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Firm in O.C. Bus Deal Allegedly Skipped Rent : Transit: Officers of 'SuperBus' company are also being sued for fraud in unrelated ventures.

January 31, 1992|RALPH FRAMMOLINO and JEFFREY A. PERLMAN | TIMES STAFF WRITERS

SAN JOSE — The company that recently won a $4-million contract to supply innovative "SuperBuses" to Orange County was accused last year of skipping out on its rent, and some of its officers are being sued for fraud in unrelated business deals, court records here show.

Orange County Transportation Authority officials say they were unaware that SuperBus Inc. had stopped paying rent on a downtown San Jose office suite months before it won a non-competitive contract last summer to build 10 high-capacity buses for the agency.

Instead, files show that the OCTA never closely questioned the finances of the fledgling Northern California firm, which a top officer said retained former Supervisor Ralph B. Clark to help arrange a number of "private" meetings with county officials before the vote.

That officer, SuperBus Chief Executive James F. Elder, said the company is financially sound and capable of delivering the 58-passenger buses as promised, and that the lawsuit allegations against him and his partners are untrue.

He said that the company is providing OCTA with a bank letter of credit to demonstrate its financial strength.

"I don't know that I necessarily need to report everything that I shared with Orange County," Elder said, "but it is very familiar with our ability to perform on our contracts."

However, Roger R. Stanton, chairman of the Orange County Board of Supervisors, has asked transportation officials to review all aspects of the SuperBus contract in light of questions raised by a Times Orange County Edition investigation.

"We haven't heard about this stuff you're telling me," said Stanton, who chairs the OCTA board. "There's enough here to raise questions and I think these are things that should have been pointed out and they weren't."

Reached Thursday at his Anaheim home, Clark acknowledged that he owns stock in SuperBus and that he has acted as "an adviser" to the firm. But Clark said he did nothing to help win the Orange County contract.

Clark's involvement with SuperBus is the second instance in which the retired Orange County politician had some association with a company that obtained a lucrative public contract while suffering financial difficulties.

Last summer, Clark contacted county officials and urged them to grant an exclusive airport-bus license to a firm that had already filed for bankruptcy protection and had strong ties to a man involved in a criminal savings-and-loan fraud. The airport agreement is with Ground Systems Inc., whose part-owner James Allee pleaded guilty to three counts of fraud connected to the demise of Consolidated Savings Bank of Irvine.

In the case of SuperBus, Elder said Clark helped make contacts for the company, which according to court files and interviews needed the business to settle a lawsuit over the unpaid rent.

A Times investigation shows that Elder, his business associates and the new bus company have all had trouble meeting some obligations in the past--circumstances that are detailed in public documents but were not sought by OCTA staff members responsible for negotiating the bus contract.

In particular, The Times has found:

- Elder and several officers, operating under the name of Capital Builders Inc., have been accused of fraud, self-dealing, co-mingling funds and misleading investors in lawsuits stemming from two Silicon Valley real estate ventures that failed in the late 1980s. Elder and his associates raised $6.9 million from two groups of investors to build and lease office space in Fremont and Milpitas, just north of San Jose.

Both ventures went bust, according to court records. A 1988 lawsuit alleged that Elder and his associates "manipulated" a $2.7-million partnership to reap a hefty sales commission while investing in properties. A 1990 lawsuit accused them of making "fraudulent inducements" by raising $4.2 million for a separate partnership with the promise of personally guaranteeing a loan that was eventually foreclosed on by the banks. The suits are pending in Santa Clara County court, and the one is scheduled for trial in April.

Elder and the current president of Capital Builders, Michael J. Metzger, vigorously deny misleading investors and blame the failed ventures on a sudden drop in the economy of Silicon Valley, where rents plummeted as research and development firms closed.

- Elder was sued personally by Union Bank for defaulting on a $77,500 loan that was due in 1985. The suit was dismissed after Elder agreed in mid-1988 to repay the balance of $70,000--plus interest, court files show.

Elder and a bank attorney declined recently to discuss the matter.

- SuperBus stopped paying its rent on 1,760 square feet of San Jose office space in November, 1990, according to a May, 1991, lawsuit in which the landlord asked for more than $17,100 in overdue rent, interest and attorney's fees.

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