In a little over a year since its current ownership group acquired it, Baja Fresh has doubled in size and revenue. The Westlake Village-based restaurant company founded about a decade ago has expanded from 49 units in a handful of states to about 100 company-owned and franchise stores in nine states with sales of about $160 million projected for this year. The chain’s success is due largely to its formula, a fast-food restaurant serving freshly prepared, healthful food at modest prices. The job of controlling costs while maintaining high levels of quality and managing the company’s stellar growth falls to its chief executive officer, Greg Dollarhyde. Staff reporter Shelly Garcia talked to Dollarhyde about his philosophy for running the company. “I have a phrase I use: people support what they help create. That is really the mantra. If you go around dictating, do this, do this, and everyone has to say, ‘Yes sir,’ they’ll do it, but they won’t support it. “I use a six-step program that is very successful to manage change. “The first step is to build the knowledge. “The second step is to develop a shared vision. Everyone has to share it, believe it and be willing to commit to it. “Once you do that, you realize that some of the old habits, the old values, the way people were compensated or benefited were outdated, so the third step is you really have to say, ‘If this is our vision, what do we need to change in our benefits and compensation and the way people are valued to align it better with the new vision?’ “Then you have to take those values one of the values is coaching and teamwork and ask, ‘What are we doing in concrete day-to-day behavior to support and execute that value?’ In other words, walk your talk. “Once you’ve figured out what those values are, the fifth step is to redirect power and authority and resources to support those new behaviors. You can’t walk your talk unless you apply mankind, money and materials. “Item six is make sure you are out there looking for and harnessing and executing high-impact management systems. If we say we’re going to put our money where our mouth is, and we’ve hired the people, they have to do something. They have to change what they’re doing day to day and find the best system to do that. “Then sit back and do it every day.”

A woodland hills clothier came up with a way to target men looking for a look that is as good as money can buy Some business executives work boardrooms. Some travel the world. Arturo Carlos Lewin rummages through closets. His job is to custom tailor clothing, mostly for business executives, and the first step is often weeding through a client’s existing wardrobe. The service is just one of several Art Lewin & Co. provides to clients, who typically plunk down about $3,000 on their first visit to the Woodland Hills shop. At those prices, customers expect not only a new suit, but the kind of head-to-toe service that may mean salvaging a favorite coat that’s seen brighter or lighter days. “If one of my clients calls and says one of my buttons fell off, I’ll go over there and pick it up and sew the button on,” said Lewin. “If they have weight gain or weight loss, I’ll go alter it. That’s what separates me (from traditional stores), that and I know who they are.” The company’s client list runs to 1,200 active accounts customers who make purchases anywhere from once a week to once a quarter accounting for about $1.5 million in sales in 2000, its fourth year in business. Lewin himself attends to about 700 clients personally, about 50 a week. Since its launch, Art Lewin & Co. has grown from a one-man operation with two part-time tailors to an organization with five sales representatives and nine tailors located in the company’s factory in downtown L.A. Lewin and his sales reps see clients in their homes, offices and the store, using swatch books of fabric from some of the most exclusive textile companies in Italy and England cashmere, wool, silk and linen from E. Thomas, Loro Piana, Ermenegildo Zegna, Gladson Ltd. and Roger Laviale among them. The average price for a custom suit ranges from $900 to $4,000. A custom shirt will typically run from $125 to $265. The company also provides made-to-measure clothing and coordinates the ensembles with ready-made ties. “We want to make an impact on their wardrobe and, in order to do that, one suit doesn’t cut it,” Lewin said. “We like to do at least a couple suits with six shirts and three ties for each suit. That way, you don’t have a uniform. You can pick and choose what you want to wear.” A Chilean native who came to the U.S. when he was 8 years old, Lewin started working for a custom clothier while he was still in college. After striking up a partnership at that company and disbanding it three years later, he went to work for The Custom Shop, a men’s chain specializing in made-to-measure clothing. In 1997, Lewin went out on his own, tapping all his credit cards to the tune of about $70,000. “I went from making a pretty good income to zero, but I didn’t think about that,” said the 33-year-old entrepreneur. Working out of a spare bedroom in the home he shares with his wife and then 8-month-old daughter, Lewin began telemarketing for clients using business directories for his prospect lists. He screened potential clients to determine their shopping and spending habits, a technique the company still follows. “I wanted to hear that they shop at Macy’s and up,” Lewin said. “If they’re shopping at Nordstrom, that was an ideal candidate. If they tell me they’re shopping at Neiman Marcus, I already know they’re paying $800 or $1,000 for a suit. I can offer them something competitive that’s custom-made for them.” Lewin picked up an astounding 400 clients in the first nine months of operation, enough to move the business out of his house into a small office and hire an additional tailor and four sales reps. For a time the business looked as if it would become heavily reliant on the entertainment industry, but Lewin prefers to work with law firms, real estate companies and investment firms. “Entertainment is too demanding,” he said. “I can’t get up at 4 in the morning and go see them or be there at midnight. I have a family.” Lewin has seen the inside of enough boardrooms to be able to offer advice on the colors and styles that are most appropriate to each profession, a benefit that also helps distinguish him from department stores and specialty shops. “When you go to Nordstrom, they don’t know who you are. They don’t know how you should dress. They just want to sell you whatever you like,” said Lewin. “I know you’re an attorney and you need to wear navy, gray and a couple of earth tones. I work with their skin tones.” Clients say Lewin’s expertise is a key element of the service, allowing them to make selections they would not make if left to their own devices. “I feel very comfortable with him,” said Barry Wolfe, president of Centrelink Insurance and Financial Services in Woodland Hills. “I’ll say, ‘Is this really OK?’ and he would tell me if it doesn’t look good. I like the suggestions he makes. He understands colors a lot better than I do. I’m wearing colors I never did before, and people say, ‘You look great.'” Then there are the house calls. “I have clients whose closets are as big as the whole store,” Lewin said. Sometimes he will alter or update the styling of a favorite jacket or suit. But mostly he tries to get his clients to discard clothing they no longer wear. “Clothing is one of the hardest things to throw away,” said Lewin. “The other day I was at a doctor’s house, and he had things from 15 years ago. I ask, ‘What haven’t you worn in the last year?’ and that cuts off a lot of things.” And those ties? According to Lewin, there are no ugly ties, just bad combinations. “What makes an ugly tie is when you combine it with the wrong colors or the wrong look,” he said. “You can put that same tie with something it should go with, and it will look good.”

Seeking to win over a market segment that has traditionally been suspicious of banks, Banco Popular will open its first San Fernando Valley branch this summer with an unusual twist full-service banking on Sundays. The new branch, to be based in the Plaza del Valle shopping center under development in Panorama City, is geared to the area’s large Latino population: mostly blue-collar families, many of whom don’t use banks at all. Puerto Rico-based Banco Popular hopes the seven-day-a-week schedule will lure converts by helping to promote its image as a customer-friendly bank that understands the needs of the population it serves. “What we found out from our current branches is many of our customers are two-income families, and traditional banking hours don’t work for them,” said Vernon V. Aguirre, California region executive for the bank. Commerce Bancorp, a regional bank headquartered in New Jersey with about $7 billion in assets, whose founder also owns a string of Burger King stores, is one of a very few banks that offers Sunday hours. Even Washington Mutual Co., which inherited a number of branches in grocery stores when it acquired Great Western Bank in 1997, closes those branches on Sundays. But for Banco Popular, particularly in a location like Panorama City, staying open Sunday offers the chance to cement its relationship with Hispanics, who account for about 50 percent of the bank’s customer base. “Large portions of the Hispanic population have traditionally not used banks period,” said Joseph Gladue, an equity analyst with The Chapman Co., an investment firm in Baltimore. “So, probably having a physical presence and going out of your way to make things convenient and friendly for people is one way of breaking down the mistrust of people of financial institutions.” Founded in Puerto Rico about 100 years ago, Banco Popular entered the mainland United States market in the 1950s with branches in New York, New Jersey, Florida, Texas and Illinois. The bank expanded into California in the 1970s and currently operates 16 branches in Los Angeles, Orange County and Chula Vista near San Diego. The right location Banco Popular was seeking a Valley location for some time when it came upon the Plaza del Valle site. The redevelopment project underway by Agora Realty Management and Construction is designed to capitalize on the population of about 650,000 people, largely Hispanic with an average income of $40,000, that live within a five-mile radius. Plaza de Valle will feature small retail shops, family restaurants and other entertainment venues and office buildings for social services like job training. The center will also have the kinds of open-air markets and gathering places typically found in town squares south of the border. “The location meets the needs of both heavy traffic, heavy Hispanic community and strong business community,” Aguirre said. Banco Popular, with more than $27 billion in assets, employs a number of strategies geared specifically to the Latino community. Each bank branch displays the flags of South and Central American countries, and caters to the Latino preference for face-to-face relationships by employing full-time tellers that get to know customers by name. “Many large banks have part-time employees,” said Aguirre. “It’s hard for the customer to have a relationship with part-time tellers. They’re constantly being asked for I.D. They’re constantly being scrutinized. When you get to know somebody on a personal basis, you call them by name, you ask how their kids are doing.” The strategy has worked well. For the quarter ended Dec. 31, 2000, Popular, Inc., the bank’s parent company, reported that net income increased nearly 15 percent to $75.5 million or 54 cents per share, compared with $65.7 million or 47 cents per common share for the comparable period in the prior year. Net interest income for the quarter rose 15 percent to $558.4 million, compared to $485.5 million for the like period in 1999. Revenues from other income rose 17 percent to $119.3 million from just under $102 million in the same quarter last year. But the bank’s Sunday strategy has not always been successful. An earlier attempt at a seven-day-a-week schedule at a Huntington Park branch was scuttled when Banco Popular found there was not enough traffic to support the expense of the Sunday opening. Aguirre attributed the problem in Huntington Park to the location of the branch, a sparsely-traveled sector of a shopping center. He plans to reopen the branch on Sundays when Le Curasao, a furniture and electronics retailer that caters to the Latino community, moves into the center later this year. Plaza del Valle, on the other hand, is surrounded by the Panorama Mall and El Super, a Latino supermarket, and should draw large crowds of shoppers as a result. In addition, the bank branch will share the 5,500-square-foot facility with another of the company’s divisions, Popular Cash Express, a 24-hour check cashing service. Aguirre said he expects the synergy between the two businesses to help build the bank’s customer base. Many Latinos prefer to use check-cashing services instead of traditional banking because of their experiences in their home countries, where banks are often embroiled in the country’s politics. “Recent immigrants do savings, but they do it at home under the mattress,” said Aguirre. “They also believe that some banks aren’t very interested in them as customers.” But by combining the check cashing with traditional banking services, officials said they hope that many customers will be persuaded to give the bank a try. “This is what the pilot is all about,” Aguirre said. “To what extent are we able to take a customer of Popular Cash Express and move them along the financial services path, beginning with a secured credit card to basic savings accounts and other services?”

Sometimes perception really does mirror reality even if the reasoning is obscured. Look at Countrywide Credit Industries’ stock chart for the last year and you’ve got to believe the gigantic Calabasas-based financial services firm is doing something right. Countrywide started 2000 with its stock trading at just under $24 a share. By the second trading day of 2001 it had steadily climbed to $51 a share. After all, Countrywide is the nation’s third largest provider of home loans. The Federal Reserve Bank cut interest rates the same day Countrywide’s stock hit its high and the refinancing business is better than ever. Even industry experts say the lower interest rates and the refinancing trend mean business is bound to be good for mortgage giants like Countrywide. Kenneth Posner of Morgan Stanley Dean Witter Discover & Co. said, if the economy does end up taking a “hard landing, “a sizable refinance boom becomes highly likely.” And David Bigelow, Countrywide’s executive vice president for strategic planning, said, “A lot of investors do perceive our success as being tied to interest rates.” In fact, Countrywide’s net income for the third quarter of 2000 was actually down 5 percent from the year before, a phenomenon Bigelow calls “unusual.” “We were actually in an environment where rates were rising,” he said, “and there was an accounting adjustment we made.” In the quarter ending Nov. 30, 2000, Countrywide reported net income of $95.4 million (87 cents per share), down from the $100.6 million (84 cents per share) reported in the same quarter a year earlier. A lot of things have changed since then. Countrywide did $1.9 billion in refinancing business during December 2000, up 91 percent from December 1999. That surge pushed its total mortgage funding up to $6.2 billion, a 48 percent increase over the same month last year. Refinancing applications amounted to $3.7 billion in December 2000, compared to $1.6 billion a year earlier. Countrywide has $9.9 billion worth of refinancing business in the pipeline, up 41 percent from the same period a year ago. Industry experts, however, say that refinancing activity can be deceptive when you try to link that business to a company’s bottom line. Often, a refinanced mortgage results in little more than a one-time fee for churning a loan. Other times, the loans a company picks up are countered by the loans it loses to other mortgage companies who are also picking up the refinancing business. Indeed, Bigelow said, “If we do get into a refinance boom over an extended period of time, the challenge we face is you have to work to maintain market share.” Nevertheless, he went on, “When you’re in the mortgage business, it’s always exciting when you get into a period of activity when you’re very, very busy.” It may get busier too. David Berson, a Fannie Mae economist, said, “Right now, another two Fed lowerings are built into rates and so we are probably going to see mortgage rates around 7 percent. “The mortgage industry is going to be amazed.” What could also be amazing for Countrywide’s bottom line, anyway is the amount of business coming to it over the Internet. E-commerce funding was worth $2.5 billion to Countrywide last month. “This is the first time in company history that e-commerce has accounted for 40 percent of total funding volume,” said Stanford Kurland, Countrywide’s chief operating officer. By comparison, Internet lending business in December 1999 amounted to 19 percent of the company’s funding. While the argument can be made that increased Internet business reflects merely a change in the way consumers are doing their mortgage shopping rather than a real increase in business, Bigelow said, “It’s us wanting to shift people that way. It creates efficiencies for us.” Principal subsidiaries of Countrywide include Countrywide Home Loans, Inc., which originates, purchases and services home loans; Full Spectrum Lending, a sub-prime residential lender; Landsafe, Inc., a provide of loan closing services; and Countrywide Insurance Services, an insurance agency.

The West Valley’s health care community continues to spread its wings. Blue Cross of California just inked a deal for 47,000 square feet at West Hills Corporate Pointe, the commercial park under development by Trammell Crow Co. at 8433 Fallbrook Ave. Blue Cross, which has its headquarters in Warner Center, will be expanding its offices into the new facility in a 10-year lease valued at $11.5 million. Blue Cross will occupy the ground floor of one of six buildings in the complex, which is currently under renovation. The lease brings the occupancy at Corporate Pointe to 40 percent, said Mark D. Leonard, principal and senior vice president at Trammell Crow. Other tenants include MRV Communications Inc. and Recycler. The complex consists of six buildings, including a 50,000-square-foot build-to-suit. Mark D. Leonard at Trammell Crow Co., along with Ron Wade, Mark T. Leonard, Matt Hargrove and Margaret Fichter at Cushman & Wakefield Inc., represented the development. Allen Trowbridge with Jones Lang LaSalle represented the tenant. With the lease, Blue Cross becomes the latest health care company to expand or relocate. Health Net recently inked a deal to relocate its corporate offices to LNR Warner Center. The company has been located in the Trillium. Warner Center has been considered a hub for health care, housing such companies as Aetna, Foundation Health Systems and Wellpoint Health Networks Inc. Former Dole HQ Leased Guitar Center Inc. leased the former Dole Foods facility in Westlake Village in a transaction valued at $6 million. The music equipment retailer, which is relocating from Agoura Hills, will set up its corporate headquarters in the facility at 5795 Lindero Canyon Road. Michael Slater and Tom Dwyer with CB Richard Ellis Inc. represented Guitar Center in the eight-year lease. Ken Ashen and Nick Gregg, also of CB Richard Ellis, represented the landlord, J. David Gladstone Institutes. Fourth Quarter Strong Office vacancy rates in the San Fernando Valley continued to inch downward in the fourth quarter of 2000, despite some evidence that the demand that fueled the market earlier in the year has cooled considerably. Overall, office vacancy rates in the Valley declined to 9.8 percent from 10.8 percent in the third quarter of the year and 11 percent for the comparable quarter last year, according to data recently released by Grubb & Ellis, Inc. The latest numbers reflected net absorption of over 530,000 square feet, indicating that a great deal of the new space that had come on line in the third quarter has been leasing briskly. Space was tightest in the Central Valley, which recorded a vacancy rate of 7.8 percent, the Grubb & Ellis report revealed. But the East Valley, with 8.1 percent; West Valley with 9.2 percent; and Conejo Valley, with 9.7 percent; all saw vacancy rates fall to single digits in the period. Only the Santa Clarita Valley, which has been slow to lease its office space, had significant vacancies, with rates at 33.2 percent. Consistent with the tightening in vacancy rates, rental rates continued to move higher during the last quarter of 2000. Asking rents for Class A office space averaged $2.27 per square foot throughout the San Fernando Valley, compared to $2.13 per square foot for the third quarter of last year, Grubb & Ellis reported. The biggest jump occurred in the East Valley, where rents rose by 10 percent to $2.54 per square foot. The West Valley also saw a substantial rise of 7 percent to $2.48 per square foot for the period. San Fernando Sale GMS Realty LLC acquired a shopping center in the city of San Fernando for $8.7 million. The 67,000-square-foot San Fernando Mission Plaza is anchored by Value Plus Food Warehouse and Hollywood Video. It is 100 percent occupied. Center Trust Inc. was the seller. GMS also owns Canyon Plaza, a shopping center in Sun Valley. Northridge Lease Child Care Resource Center has leased 14,000 square feet of office space at The Centre at Harman International Business Campus in Northridge. The five-year lease is valued at $1.65 million. The Centre is a 125,000-square-foot office building at 8510 Balboa Blvd. Rick Pearson at CRESA Partners represented the tenant. Mark D. Leonard at Trammell Crow represented the landlord. Speculating in Westlake Opus West Corp. has begun construction on Westlake Village City Center, a 132,800-square-foot office complex at 31111 Agoura Road. The speculative project will consist of two buildings, each 66,400 square feet. Construction is scheduled for completion in September 2001. Opus West acquired the property from Raypak Inc. last September. Nicholas Gregg and Ken Ashen, brokers with CB Richard Ellis, will market the development for Phoenix-based Opus West. Thousand Oaks Lease Medtronics, a maker of three-dimensional and holographic images, has leased a 7,042-square-foot industrial facility at the Grande Vista Business Park in Thousand Oaks. The five-year lease is valued at $440,000. Medtronics will relocate its sales and distribution operations to the new location. Tony Principe and Jim Darin of Westcord Commercial Real Estate Services represented business park owners Burke Real Estate Group. Staff reporter Shelly Garcia can be reached at (818) 676-1750, ext. 14 or by e-mail at [email protected].

Allow me to introduce the Lottery Effect, the greatest mixed blessing in 401(k) plans. As a blessing, it can make your retirement incredible. As a flaw, it can keep you working until you’re 99. My first personal encounter with the Lottery Effect was last fall, after making a speech to a large group of retired Texas Instruments employees. Following the speech, I listened as a retiree asked a TI executive what she should do with her 30,000 shares of Texas Instruments. We are not talking about an executive here. We are talking about a working stiff. None of her shares had come from employee stock options. She had simply accumulated her shares by working many years and by participating in company savings plans. Her share holdings increased each time the stock split, which it has done four times since 1995. She had the good fortune and smarts to join one of the oldest high-tech companies in America, a primo bastion of intellectual capital. More important, she had stayed with it through thick and thin: through embarrassments the company suffered in consumer markets, through the sale of the defense businesses the company had acquired and through the endless cycles of the semiconductor industry. That night, TXN closed at $60. Her shares were worth $1,800,000. She was worried, she said, because the stock had been as high as $100 a share in the spring and it had been falling ever since. At $100, her shares had been worth $3 million. As the year closed, TXN was trading at $47 3/8. So it could be said that she had lost nearly half a million dollars between Labor Day and Christmas. In fact, I doubt that it bothers her or TXN retirees in similar positions very much. Whether she has $3 million or a mere $1,350,000, she still has more money than she ever expected to have. Unfortunately, the Lottery Effect has also had a dark side. Some stocks go down. Some disappear altogether. Many companies contribute shares of their own stock as employer-matching contributions to 401(k) plans. J.C. Penney shares, for instance, have plunged from a high of $77 & #733; on April 1, 1998 to a year-end close of 10 7/8. That’s a loss of 86 percent. It also means that every share of JCP held in the company’s 401(k) plan is now worth pennies on the dollar. Rank-and-file employees, who number some 291,000, have lost millions. Worse, some are facing forced retirements as the retailer grapples with its problems. Ironically, this is the same company whose board of directors rewarded the outgoing top management team with multimillion-dollar going-away contracts, an act that is the equivalent of giving million-dollar cashier’s checks to the captain and officers of the Exxon Valdez as compensation for running the ship aground. The problem here the one likely to get government attention is that J.C. Penney isn’t alone. A recent blurb in Forbes magazine on the subject of big but sinking 401(k) plans also mentioned Verizon, Sprint, Textron, Caterpillar and PPG Industries. In fact, the number of companies with “distressed” shares in their 401(k) plans is probably in the hundreds. Nor does a company’s share price have to collapse to be a long-term threat to employee retirement security. All it has to do is underperform the market for a long time. Over the last five years the S & P; 500 index has provided an annual return of 18.66 percent, while the average of 6,589 domestic companies in the Morningstar stocks database has provided a return of 2.43 percent. Over the last 10 years, 740 of the 2,285 domestic companies with 10-year records have provided annualized returns of 6 percent or less. This means millions of workers have essentially missed the greatest bull market in history, simply because their employers contributed company stock instead of cash that could be more broadly invested. Is there a way to avoid the Lottery Effect? Not while many companies meet their matching requirements with shares of company stock. Is this a serious issue? Absolutely. Years ago, traditional defined-benefit pension plans the kind that take responsibility for investing and deliver retired employees a monthly check for life came under fire because only some employees got pensions. Others were closed out altogether or received reduced pensions because they had changed jobs. Congress held hearings. Laws were changed. Plans were reformed and regulated. Indeed, pensions were so well-regulated that the traditional DB pension is now the dodo bird of employee benefits. Their population declines year after year. The Lottery Effect introduces the same kind of uncertainty to the rising world of defined-contribution 401(k) plans. Sometimes it’s feelings, not numbers Question: I am retiring. My problem is whether to take a lump sum or a monthly annuity. I have talked to several money managers and they all say the same thing: They all want to manage the lump sum for me. My package is around $400,000 if I elect the lump sum, or it will be about $3,300 a month for the rest of my life. I am 65 and in excellent health. My wife and I have around $600,000 in the stock market, mostly growth funds. I have about $150,000 in an IRA, and my Social Security will be about $1,400 a month. We also own three rental houses that are paid for plus our own home, mortgage-free. I am inclined to take the monthly payment. We would not have to make a significant change in our lifestyle on $4,700 a month. My wife isn’t sure. She is eight years younger than I am and worries about what she would live on when I die. What do you say? T.S., by e-mail Answer: Talk with the benefits manager where you work. While most defined-benefit pensions are offered in the form of a “life only” option a monthly income that ends when you do you can’t take that option without a specific sign-off from your spouse stating that she understands the consequences of the life-only decision. Most retirees choose the “joint and survivor” option. This pays a monthly benefit for the worker’s life, followed by a reduced benefit for the surviving spouse. Typically, the survivor benefit is 50 percent to 75 percent of the joint benefit. . While I agree with your feeling that there are sufficient assets to take care of your wife after your death, you need to address her feelings with some more specific plans about how her income will continue in the event of your death. Then you can both relax. Questions about personal finance and investments may be sent to Scott Burns, The Dallas Morning News, P.O. Box 655237, Dallas, TX 75265; by fax: (214) 977-8776; or by e-mail: scott(at)scottburns.com. Check the Web site: www.scottburns.com. Questions of general interest will be answered in future columns.

While acknowledging some responsibility for the collapse of Stan Lee Media, ousted company co-founder Peter F. Paul says there’s plenty of blame for the dot-com’s demise to go around. The Encino-based Internet company suspended operations and laid off most of its staff last month amid a flood of red ink and an investigation by the Securities and Exchange Commission into alleged misuse of company funds by former employees. The company’s Internet sites remain in operation while its top brass struggle to secure financing to meet its obligations. Company President and Chief Executive Officer Kenneth Williams said he is aware of the SEC investigation, but would not elaborate further. In a written statement, Williams said, “The company plans to cooperate fully with the investigation and to turn over to the SEC any information in its possession which may be helpful to the investigators.” The company says the SEC is looking into the alleged illegal trading in company securities by individuals and outside firms, as well as the alleged misuse of company funds by former employees. Company officials discovered evidence of the apparent misuse of funds during an internal investigation, according to an SEC filing. An SEC spokesman said he would neither confirm nor deny there was an investigation being conducted. The company has terminated a contract with con-sulting firm Paraversal and with its co-founder, Paul, who had been Stan Lee Media’s driving force for much of its existence. A contract with Stephen Gordon, the company’s executive vice president of operations, was also canceled. Paul said last week that his ouster was part of the company’s reorganization under a new management structure and not the result of any wrongdoing. “All the reorganization charts didn’t include a spot for me,” said Paul, who remains a major stockholder of Stan Lee Media, with about 2 million shares. “It’s all part of a general restructuring,” he said. But Williams told Dow Jones News Service last week that Paul was fired “for cause,” though he would not comment when contacted by the Business Journal. The probe into the company’s dealings comes after it suspended operations Dec. 16, citing its inability to secure further financing. As a result, all but a few of the company’s 129 employees were laid off. A handful remain to conduct a strategic search for more funding, officials said. The value of Stan Lee shares had fallen to 13 cents when trading was halted Dec. 18. Nasdaq officials have asked the company for information about its operations. “The sooner they provide us with information, the sooner they can begin trading again,” Nasdaq spokesman Mark Gunderson said, adding that the specifics of the request are not matters of public information. Stan Lee Media’s value peaked last February when shares traded at $28.18 apiece before dropping to 13 cents at its final close. Sources at the company said the company namesake and founder Stan Lee may seek agreements with television and film producers to pursue projects that would not require Web-based animation, as had been the company’s initial strategy. Lee himself could not be reached for comment. Analysts tracking the stock said they would not comment on the company’s troubles, citing an ongoing SEC investigation. But company General Counsel Rick C. Madden said last week that short sellers contributed to the stock’s rapid plunge. Paul said the company’s so-called “death-spiraling financing” was to blame. Issuing convertible securities with no floor price for converting into common stock forced the stock’s downward spiral. Such financing, he explained, forced the company to issue more stock and pushed down its value and gave investors a bigger stake in the company. Madden said margin calls contributed to the company’s woes. Paul, who owns 27 percent of the company stock, admitted he was forced to sell some of his holdings during the selling binge. “I never really intended to sell any of my stock,” he said, explaining that the shares were liquidated against his wishes because they were security for a loan. In its last nine trading sessions, the company lost more than 70 percent of its value in furious trading that saw unprecedented volume for the stock before it came crashing down to earth, much like some of Stan Lee’s superheroes. From its August 1999 launch to the end of the third quarter in September 2000, the company had $1.2 million in revenue, lost $26.9 million and burned through $22 million of its cash reserves. Although the company’s fate is not unique in the dot-com world, its rapid decline is. Two months ago, the company agreed to a deal that would give it $2.2 million in cash and an equity line of up to $40 million from investors that was pegged to stock performance. As a so-called glamour e-stock featuring well-known comic book writer Stan Lee, the company got off to a rousing start with its initial public offering in 1999. Lee is known for his popular comic-book heroes Spider-Man, the Hulk and the X-Men. But his involvement on the company’s business side has been said to be marginal. He left most of that to his management team, while he himself concentrated on the creative side of the business. Although the company’s fortunes have headed south, Lee’s popularity has soared with the creation of two made-for-Internet superhero series, dubbed “The 7th Portal,” and “The Accuser.” With new so-called “Webisodes,” the company’s interactive Web sites in the U.S., Latin America and Mexico gained plenty of attention from Web surfers, but little revenue.

Bucking the recent trend of south-heading e-tailers, Guitar Center, Inc. has shown a 123 percent jump in Internet sales, with more of the same forecast for the rest of the year. According to its most recent numbers, the Agoura Hills-based musical instruments retailer’s Internet business showed $16.5 million in sales during the fourth quarter of 2000 a substantial increase over the same period in 1999 when it raked in $7.4 million. Analysts expect that strength to carry over into the new year. “One of the things that Guitar Center differs from other retailers in is the demographics of its customers,” said Justin Cable, an analyst with B. Riley & Co. in West Los Angeles, which tracks the company. “The customers they serve are often musicians who are in the music business, who like to try out the latest products regardless of how much it may cost and that carries over into their e-business.” The company’s year-end figures showed growing strength in the market, despite an overall slowing economy nationwide. Total net sales for the company in 2000 were $786 million, a 27 percent jump from 1999’s $620 million. Larry Thomas, the company’s chairman and co-chief executive officer, credited the upsurge to successful promotional and marketing efforts along with competitive pricing of top-of-the-line musical equipment. “We were able to successfully counter the recent retail industry softness and December weather-related impacts throughout many regions of the country through aggressive promotional and marketing activities,” he said. Bruce Ross, chief financial officer, said the company’s expansion and increased presence in the market place is borne out by the year-end numbers. “We saw sales growth in every aspect of the company while at the same time we were opening new stores,” he said. Last year, Guitar Center opened 14 new stores, bringing its total to 83 in 25 states. This year, the company plans to open 12 new stores. The first opened its doors last week in Philadelphia. The company’s Internet sales site was one of the company’s brightest spots in 2000, racking up $45 million in net sales, a 171 percent increase over the $17 million it sold in 1999. Partly responsible for that is the high-end nature of the business, said analyst Justin Cable. “Their customers are musicians and they’re technology-oriented and they’re taking advantage of the Internet,” he said. The e-business success comes as the company joins forces with Musician.com, a new web site founded by music industry professionals, allowing musicians to create, manufacture and distribute their music via the Internet. Under a Dec. 14 agreement, Guitar Center and Musician.com will cross-market products directly. Guitar Center has invested $3 million in the new venture. Store sales, however, still took the biggest part of overall net sales with $652 million, a 22 percent increase over the $537 million the company took in during 1999. Sales from new stores added $79 million, accounting for 69 percent of the overall increase in store sales. The company’s catalog department also showed strength in 2000 with a 33 percent net sales jump, going to $88 million from $67 million in 1999. Cable said Guitar Center’s key position in the market is encouraging to investors, but he cautioned that competition is intensifying from the privately-owned Mars Music stores and Sam Ash Music is continuing to grow. “Mars Music doesn’t have as many stores, but they have a lot more square footage than Guitar Center stores, so their sales figures aren’t as high as Guitar Center’s, but they’re getting close,” he said. Mars Music, which does operate an Internet sales site, would not comment on its sales figures. Sam Ash does not have on-line sales. Sam Ash stores are also taking aim at Guitar Center with a moderate expansion of its own, with plans to open several new stores this year, Cable said. “But their competition is mainly mom and pop music stores in many markets,” Cable said. Despite these upturns, Cable does not consider the company a “buy” just yet. Guitar Center’s $56 million debt, which includes a line of credit, along with $67 million in long-term debt, is reason for caution, he said. “If they had less debt, they’d get my recommendation,” he said. Meanwhile, the company is poised to continue its expansion with plans to open 12 new stores, including some in New Jersey, Pennsylvania and California.

Business leaders, elected officials and local interest groups in favor of, opposed to, or just plain neutral on Valley secession are among those gearing up for what is being touted as the first local, non-political brainstorming session on the issue. Organizers of the day-long forum, “Rightsizing Local & Regional Government: A Symposium,” say the event, slated for Feb. 5 at the Sheraton Universal Hotel, will mark the first academic discussion on the feasibility and economic impact of secession. The panel includes a lineup of experts who will tackle a core of secession-related topics. The goal, organizers say, is to set aside political viewpoints and focus instead on the viability of a breakaway system vs. alternative systems using cities around the globe as a model. “I think a lot of what people have been talking about has been politically-motivated without a real sense of what’s out there on the academic level,” said Sam Staley, director of the Urban Futures Program of the Reason Public Policy Institute, one of four organizations sponsoring the event. “This really is, from my perspective, going to be a very academic approach, where we will talk about the potential effects and impacts of moving to smaller governments. There’s really a lot of very substantial academic research out there on this issue that has not been part of the debate in Los Angeles.” Staley said the speakers have been selected with the core issues connected to secession in mind. Those include the pros and cons of centralized vs. individual control over public services; how borough communities around the nation and overseas have managed or failed; and challenges to conventional wisdom about the deterioration of big communities in the so-called “New Economy.” “You are going to have a much better idea of what the impacts are going to be if the Valley breaks away from Los Angeles, or if the city tries to devolve more authority to the local areas,” Staley said. Panelist include: -Joel Kotkin, author of “The New Geography,” a senior fellow at the Davenport Institute for Public Policy at Pepperdine University and a regular contributor to The Business Journal; -Doug Munro, president of the Calvert Institute for Policy Research in Baltimore; -Tony Travers, director of the Greater London Group and lecturer at the London School of Economics; -Ronald Oakerson, author of “Governing Local Public Economies” and former senior analyst with the U.S. Advisory Commission on Intergovernmental Relations. “I think what local business people would find out is that this conference is going to tell them what they can expect if they consolidate or evolve,” Staley said. “So it will help them assess what the implications will be on their businesses and their livelihoods.” Elected officials, too, are being urged to look upon the event as a fact-finding mission with more than political gain at stake. “I’m sure (elected officials) are struggling with the same issues as local business people,” said Staley. “You see the secession movement in the Valley, but you don’t know if there is actual evidence to support the feasibility. So elected officials can come out of this knowing whether this is just politics, or whether it’s politics that can become policy.” Bruce Ackerman, president of the Economic Alliance of the San Fernando Valley, also a sponsor, agreed the intent is to steer clear of the hot-button issues and focus on how smaller governments either work or don’t work. “Those of us who have lived here for any length of time have been dealing in various degrees with the issue of, is the San Fernando Valley really getting its fair share within the city of Los Angeles?” Ackerman said. David Fleming, chairman of the Economic Alliance, said elected officials were not that keen on the idea of a borough system vs. secession a few years ago. But now, “a lot of elected officials and the candidates for offices have said they are interested in attending because they are saying, ‘Hey, if there is an alternative to secession, let’s hear it,'” Fleming said. “I think that this symposium is going to be looking at the academic and economic pros and cons of reorganizing the size of Los Angeles,” said Richard Close Chairman of Valley VOTE. “This, as far as I know, is the first gathering of its kind on this issue to be held here in Los Angeles. And the questions that I think and hope will be discussed is, is this process good for the areas that will break away and, more importantly, will it be good for the smaller Los Angeles that remains?”

Los Angeles is one of four contenders hoping to secure a bid to host the Gay Games VII and Cultural Festival in August 2006. Several venues in and around the San Fernando Valley are being targeted as possibilities for competitive sporting events and related festivities, including Balboa Park, the Sepulveda Dam, Griffith Park and locations in the Burbank area. Organizers and supporters of the games say the event, should the city win the bid, would generate significant revenue opportunities for local businesses, tourism and municipal services. “We are anticipating the games to have anywhere from a $400 million to a $500 million fiscal impact on the local economy, based on previous games and projections for growth,” said Shamey Cramer, founder and executive director of Los Angeles 2006 Inc. His committee is responsible for submitting the bid for the city. Cramer has set a preliminary operating budget of $23 million and is projecting between $100 million and $150 million in direct spending. The games are expected to draw an estimated 24,000 participants and some 250,000 visitors. If those numbers hold up, they would represent a significant, but not surprising, increase over 1994, the last time the games were held on U.S. soil, in New York City. “In 1994, they had 11,000 participants and that’s pretty consistent, because every time they’ve held the games, it’s basically doubled in size,” Cramer said. Other cities vying for the games are Montreal, Atlanta and Chicago. The 1998 games were held in Amsterdam. According to Cramer, organizers in New York produced the event with a $10 million budget and a fiscal impact for the city of roughly $250 million. Kathryn Schloessman, president of the Los Angeles Sports & Entertainment Commission, a subsidiary of the Los Angeles Convention Visitor’s Bureau, said those numbers, do indeed, appear to be on target. “The reason we are so much in favor of hosting the games is it’s a huge potential for tourism and that’s what we do,” said Schloessman. “Those are key numbers for us. Our mission is to bring major sporting and entertainment events to Los Angeles that positively impact tourism and the Valley benefits directly from anything we do.” Good time to be in L.A. Schloessman said it’s too early to predict the city’s chances of securing the bid, but added that the timing of the event puts the city on solid footing. “The games are held during the summer time and this is a place people want to be in the summer,” Schloessman said. While Schloessman said it’s premature to say how many local vendors would take part, the cultural festival linked to the games is also expected to offer significant revenue opportunities for Valley businesses. “That’s more spending and more enjoying,” Schloessman said. “The organizers are big on the whole inclusion of as many vendors in Los Angeles as they can secure.” Schloessman said the bureau and her commission have worked in tandem to help back organizers with everything from locating potential venues, lining up cash and in-kind sponsorships, to soliciting political support from elected officials. “This is the kind of business that we want,” she said. “They have a lot of sponsorship revenue lined up and I was very impressed with them when they told us what they had already managed to accomplish.” According to Michael Jimenez, vice president, public affairs for the bureau, there are no firm estimates yet on how many hotel rooms the games could secure for the area. However, he said, roughly 40,000 room-nights were sold in connection with the New York games and, if that figure were to merely double, the impact would still be a huge boon for local hotels. “If you did 40,000 room-nights in Los Angeles, the direct spending impact would be $16 million,” Jimenez said. “Now we don’t think for one second that will be what Los Angeles would do. By 2006, the attendance would have quadrupled and, with the projection of 250,000 visitors, that’s a huge amount of people coming into Los Angeles.” “The reason we are so excited about this is that even if it’s just double, that’s over $30 million of economic impact, and that’s a huge thing,” Jimenez said. “It’s such a tremendous event to land that we aren’t concerned about overestimating the upside. We know that on the conservative side, it would be the largest event to come to Los Angeles over the five-year period.” The first Gay Games were held in San Francisco in 1982. The event was founded by Tom Waddell, a former U.S. Olympian who placed sixth in the decathlon at the 1968 Olympic Games in Mexico City. The 2002 Gay Games VI will be held in Sydney, Australia, using most of the same venues used for the 2000 Olympic Games. Organizers there are planning on an operating budget of $15 million and expect roughly 18,000 participants, Cramer said. The host city is required to offer 22 core sporting events, ranging from aquatics to volleyball. But they also have the option of adding as many as eight more events for a total of 30, which Cramer’s committee has chosen to do. “We are going for the full 30 because we think, with North America being the strongest base, we will see the draw for those events,” he said. Ticket prices should range from $10 to $20, with higher attendance figures projected for final events. West Hollywood has been selected to serve as the Gay Games Center, or a primary hub for the event, with others located at UCLA and USC where athletes will also be housed. Cramer said plans are also in the works to construct a pavilion at the Pacific Design Center to house an exposition site showcasing the achievements of California-based industries. His organization is hoping to secure interest from local space and engineering companies, such as Boeing and JPL.