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Michael Hiltzik / GOLDEN STATE

Entrepreneur Left in Limbo by Verdict for $1.2 Million

November 24, 2003|Michael Hiltzik

Clark M. "Buzz" Holcomb is the sort of person of whom it's often said: "He never lets anything go." He's a big man, solidly built, with silvery hair that stands erect, like a drill team on parade, and a stentorian voice hoarsened by the ravages of a serious illness.

"I'm a type-A personality," he says, and you're inclined to think: "No kidding."

Type-A personalities don't cope well as parties in civil litigation, where people win a full measure of justice only in scripts written for TV. In the version that Holcomb lives, he has won a great victory from a jury in state court but nevertheless feels cheated out of a lifetime of hard work, with his options for gaining redress shrinking day by day.

"Here's the case," he told me recently, escorting me to the doorway of his condo garage in Westlake Village. In the gloom I could make out four file cabinets, each with four drawers, all brimming with documents. Back inside the house, what looked like dozens more file boxes were piled in a corner of the living room.

The Moby Dick to Holcomb's Ahab is Prudential Insurance Co. of America. He contends that one of the company's agents incited the Ventura County Sheriff's Department and the Internal Revenue Service to investigate him for fraud and disclosed to them his personal financial information, without either a subpoena or his permission. The alleged motive: vengeance for a private investment deal gone bad.

The investigations, which didn't lead to Holcomb's prosecution, nevertheless produced plenty of collateral damage, he says. They brought down his dietary supplement business and have reduced Holcomb, who at one time measured his net worth at $300 million, nearly to poverty.

Holcomb, 56, sued Prudential and the agent, Patrick C. Welch, in 1997. Early this year a Los Angeles jury found against Welch for $1.2 million in damages but cleared Prudential of any liability. Holcomb had filed for bankruptcy in the meantime, so the $1.2 million has been parceled out among his creditors and lawyers.

A few months after the verdict he filed an appeal to reverse the judgment pertaining to Prudential, but the appeal may have to await the resolution of his bankruptcy case. ("If there's a new trial or appeal," says a spokesman for the Prudential Financial Inc. unit, "we fully expect to prevail as we did in the original case.")

"I've got no income, no job," Holcomb says. "I've worked from the day I got out of high school, except when I was in the infantry in Vietnam." His days are now spent getting treatment for a rare, potentially fatal disease that damages his pulmonary system, and staving off the loss of the condo, which he owns and shares with his son's family.

Holcomb was a successful West L.A. real estate agent when he started his rise to wealth. The vehicle was his relationship with William Shell, a Los Angeles cardiologist who had acquired patents on a number of dietary products that he licensed through Interactive Medical Technology Inc., which was traded on the over-the-counter stock market.

This was 1992, during a craze for OTC biotech stocks. Over the next year or so, Holcomb and Shell sold 2.5 million IMT shares to friends and other people under circumstances that led to Securities and Exchange Commission charges of illegal trading of unregistered stock. The SEC didn't fine Holcomb, but he says he eventually bought back millions of dollars in IMT shares from friends and acquaintances unhappy with the terms of their purchases.

In the same period, Holcomb formed his own company, KCD Holdings, to market a line of dietary supplements. He also met Patrick Welch, then a rising regional star at Prudential. Welch sold him a package of Prudential life and disability insurance policies and other financial planning instruments. He also bought into IMT through Holcomb, even though Prudential's rules frown on managing directors engaging in such private deals with clients.

IMT shares did not do well -- the company has since disappeared from the public markets -- but KCD was booming. Those who know Holcomb describe him as an exceptional salesman, and KCD's products were nothing if not aggressively marketed. Chief among these was a dietary supplement known as SeQuester. Manufactured from fiber and ox bile, SeQuester purportedly would bind with dietary fat, preventing its absorption by the body and thus aiding in weight loss.

SeQuester soon landed on the shelves of Kmart Corp., Target Corp., and Wal-Mart Stores Inc., the last of which accounted for more than a quarter of KCD's business in 1997. NFL coach Mike Ditka signed on as the company's advertising spokesmodel, for which he was paid, according to KCD documents, $75,000 plus 1 million shares of company stock. At its peak, the company was worth nearly $200 million in market capitalization.

But KCD also ran afoul of the Federal Trade Commission, which charged in 1997 that it couldn't prove its weight-loss claims. KCD settled the complaint for $150,000 and promised to temper its advertising.

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