Boise Cascade: The One That Didn't Get Away
Rodgers, William H. Jr.
Boise Cascade: The One That Didn’t Get Away by William H. Rodgers Jr. Last year Joe Curia was saying that you didn’t need excitement to sell a William Rodgers teaches law at...
...To Boise Cascade this was small stuff compared to the troubles their other real estate developments were bringing in...
...and Mrs...
...They, however, continue the big sales and TV push...
...By 1969, Boise’s sales exceeded $1 billion, and the company ranked 55 on Fortune’s list of the 500 largest American corporations...
...Mental Toughness Is Essential...
...Representative promotional developers have stated that of this sum, one third is spent for the land, engineering, streets, water supply, sewers if required, country clubs, lakes, etc...
...Another one is Lake-of-the-Pines...
...Bar XX Ranch, with 230 parcels on 5,000 acres, has one house-owned by a former Boise executive...
...You keep the options open: if the planners demand sewers, you promise sewers...
...brought a major action against the Boise land sales subsidiaries, and requested an injunction against fraudulent sales tactics at several projects...
...Read the sales manager’s message to headquarters announcing that the Lake Wildwood lots had been sold out: “Mission accomplished...
...For $1 8,000-$10,000 down...
...W. L. Mills, Boise’s director of governmental affairs, admitted to devoting 25 per cent of his time to helping candidates seek elective office: “If I can help get good people elected to office, I don’t have to baby-sit them...
...We stay around to see what develops...
...Another third is spent on advertising and sales...
...It invites promises of economic benefits...
...The crucial target-the end of time as far as the company is concerned-is the sale...
...Richards: As a company then, as a representative of the company...
...One misstep by a single executive does not a course of criminal conduct make...
...In any case, they will make the best decisions without any arm-twisting...
...At issue was the propriety of going ahead with a recreational development to provide homes for 20,000 people...
...Johnson: And one I can think of-of course, I am from down California way and one that I am thinking of is Incline Village...
...The case ended with a plea of no contest...
...Calm Down, Boys The dread of thousands of buyers coming unstuck from their commitments called for aggressive action...
...Richards: What projects of this nature, this size, have you undertaken, you and the company, and where are they located...
...Twenty years hence, when lot-owner Smith sues lot-owner Brown for polluting his well water with a septic tank, all will be conducted according to formal procedures...
...With the stock market acting sickly and inflation devouring the dollar, even a weed-covered parcel of the desert may look like a good investment...
...In 13 years, the company had grown 30-fold, consummated 33 mergers, and compiled a phenomenal annual growth rate of 33 per cent...
...Magic Lantern Show This process calls for no firm plan-it calls for a 40-minute slide show...
...This shows a number of parks and open spaces that we tried to design in the project...
...Here will be the golf course with a club house, a teen center, and a dance bandstand...
...The plaintiffs were not pleased that the value of a Boise share they got for their previous property on November 3, 1969, had plunged from $74.50 to $13.00 by June, 1972...
...On October 12, 1971, California...
...Enclosed for inspiration was a copy of a San Francisco Chronicle column by financial editor Sidney P. Allen, reciting the company line about “Who’s Hurt By Class Actions...
...I would say Incline Village...
...We propose that the road system be private...
...with the purposes of this ordinance” or some such phrase...
...Diamond XX Ranch, with 190 lots on 4,000 acres, has a single structure, the former sales office converted into living quarters...
...One Boise press release reported the trial court as holding “void” several of the state’s claims, but forgot to mention that a sweeping injunction had been entered...
...There is, still^, more modest consolation in the Boise story...
...Outlawed in Maryland, sued in California, investigated in Hawaii, Boise now watches in astonishment as its bit of the real estate pot of gold threatens to pull the whole company under...
...Boise Cascade was a relative newcomer to both the real estate field and the ranks of corporate giants...
...Misrepresentations about the case were liberally distributed to critical groups-the press, the company’s lot owners, and the shareholders...
...With its eye on the trends, in the mid-sixties Boise moved into the “leisure-living” business-the market for recreational communities...
...Director of the Torrington, Connecticut, health district: “I am endeavoring to get the real estate commissioner to lift their license to sell, as the sewerage problem solution is very dim and far in the future if at all...
...They pointed out that Boise had lost $40 million on its land operations...
...The question boils down to whether the planning commission thinks the developer ought to go ahead...
...Front-end cash requirements for new towns can be stiff,” says Business Week, “even for large corporations...
...Like the other development companies Boise recruited a crack sales team, drilled them in the best hard-sell tactics, and rewarded its aces...
...Experience proves it: Lake-of-thePines has 1,944 lots, 1,300 acres-and 100 houses...
...And Hansberger didn’t send the shareholders a copy of another internal company memorandum depicting intolerable conditions at the Ranch Calaveras project: The real question that has to be answered is [whether] Boise...
...in another area, the Boise task force patronized the hotel and restaurant of one of the county supervisors, who also received free advertising in the company newspaper...
...But if we believe that, why not believe that Boy Scout posters prove that youth is noble, or watch Love Story and believe its problems reflect those of our friends...
...There are shots of the area in its natural state, many of them taken from a helicopter, contrasted with multicolored plans for its development: Here is a picture of morning frost on the edge of ponds, there is one of the beautiful Olympics [In other shows substitute Poconos, White Mountains, Rockies, etc.] looming in the background...
...The legal system for land-use planning, born in a different age, presents few barriers to the smoothtalking lawyer, with his multi-colored charts and stable of experts...
...a county planning director was hired off the public payroll by Boise Cascade midway through a development project...
...Onorato got a two-year suspended sentence...
...I told them there was nothing like it along the entire Eastern Seaboard from Maine to Florida...
...For the corporation, the words are different but the result is the same...
...Nevada County, California, has lots enough to last 400 years...
...The realities of things being what they are, no one puts much hope on the first pitch...
...Bouncing from town to town, dealing out of a tin shack or a dusty storefront, he fleeces the endless stream of suckers ready to buy an acre of swampland or a desert tract as their stake in tomorrow...
...The California attorney general’s office: “This firm [ Boise Cascade] has developed a number of subdivisions in California of a highly speculative nature which have received the attention of local authorities because of misrepresentations and lot-owner dissatisfactions...
...To make sure that these nonbusiness uncertainties don’t interfere with the smooth business calculations, companies like Boise divert some of their manpower from selling the lots to buying the government, or at least to influencing it to listen to reason...
...As Harold Berliner, the district attorney of Nevada County, California, said: The total price of lots in one of these promotions can reach $50 million, and they can be sold out in a year or two...
...But like two-bit political bribery, land speculation has become big business, and big businesses like Boise Cascade have moved in...
...Where do you want us next...
...in another county, the head of a project which was purchased by Boise saw fit to take out a $40,000 life insurance policy from an obscure mid-Western company, through its local agent, one of the county supervisors, while another supervisor was awarded a sizable campaign contribution and yet another was graced by the project’s purchase of three automobiles from his local dealership...
...Brothers Under the Skin Like the other big companies who have entered land development, Boise discovered that the rules of the old tinshack huckster are remarkably similar to the dictates of modern business...
...There was, for example, that unfortunate incident during the summer of 1967, when a U. S. Land subsidiary, along with Bob Onorato, was indicted by the Nevada County, California, grand jury for misleading advertising in connection with land sales...
...Johnson: Well, at the present time this is going to be the number one nicest thing that we intend to do...
...From its high of $74.50 three years ago, the company’s stock had fallen to 9 5/8 last month . Real estate speculation has long been a specialty of that durable American figure, the huckster...
...But the speculator persists where the homeowner is defeated...
...Boise spokesmen admit the building rate at its developments may be only one or two per cent a year...
...The company merged with trouble back in 1967 when it took over United States Land Corporation, which was the predecessor of Boise’s land development division, now known as Boise Cascade Recreation Communities Corporation...
...It was “foreseeable,” plaintiffs charged, that fraudulent practices “would materially impair Boise’s business and its ability to market its recreational properties to the public...
...After that, it’s on to another tract...
...Boise met this novel challenge by resorting to an ancient technologydeceit...
...It comes as little surprise that not just anyone is eligible for slices of this profitable pie...
...if somebody has heard of eutrophication, you say that it can’t happen in your company’s lakes...
...This philosophy can lead to some amusing before-and-after comparisons: A promise of paved streets brings dirt roads, a promise of access to a lake brings a title dispute, a promise of a dam and a lake may bring a dam and a lake-by 1980...
...Boise’s non-opposition is recorded in over 10 pages of formal objections...
...President Robert Hansberger himself wrote to the shareholders to quiet their concerns with a list of deceptions, including a claim that the company did not oppose a court restraint “since our policies clearly prohibit unlawful and improper practices...
...But when developers moved to the sticks, they found the going easier...
...Boise’s development at San Pedro, California, offers water to any lot owner lucky enough to find it at the bottom of a deep and expensive well...
...A pattern emerges from data collected by a Nader task force “Land and Power in California:” One local D.A...
...In June, 1972, the shareholders of one of Boise’s merger victims joined the bandwagon by filing suit against the company and its accountant, Arthur Anderson, charging a long list of fraudulent activities...
...all improvements will be installed and paid for,” although a $950,000 water district was to be paid for by assessing lot buyers at a rate of $32-40 a year for some 25 years...
...It seems that Onorato, who stayed on for a while after the merger to become a Boise vice president, ran a newspaper ad declaring, “There are no assessment bonds [and...
...Richards: What about the size...
...one group of pros needed seven hours to tour 18 holes, losing six to 12 balls apiece...
...Two forces drew the big corporations into land development: big money and high technology...
...Things weren’t looking so good for Joe Curia this year, nor for Ocean Pines, nor for Boise Cascade...
...It has moved into engineering and construction servicesfactory-built houses, on-site houses, mobile homes, and urban development...
...is going to budget appropriate funds to complete its legal obligations and some moral responsibilities to the Ranch Calaveras property owners, which are long overdue, by completing the construction of roads, utilities, and amenities with the same vigor with which the 3,600 M/L lots were sold, or are we going to continue the fire fighting as it arises to temporarily satisfy the governmental agencies and property owners...
...there are enough lots to house eight million people, not bad for an area with an expected statewide population by the year 2000 of 1,336,000...
...Fatigue Makes Cowards of Us All...
...Roughest of these is the cash needed for initial investments...
...In another era Mills could have come out and said that what is good for Boise is good for the United States...
...The smooth techniques of the real estate developers come by Lear jet to a political system more accustomed to wandering livestock, isolated junkyards, and real estate men with tested reputations...
...So, too, with storm drainage, roads, fire, police, and school services, building restrictions, public access to amenities, disclosure requirements for lot buyers...
...The sheep who sit on land-use boards or other agencies and the suckers who buy the land were displaying considerable resistance to supposedly foolproof corporate planning...
...Sales director Bill Gibbs was ecstatic as he approved the contract: “Boy, oh boy, oh boy...
...Hansberger told the shareholders that “less than one half of one per cent” of Boise’s 30,000 property owners had joined as plaintiffs, but forgot to tell them that named plaintiffs are hardly indicative of the number of complaining lot owners, and he didn’t tell them how many complaints Boise had received...
...Developments, the corporation’s sales magazine, reported on a training film for salesmen made with the cooperation of the late Vince Lombardi, coach of the Green Bay Packers and the Washington Redskins...
...The state of New Mexico, it is said, has subdivision roads that, strung together, would go all the way to Mongolia...
...Crash By the end of 1971 The Wall Street Journal was reporting “Boise Cascade, One Time Wonder Company, Loses Wonder, Investors and Profitability,” Many of Boise’s problems stemmed from its land-development fiascos: costs were up, sales down...
...The court later set the verdict aside as being excessive...
...There would be a big dam and some lakes...
...Typically, everything is informal, with no disclosure of documents the applicant wants to suppress, cross-examination of witnesses, or notice about what evidence will be weighed...
...U. S. Land had problems, and some of them carried over to Boise...
...When so many big crooks slip through an accommodating government net, when the public endures Wonder Bread and car insurance, it is cheering to see that, at least one time, the ploys didn’t work and the hucksters got caught...
...Boise’s golf course at Lake-of-the-Pines, designed for profit, not golf, would bring Jack Nicklaus to his knees...
...The state won a temporary restraining order, only to return to court charging continuing misrepresentations by salesmen...
...The law usually says that a rezoning request will be granted, or a planned unit development approved, where compatible with “the public interest” or if “in consonance...
...Boise Cascade: The One That Didn’t Get Away by William H. Rodgers Jr...
...And there is a lot of slack to take up before today’s buyers can sell...
...Decisions must be made about sewers or septic tanks, water pipes or wells, a million-dollar bond or a promise, utilities above ground, underground, or maybe in the future...
...The California Attorney General has over 500 complaints, and he says “it is reported that hundreds or even thousands of lot purchasers have complained to private attorneys, Boise, other district attorneys, and the Department of Real Estate...
...They charged phony accounting, suppression of fact, seat-of-the-pants investment, and something else: “The practices and business methods followed by Boise in the development and marketing of its recreational properties were improper, fraudulent, and false, as a consequence of which Boise was, at the time of the merger, and remains, exposed to substantial civil liability with the possibility of recision of [the] land sales...
...They must, after all, decide whether a city is to be built, and, if so, to what specifications...
...Wildwood is dead...
...The last third is profit...
...Tough Luck, Boise Up to a point this unbeatable combination of low investment, quick sales, and high profits was doing precisely what the predictions said it would...
...Boise had 26 projects underway in 12 states in 1969-nearly double the total of one year earlier...
...was hired by Boise to handle a water problem in an adjoining county...
...Those who can meet the tests-ITT, Republic Steel, Weyerhauser, Standard Oil of California, American Electric Power Company, plus land development specialists like Horizon Land Corporation, GAC Properties, Cavanaugh Communities, and the General Development Corporationcan bite into the pie...
...By 1969 its sales of recreation products, including resort land, amounted to $209 million-about 12 per cent of the company’s sales...
...Rumors put the total at $6 billion, which can return higher-than-average profits for the shrewd company...
...But I can get in to see them if I have to...
...But somewhere along the way Boise came unmoored, lost the caution which has made the other companies cover their flanks, started reaching for slices too big to be decorously devoured...
...The accumulation of hurts was gradual but telling...
...Last year Joe Curia was saying that you didn’t need excitement to sell a William Rodgers teaches law at Georgetown University...
...He sold them a lot that was six feet under water...
...His dicta for success: “Control the Ball...
...It tilled the soil and promoted the resort houses for Ocean Pines in Maryland, the Hideout in Pennsylvania, Woodridge in Connecticut, and Incline Village on the shores of Lake Tahoe...
...the mayor of a North Coast city is also Boise’s public relations man for the area and two of the five-man city council work for Boise and a third depends upon it for his business...
...Read the reports as they trickle in...
...Fraud made its first official appearance in May, 1972, when a California jury hit Boise with a $500,000 verdict for punitive damages arising out of misrepresentations on sales at the Klamath River Ranches project in northern California...
...Sales at Ocean Pines were shut down by the Maryland Real Estate Commission, upset because some of the salesmen had no licenses...
...development costs at another soared to more than 50 per cent of the project’s market value...
...We believe that we would be able to develop all the potable water from wells.’’ There would be a “private fire department...
...It requires making friends with the commissioners, buttering up the local editor, joshing with the Chamber of Commerce...
...Some of Allen’s other work has found its way into Boise’s sales kits...
...We will do everything we can to prevent that from happening,” they said, “but your help is needed...
...With these preliminaries out of the way, the game of beat-the-clock begins: trying to unload the acres before the plaster falls off the sales office walls, the customers ask about those promised sewers, and the local aldermen think again about what’s going on in their town...
...That ruse brought a few helpful headlines-“Boise-Cascade Suit Tossed Out of Court”-but didn’t bring relief from the company’s legal difficulties...
...One Born Everv Minute The sales psychology relies on two basic urges: the urge to live in the beautiful wilds and the urge to get rich...
...The recognized authority on the subject, the Office of Interstate Land Sales Registration in the Department of Housing and Urban Development, says it hasn’t the slightest idea of how many lots are sold each year, by whom, or for how much...
...It’s hard to say exactly how much money is in the business because no one keeps track...
...Mr...
...Commissions ran as high as 20 per cent, though 12 to 14 per cent was more common...
...Troubles, troubles: there is always the chance that this delicate financial equation may be upset by a local government...
...Boise’s ads for Circle XX Ranch were designed to make even the most cautious householder feel he’s throwing his chances away: YOU CAN’T BUY A BAD PIECE OF REAL ESTATE IN CALIFORNIA...
...The local planning commission or county commissioners ruling on a recreational development usually will be making the most important decision of their public lives...
...Private suits were soon to follow...
...still another project got a go-ahead to develop with septic tanks, then was forced to come up with $6 million for a sewer system...
...In recognition of his achievements and status, Boise top executive Robert Hansberger was selected in 1970 to serve on the President’s National Industrial Pollution Control Council...
...There would be a boathouse located at this point that would have a lounge, boat service area, and clean, well-lighted, heated restrooms...
...if they’re worried about what the dams will do to the fish, you promise to protect the fish...
...Salesman Joe Curia created his own selling excitement: “I just told them how beautiful Ocean Pines was going to be...
...A few, and then this exchange with Boise’s Bob Johnson: Mr...
...The corporate analyst sees two variables: the cost of preparing the homesites, and the returns from sales...
...When the shareholders desert, the corporate ship is approaching the shoals...
...The companies must also be able to plan years into the future, to divide the labor up into minute parcels, and to command the appropriate degree of political respect...
...The process begins-and often ends-with a 40-minute slide show before the planning commission, typically composed of a real estate salesman, a bank clerk, and perhaps a former president of the local League of Women Voters...
...if the marina looks a little too big, you promise to make it smaller...
...The State Board of Equalization states: California property increases in value $1,000 every single second (In the time it took you to read the facts on this page, California Real Estate has appreciated in value by $1,000...
...Ignoring officials who still have some bite can hurt...
...Let’s pause for a bit of reminiscence, a slide show Boise presented to the planning commission of Kitsap County, Washington...
...Boise’s 35-40,000 lot owners in California were blessed with a message of concern “that the adverse publicity being generated may have a harmful effect on the value of the property you have purchased...
...The show takes 40 minutes...
...A few years ago, most major real estate development took place in the urban centers, whose governments were forced to acquire a semblance of competence...
...One lakeside project was abandoned in the face of an attack by those disenchanted with the idea of 1,300 new septic tanks draining into the lake...
...Johnson: Me as an individual...
...As Joseph Timan-whose Horizon Land Corporation lures buyers in with ads screaming “You Can Make Money Even If You Can’t Spell Albuquerque”-told a group of financial analysts, “as yet, a secondary market has not been created for the sale of these properties...
...Not so where the decision is whether to allow 5,000 septic tanks to pollute 5,000 wells...
...Richards: We should be complimented...
...The haunting refrain of the company advertisement was heard: “Boise Cascade does more than develop recreation communities...
...It would be comforting to conclude that Boise’s downfall proves the old morals: haste makes waste, crime doesn’t pay, and the company that reaches too greedily for the goods may get its fingers smashed...
...ROSS Horworth of Dover, Delaware, might not have looked like prime prospects when they showed up on a rainy January morning driving a car eight or nine years old, but Joe toured them, and sold them...
...To raise the already-high odds for a favorable hearing, many companies find that the time spent manuring the citycouncil fields yields good returns...
...But after a while, the accumulation of anecdotes conveys the flavor of the operation...
...As if in confirmation, Robert Hansberger followed with a stunning announcement that Boise was considering a $200-million charge against income (one of the largest single corporate write-downs in recent years), mostly in anticipation of a withdrawal from the recreational land business...
...New Hampshire’s State Planning Director: “If we hadn’t stepped in they would have been dumping that refuse from the 5,200-acre development into the lakes...
...Ranch Calaveras has 3,600 parcels, 5,200 acres, and nine houses...
...To get a healthy piece, companies must meet the financial and technological requirements...
...Once a small company locked into the lumber business in the late 195Os, Boise rode the merger movement into pulp and paper, plywood, packaging, building materials, office supplies, and the distribution of these products all the way to the retail level...
...State and federal laws intrude occasionally, but the big play is in local hands...
...You can get rich quick, all right, if you don’t mind waiting a century or so...
...Johnson: Nothing of this size...
...At its 12 projects in California, Boise had, by 1970, chewed up 63,000 acres (about 100 square miles...
...piece of Boise Cascade’s multi-million dollar Ocean Pines development on the coast of Maryland...
...They were, instead, a speculator’s come-on to the next eager speculator...
...While Boise formally rejected the speculative sell in 1970, its early Lake-of-the-Pines ads stressed that “the first investor makes the most.’’ And, of course, Boise is the first investor...
...Are there any questions from the Commission...
...Who can tell when the Main Streeters are going to overhear one of the pre-sale promises, or be suspicious about the project from the start...
...Under the circumstances, the company’s promises about lakes, parks, green belts, and beaches were not the syrupy song of a builder of cities luring future residents...
...This partnership between business and government means that planning for “governmental” relations becomes an ever more dominant corporate objective...
...Since the buyer has no intention of living on his property, this is just another reason for withholding the investment that would make it livable...
...In the long run, Boise Cascade will benefit most from this policy...
...All that’s missing from these pictures of a rosier tomorrow is someone to buy the house from the speculator who bought it from Boise...
...The major development decisions are now being made by backwoods boards that are hopelessly illequipped...
...This is what Boise did best...
...Disgruntled officials, disappointed lot owners, and investigative sleuths ganged up on Boise...
...The huckster stuck to one iron principle: buy low and sell high...
...This article is adapted fvom his book, The Corporate Company, to be published next year by Rodale Press...
...The people who intend to live on their bit of Boise land are often dissuaded when they actually see it...
...By manipulating each of these, he ends up buying low (putting not one extra penny into the sites before they’re sold) and selling high (devising sales pitches that will loose hordes on the sales office...
...I know that we have some back in around the Chicago area...
...Minimizing the business risk was the aim...
Vol. 4 • November 1972 • No. 9
