurst Park, unleashing citywide panic. Perpetrator is never identified and remains, presumably, on the loose.

* Burning sage, beating drums and boiling cauldrons, local sorcerers converge on a Jantzen Beach hotel hosting a convention of Republicans. Alarmed by dark forces haunting the Bush administration, the witches and wizards cast a spell to "remove the thrall that ensorcels the United States government."

* Jessica Williams, 22, a developmentally disabled woman with a mental age of 12, is beaten, stabbed and burned to death by her "street family" for violating the family code. Williams had apparently accused a family member of offering her money for sex.

* Beaverton softball coach Andrew Garver, 38, runs off with Mimi Smith, 15, a high-school sophomore who played on his team. Smith and Garver give themselves up nine months later when they crash their SUV in Knoxville, Tenn.


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