Leaves company in shambles

MISSING CEO

October 31, 1993|By Gary Cohn | Gary Cohn,Staff Writer

On the day he decided to drop off the face of the Earth, Hamilton Schmidt was tormented -- by both the embarrassment the impending collapse of his company would bring and the feeling that he had been betrayed.

His nightmare had intensified with each day for months, though there was no public display of the pressure he was under.

But two letters he sent on the very day he vanished -- Tuesday, Sept. 14 -- reveal a man who no longer could maintain his walk on the tightwire.

"I feel my mental and physical health is in jeopardy," Mr. Schmidt wrote in a one-page letter to his company, the Charter Group Inc. "I have lost my desire and drive to lead. . . ."

In a second letter mailed that day to his sister, Susan Schmidt, Mr. Schmidt confided that he was anxious about problems in his life and needed to get away. But troubled as he was, Mr. Schmidt's thoughts also turned to the company-sponsored softball team.

The team had been a source of pleasure -- perhaps the only one -- in Mr. Schmidt's life for several months as he alone knew that his company, one of the region's largest independent insurance agencies, was sinking deeper and deeper into a financial abyss.

Surely, friends and associates say now, Mr. Schmidt, the 38-year-old chief executive, realized that his most secret plan would unleash investigations, a manhunt for himself, and considerable worry for the financial security of his workers and clients.

Still, in his Sept. 14 note to his sister, he asked her to wish the softball team well in a tournament in Pennsylvania that weekend.

"Softball was his No. 1 love," says John C. Kidd Jr., a former Charter Group salesman and vice president who worked with Mr. Schmidt from 1984 to 1991. "If he had run the company as well as his softball team, Charter would have been a totally different organization."

Indeed, the investigation into Mr. Schmidt's mysterious disappearance unmasked the perilous financial condition of the Towson-based insurance agency and caused consequences unimaginable six weeks ago.

Both the state attorney general's office and the Maryland Insurance Administration are poring over the company's books, Charter's insurance business was sold, the firm filed for bankruptcy protection and the employee pension fund is in jeopardy. Meanwhile, Charter is seeking nearly $1 million from Mr. Schmidt and wants court permission to question his sister and his mother.

At the heart of the mystery is why Mr. Schmidt, who in nearly two decades as an executive had earned a reputation for integrity, fled without a trace and left his company in shambles. "I don't know if there are words to describe my feelings -- surprise is not adequate," says Donald Reinhart, Charter's former chairman and chief executive. "After 18 years of knowing and working with him, I had no reason ever to question his ethics or his morality."

Hamilton August Schmidt hasn't been seen since 12:45 p.m. on Sept. 14, when an employee of Chesapeake Cadillac-Jaguar dropped him off at Pennsylvania Station. He had hitched the ride after dropping off his 1992 Cadillac DeVille for repairs to a power window.

The employee, Gregory Winebrenner, presumed that Mr. Schmidt would catch Amtrak, but did not actually see him board a train.

The last time his employees saw him was two weeks before that, on Sept. 1. Mr. Schmidt had phoned the office after that, saying he was taking some time off to prepare for a crucial business meeting with the company's chief creditor on Sept. 16 in Hartford, Conn.

Metting missed

Employees were not surprised. Mr. Schmidt frequently gave short notice when he would not come into the office -- most often complaining of feeling ill, causing many to describe him as a hypochondriac.

But when Mr. Schmidt missed the Sept. 16 business meeting, people became concerned and began asking questions about what was going on at Charter Group.

That meeting had been demanded by ITT Hartford Insurance Group, which had financed Charter's employee stock ownership plan, but had become increasingly alarmed after Charter was nearly two months late in making the quarterly payment on its $3.6 million loan.

Tom Creager, general manager of ITT Hartford's Baltimore regional office, was in Hawaii at the time. He received an urgent call from ITT Hartford's corporate headquarters at 2 in the morning. The message, he recalls, was that Mr. Schmidt has failed to show up and that the early indications are "we have a problem."

After Charter was informed, it held an emergency meeting on Saturday, Sept. 18, attended by members of the board of directors, company lawyers and its outside auditors, Wolpoff & Co. Working long hours over the next week, the auditors discovered that Charter Group had lost more than $600,000 in the first nine months of the 1993 fiscal year. Only Mr. Schmidt had known the severity of the financial troubles.

"Rather than come clean, Hamilton Schmidt . . . gave false financial reports," says James A. Vidmar Jr., Charter's bankruptcy lawyer.

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