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Orange County

A Fortune Lost--Then a Legal Knot

Courts: Jim Slemons, the epitome of Orange County success in the '80s, spent the '90s in a financial hall of mirrors. He vows 'to make a comeback somewhere.'


He was the quintessential Newport Beach entrepreneur: owner of a flourishing Mercedes-Benz empire and a jet-setter who married six times, kept an 83-foot yacht at Newport Harbor and boasted a string of showplace homes.

Jim Slemons, whose name defined success in Orange County in the 1980s, told a Superior Court jury this year that any shred of the $87-million fortune he had amassed by 1988 was gone. He was so broke last year, he said, he had been living out of his car in Honolulu, sleeping in a park near Waikiki Beach.

It was a spectacular fall from grace--and a second one at that.

Slemons, 69, is now vowing to pursue the people he said duped him after his business empire collapsed in 1991, his first lost fortune. His second loss came years later, the details emerging over four months as he sat as a defendant in Orange County Superior Court.

It was only then, he said, that he discovered $4 million had come and gone in his name, without him knowing a thing about it. "I'm not going to lay down and say, 'Poor me,' " he said. "I'm going to make a comeback somewhere."

Roger Riddell, a marketing executive from Huntington Beach, sued Slemons as well as attorney Francis K. "Guy" Friedemann, father-and-son businessmen Merritt C. "Chuck" and M.C. "Chad" Horning and their company, Newport Federal Financial of Newport Beach, in February 2000, along with various corporations owned by the defendants. The suit accused them of concocting an elaborate scheme to manipulate Slemons' assets while he allegedly ducked creditors from his earlier bankruptcy, including an unpaid $1.2-million fraud judgment that Riddell won in 1993.

In April, a Superior Court jury found that the defendants engaged in a conspiracy to defraud Riddell, awarding him $1.7 million in compensatory damages and $16 million in punitive damages. The jury held Slemons responsible for $2.5 million of the punitive damages.

"In a way, I feel bad about [the result], and in a way I feel good," Slemons said from Honolulu, where he said he is living on Social Security payments and a loan from his 94-year-old mother. He said he was duped by his fellow defendants and will fight to get some of the money back. "Now, I feel there's some hope in my life."

Riddell's attorney, Gary Dapelo, said he emerged from the trial sympathetic to Slemons, whom private investigators dogged throughout California, Hawaii and even Switzerland in the late 1990s trying to unravel what happened to his remaining assets.

"They played him like a piano," Dapelo said of Friedemann and the Hornings. "He got into bed with cheats and they cheated him."

Attorney Bill O'Hare, who represents the Hornings and Newport Federal Financial, said his clients got snared in sour business dealings with Friedemann and Slemons, losing about $1.5 million. During the trial, the Hornings, whose businesses have real estate and pawnbrokers' licenses, contended that they took Slemons' properties through legitimate transactions.

"Mr. Slemons has arranged to stick my clients with his debt," O'Hare said. "My clients are lenders. They loaned money and didn't get paid back. Believe me, there's been no money made on our end.... We were set up to be the fall guy."

The jury, however, disagreed that the transactions were legal and assessed $5 million in punitive damages against Newport Federal Financial, $2.5 million against Chuck Horning and $500,000 against Chad Horning.

Friedemann, a Long Beach resident who was slapped with $3 million in punitive damages, said the defendants expect "a very different outcome" on June 27 when they will ask Judge David A. Thompson to reject the jury award and grant a new trial on the Riddell lawsuit.

"There's going to be a lot more coming out" in court, Friedemann said, declining to elaborate. "That's when you'll have the full story."


A Genesis in Bankruptcy

The story that unfolded this year in Thompson's courtroom has its roots in the bankruptcy of Jim Slemons Imports in August 1991. A year earlier, the luxury lot--near John Wayne Airport--was the nation's second-largest Mercedes-Benz dealership, with about $80 million in revenue that year. It and six other dealerships supported Slemons as he entertained at the Balboa Bay Club, held his annual Kings of the Court tennis tournament in Newport Beach and built a 9,500-square-foot Mediterranean-style home in Harbor Ridge, where nearly every room had an ocean view.

Slemons also had taken over Resort Commuter Airlines with a dream of cashing in on lucrative sportfishing charters to Baja California. But a plan to take the airline public failed and the planes it leased couldn't handle the long-distance trips. Slemons lost $14.7 million in 18 months, defaulting on loans from Tokai Credit Corp., which he had secured with personal guarantees.

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