Chapter XIII • Out In The Cold
Sweet Success • The Albert Sweet Story
Chapter XIII • Out In The Cold
Following the death of Al’s good friend Don Pritzker, the President of the Hyatt Corporation, the company experienced a major shift in power. The new regime did not sit well with Al. This set in motion a series of events that would ultimately lead to one of Al’s darkest hours.
Yeah, we had a problem. Don Pritzker died in 1972 when he was only 39 years old and Jay Pritzker appointed his brother-in-law President of Hyatt. I thought the guy who had introduced me to Hyatt, Joey Amoroso, who was Vice President at the time, should’ve made President.
There were allegations that the person who got the job was not a good guy. But it was Jay’s brother-in-law after all, and I figured he’d find out. He eventually did and got rid of him, but in the meantime, I couldn’t work with the guy.
I said to Jay, who was the Chairman of the Board at that time and a very nice man, “Look, I’ve got a year left on my five year contract. I’ll sign any termination agreement you want. I will never be your competitor. I’ll help you find a replacement for me. The Pritzker family has been more than generous. But for the first time in my life, I’m working for a company that I can’t enjoy.”
I figured I had enough money by then. And really, it wasn’t just about money. I had a good relationship with the Pritzkers. I had a lot of fun with Don, and when he died, it was a real blow to me.
Over the course of the Hyatt deal, a deal which had netted everyone involved millions of dollars, Jay Pritzker and Al had come to respect each other. Not wanting to lose Al completely, Jay made an offer that would allow Al to re-acquire his original company. As a result, Al could return to being his own boss. It was a great idea.
So Jay said, “Ok, why don’t we sell your company back to you?” I replied, “I’d love to buy the company, except there’s one minor detail – when I sold you the company, we were doing seven million dollars a year. Now we’re doing thirty five million. I don’t have the kind of money needed to support the company.” And Jay said, “Well I do. I’ll give you a deal you can’t refuse. I’ll be your bank. And we’ll do this: We’ll set up a company called Newco to handle all the new business you get, and another called Oldco that will take care of all your existing business.”
In Al’s eyes, Jay Pritzker was a genius. The Old Company/New Company structuring was a brilliant idea, while his offer to loan Al money to buy back his old company was generous beyond words. Al took Jay up on his kind offer and agreed to pay the interest on the loan. But as the days continued, Al would begin to feel uneasy about the flow of money from his former partner and mentor.
I decided I wanted to end this borrowing. I’m not sure why now, but I’m sure I had a good reason. So we decided to try and find another company like us to merge with. Sandy Elster ran an ad in the Wall Street Journal explaining what we do, just to see what might spring up.
The following day, in walks these guys (we later called them the Dead End Kids) from a company called Frigitemp. The chairman, the president, and the treasurer all showed up to this meeting. They said, “What you do on land with refrigeration and air conditioning for restaurants and hotels, we do on the sea with ships and submarines.” It was essentially the same business only different. They wanted to do a stock for stock merger. Sandy and I thought it was going to be another Hyatt deal.
I didn’t know enough about these guys, but I figured they were on the American Stock Exchange and they had one of the big five accounting firms as their auditors. I never dreamed that such a company would do what they ended up doing to us.
For years, this big five accounting firm had been licensed in the United States to provide auditing, tax, and consulting services to large corporations. Those corporations fortunate enough to have them as their certified public accountants, saw it as a badge of prestige within the world of high finance.
Here’s what happened: The man who was handling the accounting for Frigitemp had a wife who was dying of cancer. The guys from Frigitemp got a hotel suite for him near the Frigitemp offices, and they had some ladies of the night pay him a visit. Soon, this accountant was being blackmailed by the Frigitemp guys. So he started manipulating the numbers on their behalf. When I looked at the numbers, their sales profits were as good as ours. I said, “Here’s another marriage made in heaven.”
We had already built a terrific air conditioning equipment manufacturing company. But before you knew it, Frigitemp started filling up our plant with a lot of work, and then not paying us for any of this work. I started to get really upset because the deliveries for my clientele were being delayed, which had never happened before. I told the Frigitemp guys that they couldn’t do this or else they were going to destroy our manufacturing company. They turned around and accused me of not being a team player.
I checked with my lawyer and we put them on notice that we were going to rescind the merger. I put their equipment aside and told them to come get it, because I wasn’t about to allow my company to be destroyed. The story showed up in the Wall Street Journal and my clientele began to ask what was going on. I started to lose their confidence.
We sued Frigitemp and they filed for bankruptcy. At that point, we really didn’t have a company anymore – we had lost it. It was the horror of my life.
We took action against the accounting firm because Frigitemp had no assets. Then they started playing this game where the lawyers and accountants all got rich by running up massive bills. It took seven years of legal and auditing costs to beat them, but we finally did. Some of them ended up going to jail. But in the process, we lost a lot of credibility.
At that point, Al decided it would be just too difficult to try and rebuild the company. Fortunately, there was a glimmer of hope nestled amongst the ruins. And it all had to do with some key pieces of real estate that Al had been able to hang on to.
Had we not succeeded with our legal claims against the accounting firm, and had I not had the foresight to retain some of our buildings when we made the Frigitemp deal, I wouldn’t be where I am today.
In the days that followed, this real estate would prove to be a major factor in Al’s ability to rebuild himself, and rise above the ashes of the Frigitemp debacle.