LOS ANGELES — NEW YORK -- Under cover of night last October, 68-year-old Los Angeles financier Meshulam Riklis and his 38-year-old wife, actress-singer Pia Zadora, crept out of their two lavishly appointed suites at the Trump Tower on New York's Fifth Avenue, according to a lawsuit filed by real estate tycoon Donald Trump, because they could no longer scrape up the $100,750-a-month rent.
The undignified exit could serve as a metaphor for the shifting fortunes of Mr. Riklis' financial empire. True, the couple still has matching Lear jets plus two multimillion-dollar Beverly Hills houses .
But the network of companies cobbled together by the Istanbul-born wheeler-dealer over the past 30 years appears to be in serious trouble.
Last Wednesday, McCrory Corp., the 109-year-old five-and-dime store chain and a centerpiece of Mr. Riklis' financial holdings, filed for federal bankruptcy court protection from creditors. The York, Pa.-based company, which operates 819 variety stores under a number of names, including McCrory, G.C. Murphy, J.J. Newberry, McLellan and Kress, said it intends to stay in business while it reorganizes.
A fixture in Baltimore, McCrory opened its first store in the city at 6311 York Road in 1955 and currently operates about a dozen McCrory's and a half-dozen Murphy stores in the Baltimore area.
The filing was the latest -- and perhaps the biggest -- in a series of financial reversals for Mr. Riklis.
Last December, his Las Vegas casino, the Riviera Hotel, filed for bankruptcy protection. Another company Mr. Riklis controlled until late 1990, E-II Holdings Inc., a spinoff of the former Beatrice Co., faces a class-action suit brought by bondholders.
And, in January a New York State Supreme Court judge ordered one of his companies -- formerly the conglomerate Rapid-American Corp. -- to pay developer Trump one year's back rent as well as legal fees and other costs.
Mr. Riklis was unavailable for comment last week, according to a spokeswoman for McCrory.
Mr. Riklis' stumble in the '90s befits a decade when companies built on debt are unraveling faster than spools on a loom -- for debt had no greater champion.
He told the Los Angeles Times in a 1986 interview: "I never used a dollar of cash. That was a Riklis principle: Money is to look at, not to use."
Not all of his holdings are in trouble. A private Riklis partnership owns the 230-store Springfield Mall in Northern Virginia that is doing well, and a family holding company owns American Recreation Corp., a sporting-goods company that Mr. Riklis estimated last month would earn $7 million this year.
But controversy has dogged his financial dealings.
In the E-II Holdings lawsuit, powerful investors such as money manager Forstmann Leff, Saul Steinberg's Reliance Group and CBS owner Laurence Tisch's CNA Insurance charge that Mr. Riklis "removed hundreds of millions of dollars in cash" from E-II Holdings, which includes companies such as Samsonite luggage, Culligan water treatment systems and McGregor sporting wear.
The scenario sketched by the lawsuit is vintage Mr. Riklis. It recounts a tangled skein of relationships that ultimately appear to benefit Mr. Riklis to the detriment of the company. Mr. Riklis bought E-II in 1988, then sold pieces of his other companies to it. In December 1990 he resigned from E-II, and bought McCrory from it. At that time, the lawsuit alleges, Mr. Riklis transferred more than $600 million out of E-II to fund losses at McCrory, and left E-II with about $350 million in questionable McCrory paper.
Last March, E-II defaulted on $1.2 billion in junk bonds. Those bondholders claim that Mr. Riklis siphoned funds out of the company when he sold those other companies to it, and allege that Mr. Riklis forced E-II to declare a $925 million "dividend" that equaled the $950 million he paid for E-II originally. Mr. Riklis has denied the allegations.
The entrepreneur married Ms. Zadora in 1977, and the two have long divided their time between New York and Beverly Hills. They have two children, daughter Kady and son Kristofer.
Mr. Riklis was perhaps the first corporate takeover artist. He grew up in Palestine, where his parents emigrated from Odessa in southern Russia, then moved to Columbus, Ohio, with his first wife and two children in 1947 to study at Ohio State and teach Hebrew on the side. In 1954 he moved to Minneapolis where he raised investment funds from brokerage clients at Piper, Jaffray & Hopwood.
Shortly thereafter Mr. Riklis employed low-rated, high-interest bonds -- later dubbed "junk bonds" and which he called "revolutionary funny money" -- to finance the purchase of Schenley, distiller of Dewar's scotch. Mr. Riklis was on his way to forging Rapid-American into a conglomerate made up of two office-machine concerns, some garment companies, the distiller and the variety stores.
By 1962, however, Rapid was close to bankruptcy after a stock market plunge cut the company's market value in half. But Rapid recovered and went on to acquire Playtex, B.V.D. and Schenley as well as Kenton Corp., owner of Cartier, Mark Cross and Valentino. By 1974, the company again hovered close to bankruptcy, but again, Mr. Riklis recovered.
By 1978, Mr. Riklis' complicated deals landed him in trouble with the Securities & Exchange Commission. The Commission objected to a series of transactions in which he sold off parts of Rapid to pay down its debt, then took personal loans from the buyers to help pay down his own debt. Mr. Riklis agreed to an injunction that forced him to separate Rapid's affairs from his private deals. He went on to add Elizabeth Arden and Faberge, the cosmetics businesses, to his empire.