Steven Posner accuses his father of looting firm

September 02, 1995|By Kim Clark | Kim Clark,Sun Staff Writer

Steven N. Posner has asked a Baltimore County Circuit Court to dissolve his father's Security Management Corp. -- one of the largest property owners in Maryland -- charging that Victor Posner is looting the company.

In a suit filed in Towson on Aug. 18, long-loyal Steven Posner turned on his father and echoed charges that have long been made against both Posners.

The 31-page document, filed on Steven Posner's behalf by Baltimore attorney Gerson B. Mehlman, asks the court to appoint a trustee to oversee and dissolve Security Management, which owns about 20,000 properties in Maryland.

In addition, the suit asks for more than $600 million in damages to settle Steven Posner's claim that his father improperly hid trusts that gave Steven Posner 25 percent of SMC stock and failed to pay about $27 million promised him for bailing SMC out of several financial scrapes.

Among the charges, Steven Posner alleges that the 76-year-old patriarch has demonstrated "erratic, irrational and rapacious conduct" by, for example, appointing to the corporate board of directors two former mistresses.

One of the new directors, Mr. Posner charged, is "in her 20s. . . . Her only qualification to be on the board appears to be that she has been in a close personal relationship with Victor Posner for a number of years."

The younger Mr. Posner charged that his father "plundered" his public companies until the courts forced him to stop.

After that, the son alleged, Victor Posner started looting the family's private holdings.

"Victor Posner . . . used the public companies to pay himself ridiculously excessive salaries. Now that he can no longer use the public companies for this purpose, it is believed that he uses SMC to pay himself a ridiculously excessive salary," Steven Posner charged.

"He has caused SMC to purchase substantial positions in various companies and then proceeded to ruin the investments with his irrational conduct," the son's suit charged.

Security Management may be best known locally for its controversial plan to develop Colvista, a 1,500-unit hillside housing community near Loch Raven Reservoir.

Security Management officials didn't return calls asking for comment yesterday.

But a New York lawyer who has long represented the elder Mr. Posner, Martin Rosen, said he thought it was "disgusting for a son to sue his father. The father has been good to the son over the years."

Mr. Rosen declined to comment on the son's allegations, saying a court would have to decide whether Steven Posner is owed any money.

The lawsuit splits a father-son team that had presented a united front for decades in their losing battles against allegations of financial misconduct.

In 1993, the two Posners were convicted of federal securities law violations in the same case that sent

Michael Milken and Ivan Boesky to prison. A federal judge barred father and son for life from participating in publicly held companies.

"It's like watching scorpions in a bottle," said Richard Kerger, a Toledo, Ohio-based attorney who was appointed by a federal judge to help watch over operations of one of the Posner's public holdings, DWG Corp., owner of well-known compa

nies such as RC Cola and Arby's Inc.

Mr. Kerger was one of three independent monitors who charged that the Posners looted Miami-based DWG. Mr. Kerger reported, for example, that in one year, Victor Posner charged the company for nearly $500 worth of business meals every day.

Mr. Kerger said he was surprised to learn of the lawsuit yesterday because Steven Posner always seemed "extremely loyal to his father."

Barry Goldsmith, chief of litigation at the Securities and Exchange Commission, was also surprised to hear of the lawsuit.

Some of Steven Posner's allegations in the suit "sound remarkably similar" to the charges his office filed against the Posners years ago, he said.

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