Big Bob ran his company with several priorities. First and foremost, he pulled cash out of that sucker like there was no tomorrow. If it was a cow he would have drained so much milk that the thing wouldn’t be able to stand and move to another plot to graze. Second, one of the family jokes was that he had to grow the company, just to give all of his kids a job. He treated Lefleur Homes as a giant employment agency dedicated to hiring his children. Third, he did whatever he could to lower his tax liability, which is generally a good thing, unless your business decisions related to this are detrimental to the growth and operation of the company.
A final priority was operating his company as a growing and profitable firm. This priority was way, way down the list of important priorities. It was such a low priority, in fact, that most years his company barely turned a profit. Mark Falwell was the poor bastard with the unenviable task of resolving these priorities. I’ll give the devil his due, though. If Mark had to dance around the accounting standards, he danced like Fred Astaire.
The cash suction priority was handled through any number of means. Before I met Big Bob and got to know the company, I had heard of these tricks, all legal, of course, but I had never seen any single outfit use them all. For instance, for many years, while the house was on the property, the electric feed was on the office with a subfeed going to a panel box in the house. That way the company paid the electric bill for the family. He used the same technique with his telephone bills, running the house line off the company switchboard. All the cars the family drove were company vehicles. The summer house on Sacandaga Lake was listed as branch office, so all the costs there ran through the firm. Whenever Big Bob and Harriet went out to eat, which was three or four times a week, the bills went through the company.
The most amazing technique, which sucked cash as well as lowered taxes, involved the other priority of employing his children. Since all of his children went to parochial school, which he had to pay for out of pocket, he had two basic choices. If six children were in parochial school at any one time, and if the yearly tuition averaged $3,300, he needed $20,000 to pay for it. Choice One — pay himself enough money so that after taxes he has twenty grand left over. Choice Two — hire all six kids at no show jobs for enough money so that they could pay their own tuition! Their tax rate was nonexistent.
Marilyn was just the first kid who did this. It got bigger, actually. Eventually, the kids were getting $5,000 or more a year, and would be expected to buy their own food, clothing, and other supplies. If they went to college, it continued, with their college tuitions. This lowered the amount Big Bob had to pay himself to care for his children, and moved income from his higher tax rate to his children’s lower tax rate. As far as I knew, the kids never actually saw the money, and Big Bob and Harriet controlled it completely. It was the most amazing scam.
The other problem related to family was that Big Bob put all his kids to work. Okay, lots of family outfits do that. Big Bob wasn’t the guy who invented nepotism. Big Bob simply took it to the extreme, and did it badly. He ran the company like his family. So, since in a good family (unlike mine) all the children get the same weekly allowance, apply that principal to the company. All family members get the same pay. Mark, who was serving as Big Bob’s general manager, got paid the same amount as Ruth, who was functionally illiterate, had an IQ in the high 80s, and cost us more money than we paid her. Sales managers, like Gabriel and Michael, were paid salaries — and you never pay a salesperson a salary! You pay them a commission, and then turn them loose to make as much as possible, but that would mean they might make more than their brothers. You had secretaries, truck drivers, setup trainees, and salesmen making the same money as the general manager of the firm.
Then there was the general corporate structure. Lefleur Homes was actually an amalgamation of any number of companies. The original farm was owned by Harriet, who then leased the land to Lefleur Homes (at three times the going rate for farmland.) Lefleur Homes was owned by Big Bob, not Harriet. Then, when we opened the Cooperstown facility, which I ran through the Eighties, he created a new corporation, Cooperstown Acres, so that if we discovered radioactive waste on the property nobody could grab Lefleur Homes. Lefleur Homes would lease the Cooperstown Acres property. To make it more interesting, Big Bob gave shares in Cooperstown Acres to all thirteen children. He did this stunt every time we started a new sales center, creating a new corporation, and then had one of the existing companies loan money to the other company. One side effect was that this allowed him to funnel cash, through rent payments, to family members who didn’t work for the company.
To say that this made everything ridiculously complicated would be an understatement! After he died, it took us five years and three family lawsuits to sort it all out. Some of the kids didn’t talk to each other for years.
It was a real eye opener when I discovered the extent to which Big Bob was draining the coffers. Through the Eighties I ran the Cooperstown office, and I was the first person to ever run divisional level profit and loss statements. Prior to this, they only ran them at the corporate level. Big Bob was so impressed by this that in the Nineties I was yanked to Utica and named the comptroller. This was all Big Bob’s idea, since I hated accounting, but short of quitting a really well paying gig, I had to do it. So, I started doing division level P&L statements throughout the company — including general and administrative expenses, the cost of running the headquarters.
You can’t figure accurate costing until you know what all the G&A expenses are, because a portion of those expenses have to be allocated to each division. As soon as Big Bob discovered this, he shut me down in no uncertain terms. I was not to examine the books in headquarters! Still, I soldiered on, since I was a good little comptroller.
It wasn’t that hard. If you know all the costs assigned to the divisions, and you know all the costs of everyone who works for headquarters, and you know all the other costs you can nail down, then you can subtract them from the total costs of the entire corporation. What’s left had to be the costs for Big Bob and Harriet, the only people not being accounted for until then. This is really a simplistic explanation, but if you look at the numbers carefully, you can work it all out.
By my calculations, which I told Marilyn and a few of her more responsible and senior brothers, by the mid-Nineties Big Bob and Harriet were pulling about fifty grand a month out of the company, or an average of about half a million a year. It was no wonder they could afford a house on an acre of waterfront on Sacandaga Lake, two boats, and fourteen weeks of time shares in Orlando (one week for them and one week for each child, whether they used it or not. Marilyn and I only used it three times in thirty years.)
Ultimately this left the company chronically cash poor. Everything you could see or touch was mortgaged to the hilt, in some cases with multiple mortgages, and the banks were constantly pushing Big Bob to tighten up his operation, and imposing rigorous loan covenants. It looked like they were being tougher than normal this year, and Big Bob wanted to find some money somewhere without those pesky restrictions.
Like his billionaire son-in-law!
In no way did I want to give him cheap money — he’d just blow it. The only discipline he acknowledged was the discipline required by the banks.