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Management of Track Challenged by Everett : Factionalism: Ousted chairwoman of Hollywood Park files lawsuit to obtain records.

October 07, 1995|THOMAS S. MULLIGAN | TIMES STAFF WRITER

Former Hollywood Park Chairwoman Marje Everett has launched a campaign challenging the company officers and directors who ousted her four years ago in a bitter, $10-million proxy fight.

In a formal demand for records filed with the Delaware Chancery Court--a key forum for many corporate legal battles--Everett is harshly critical of a number of actions by Hollywood Park and its chairman and largest individual stockholder, Randall D. Hubbard.

Everett's motives are uncertain, but one source who follows Hollywood Park closely said her moves may even presage a fight to regain control of the Inglewood-based horse racing and gaming company, which is incorporated in Delaware. It would be a difficult fight, as Hubbard and allies hold about 30% of the stock.

Other than in the court documents that she filed quietly last month, however, Everett isn't talking.

"I have no comment to make. I'm sorry," she said in a telephone conversation earlier this week. Hubbard could not be reached for comment, but an attorney for Hollywood Park said that Hubbard has done nothing improper.

When Hubbard's group wrenched control from the Everett faction in 1991, it argued that under her leadership, the company's long-term debt had ballooned while its signature racetrack deteriorated. After taking over, Hubbard was widely praised for refurbishing the track, opening the card-club casino at the Inglewood facility and focusing on other gaming opportunities.

However, Hollywood Park's stock has languished for more than a year, with earnings dragged down in large part by poor results at the Woodlands, the Kansas City, Kan., racetrack it bought in 1994 with the expectation--as yet unfulfilled--that the Kansas legislature would approve casino-style gambling there.

The company has also suffered some other recent setbacks, such as the Sept. 12 rejection by South San Francisco voters of a plan to let Hollywood Park develop a card-club casino there.

Hollywood Park also is in the process of settling a cluster of lawsuits brought by stockholders who accused the company of manipulating its stock price by issuing misleading statements about earnings. The company denies any wrongdoing but said it was settling the suits "solely to avoid the continued expense and distraction of further litigation."

Hollywood Park has offered to settle one group of federal class-action suits for $5.8 million and a separate suit filed in San Diego Superior Court for an undisclosed amount. After collecting from an insurance carrier, the company said its own liability is expected to be less than $2.5 million.

Hollywood Park stock closed at $11.50 in Nasdaq trading Friday, up 25 cents on the day but way down from its 1994 high of $30.75.

Everett, in her court filings, focuses on several deals in which Hubbard had a personal financial interest. She says her goal in demanding more information about the deals is "to ascertain whether the members of the company's board of directors or officers engaged in self-dealing, mismanagement and waste of corporate assets."

The transactions she cites include:

* The purchase of the Woodlands, in which Hubbard owned a 60% stake. Everett notes that the Kansas State Audit Department, in a report last April, listed the track's 1994 losses at $1 million. The report also noted that Woodlands pays consulting fees of $100,000 to an unnamed former shareholder of the track, whom Everett said she believes is Hubbard's former partner, Richard Boushka.

* A 1991 venture in which Hubbard and Hollywood Park each invested $243,000 and agreed to lend up to $9.75 million to Midpointe Racing to finance that firm's application for a racetrack in Texas. But Texas officials denied Midpointe's application, awarding the track instead to a firm called Lone Star Jockey Club. Hollywood Park wrote off its entire investment of $703,000.

But two years later, Everett said, Midpointe Racing merged with Lone Star, and the merged company--in which Hubbard still held an interest--began running the track. "Despite its substantial investment in Midpointe . . . [Hollywood Park], unlike Hubbard, apparently did not benefit from the transaction," Everett said.

* The payment of $139,000 in Hollywood Park funds to Hubbard last year for "company use" of a jet owned by R.D. Hubbard Enterprises Inc., a firm wholly owned by Hubbard that is the vehicle for his personal financial deals.

Hubbard did not respond to a phone call seeking comment. However, David Siegel, a lawyer representing Hollywood Park, said of the transactions cited by Everett: "Each of those represents business judgments which were made after due consideration and proper approvals at the time . . . and have been fully disclosed by the company in its public filings."

Stephen D. Weinress, an analyst for Irvine-based investment brokerage of L.H. Friend who is bullish on Hollywood Park's stock, scoffed at the idea that Everett might regain control.

"Marje Everett has as much chance of winning a proxy fight as the Pope had yesterday of being ejected from the Meadowlands," Weinress said.

Her request for information is expected to receive a hearing in Delaware Chancery Court sometime this fall.

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