Real Estate Magnate Draws Shareholder Ire For Odd Deal Making
DALLAS -- At Transcontinental Realty Investors Inc.'s annual meeting, three men sat before a room whose audience consisted of several dozen empty chairs.
It was time to vote on a slate of directors "Please raise your hands," said Karl L. Blaha, the company's president, asking if anyone wanted a ballot. He looked around the room. "Obviously, there's no one to do that."
Indeed, no outside shareholders showed up at that meeting last October. Nor did any directors. Maybe that's because the real power behind Transcontinental has an office down the hall. His name is Gene E. Phillips.
The 63-year-old Mr. Phillips has long been one of the most controversial figures in publicly traded real estate -- which, in that famously eccentric industry, is saying something. Best remembered as the head of Southmark Corp., the Dallas real-estate conglomerate that collapsed in 1989 in a swirl of lawsuits, Mr. Phillips now presides over a $2 billion empire of garden apartments, warehouses and office buildings belonging to Transcontinental and two other public companies.
For nearly 12 years, a group of Transcontinental shareholders has been trying to wrest power from him, arguing in a San Francisco lawsuit that he has abused his position to milk the company's assets for his private use. He's also under siege from prosecutors: In June, a federal grand jury in New York charged Mr. Phillips and a top aide with racketeering and wire fraud as part of an alleged scheme to pay kickbacks to corrupt pension-fund officials in exchange for investing with one of the companies he controlled.
Mr. Phillips's attorneys say he hasn't broken any laws and has done right by shareholders. Mr. Phillips declines to comment. He and an affiliate, Basic Capital Management Inc., have filed separate libel lawsuits against Dow Jones & Co., publisher of this newspaper, over two earlier stories. Last month Basic Capital sought a temporary restraining order to prevent the reporter of this article and two former directors from disclosing allegedly confidential information. "You're not supposed to be talking to me," Mr. Phillips angrily told the reporter outside Basic Capital's offices. "You're going to get buried...."