When Perot Sees Smoke, The Criswells Get Soaked

When William and Sharon Criswell made their big move in the Dallas real estate market during the boomtime of the early Eighties, they didn’t have much of a national reputation. The name Criswell was familiar in Dallas, though; some people assumed Bill was a native son returned to the fold. How nice that the son of the Rev. W.A. Criswell of the First Baptist Church was coming home to develop in Dallas and be near Dad. Wrong Criswell.

It wasn’t long before it became obvious that the Dallas real estate community wasn’t going to slaughter the fatted calf to welcome these Criswells. And now, the Criswells are having trouble getting as much as hamburger here. Why? A sacred icon. Ross Perot, is on the warpath.

From its inception. Criswell Development Company pushed hard to play with the big boys. It sought out and acquired some of the best development sites in this city, which rubbed some developers the wrong way.

The Criswells’ first Dallas office projects-Spectrum Center and 8080 Central-had attracted some attention, but Allied Bank Tower at Fountain Place down-town, it seems, was just too much for the big boys to take: it is located at Ross Avenue and Field Street on a prime 5.8-acre spot between the Arts District and the West End Historic District, property acquired through a ground lease from Canadian-based Campeau Corporation. From Allied’s conception, the Criswells were dogged by rumors. First, it was whispered, something was fishy with the ground lease and the Criswells would never get financing for the project. They did. Then groundbreaking was delayed and rumors spread that the project was dead. It wasn’t.

During the building process, various financial ruin stories made the rounds. Granted, the Criswells don’t have bottomless pockets. Loans they had negotiated in high-rent times were no longer desirable, so the Criswells are looking for more attractive rates, just like every other developer in town. As the project began to take shape, there were reports that construction had stopped altogether on the building (It hadn’t); that Criswell Development wasn’t paying its construction company. HCB Contractors (It was).

Then, on September 1, Dal-las’s own Ross Perot filed a $200 million lawsuit against William Criswell and Manufacturers Hanover Trust Company, alleging fraud and mismanagement of funds in connection with an investment Perot made as a limited partner in Woodcreek Park Hotel Ltd., owner of the Hyatt Regency West Houston. Wood-creek’s general partner is Cris-well, who owns 25 percent; and Perot, who owns 75 percent, is the sole limited partner. The well-publicized suit alleges that Criswell and Manufacturers Hanover, which had provided a construction loan for the hotel, “induced” Perot, by withholding financial information, to guarantee a $30 million loan to the project from Bank of America. Perot’s suit alleges that Criswell diverted funds from the hotel project to help out a troubled Allied Bank Tower in Dallas, allowing the Houston hotel to slip into bankruptcy.

In this town, when Ross Perot says there’s smoke, people pick up a hose and start to spray. Says Bill Criswell: “We’ll never be able to win in a PR battle against Perot. When he says we done him wrong, we are tried and convicted. It must be true. But there are things in his suit that are just untrue, that are flat wrong. And nobody who is a thinking person, who knows how carefully Ross Perot analyzes things, could believe this is true.”

So, how can the Criswells make it through this one with their credibility intact? The Perot suit is already hurting the Criswells’ other business, de-spite their denial of all allegations, which they detailed in a counterclaim filed the second week in September.

Could Perot be wrong, mistaken, misled by his cadre of advisers? Perot wouldn’t comment for publication on this suit. “It’s in the courts,” he says.

Perot’s unwillingness to talk is just one of several ironic twists in this suit-countersuit. Typical-ly, the plaintiff (Perot in this case) is ready and willing to tell his story to the world. The defendant usual ly waits for his day in court. In this case, it is the Criswells who want to talk. Perot is wrong, they say, and they are ready to prove that Perot’s advisers were kept fully informed about the Houston hotel with monthly and weekly reports. What the Criswells need now is a speedy trial, and they are pushing for it. Twist number two: usually, the defendant beats feet to file for delays.

The background of the project outlined in the Criswell counterclaim reads like many a saga of Houston: the hotel is built in an area known as the “Energy Corridor.” When the hotel was planned in 1982, oil prices were stable and the potential appeared tremendous. But by the end of 1983. as the hotel neared completion, Houston was in the thick of a drastic decline. With dismal hopes for the short run but long-term optimism, Criswell sought investors who could afford the risk.

That’s when Perot’s advisers entered the picture and began investing in the limited partnership as a means of tax avoidance for Perot. According to Criswell, Perot took more than $25 million in tax deductions spread over 1983, 1984, and 1985 with capital contributions to the partnership totaling $8.3 million. With the passage of the 1986 tax reform bill, many investors stand to lose tax deductions taken on their real estate limited partnership investments. Which brings us to twist number three and the crux of this dispute: Perot defaulted on his $1.9 million payment due February 1, 1986. to the Woodcreek limited partnership. Could Perot’s advisers be scrambling to restructure tax-oriented investments just like thousands of other taxpayers? Criswell said he initially did not make his payments either because Perot’s advisers were telling him that Perot, who had a longstanding relationship with Bank of America, could get the bank to change the terms of the $30 million loan to require annual payments in arrears instead of quarterly payments. Perot could then wait until year’s end to make his capital contribution to the partnership to coincide with the annual loan payment. But when Bank of America threatened foreclosure because loan payments were not being made, Criswell says he was told by Perot’s advisers that Perot would not be making his limited partnership payments at all. If Perot had made his payment of $1.9 million, Criswell says he could have then made the $1.4 million loan payment.

What all this means is that, ironically, the Criswells could have sued Perot for defaulting on his limited partnership payments more than six months ago. Why didn’t they sue him?

“Out of respect,” Sharon Crisweil says. “Would you sue Ross Perot?”