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The 150-store clothing chain, with shops throughout England, had performed quite well before Wettreich came on board. During his three years there, Bambers, which once earned as much as $3.5 million, began running in the red. According to court filings, it lost $7 million in 1983.
Wettreich quit in July of that year, sold all his Bambers stock, and moved to the United States. Two months later, Bambers went into receivership, the British term for bankruptcy, rendering its stock nearly worthless.
As chief financial officer, Wettreich presumably played a limited role in the company's rapid decline, but the timing of his departure was fortuitous--and conspicuous. In an article published shortly after Bambers announced its receivership, The Daily Telegraph reported that Wettreich, the son-in-law of the chairman, had been unable to aid accountants investigating the company's books because he had emigrated to Dallas, Texas.
The company's shareholders later sued six former Bambers directors, including Wettreich and his father-in-law. The suit charged that the defendants and the company's outside auditing firm had breached their fiduciary duties and run up $4.31 million in excessive costs. The suit also alleged the directors had improperly changed the method of valuing the company's stock during Wettreich's tenure. Ultimately, some of Wettreich's codefendants settled, allowing him to testify in later litigation that the case had been dismissed.
By then, Wettreich had long been a resident of Dallas.
Wettreich says his prime reason for moving across the Atlantic in 1983 was to give his three children a chance to grow up in the cradle of capitalism, which he determined was Dallas. "I made a decision to rear my kids in a pro-capitalist environment," he says.
Before moving his family, he had already started a fledgling resorts-development company based in Dallas, named Texas Country Gold, Inc. The company owned a country club called Country Gold on Cedar Creek Lake, 50 miles southeast of Dallas. "When I made the decision to emigrate," Wettreich says, "I started acquiring real estate in Texas."
Low-key and quiet, Wettreich seems the antithesis of the high-powered, polished pitchman. Outside the office, he favors flannel shirts and jeans. He seems to have happily shed the oppressive formality of his birthplace for the more casual style of Dallas. "I didn't like English taxes and I didn't like English weather. I don't want to spend a lot of time worrying about accents and schools."
By 1985, he had set himself up as a financial wrangler in Dallas, selling his Country Gold club and establishing Wettreich Financial Consultants. The new business focused on public companies, and soon began carrying out what would become trademark transactions: merging dormant public companies with fledgling private ventures to allow entrepreneurs to sell stock without going through the expense and hassle of an initial public offering(IPO).
Typically, a businessman who wants to raise money in the public market to expand must pay accountants, printers, bankers, and lawyers to meet the hefty Securities and Exchange Commission disclosure and filing requirements to launch an IPO. On average, those costs run between $100,000 and $200,000, according to Lawrence Steinberg, a Dallas corporate lawyer associated with Jenkens & Gilchrist. Then the entrepreneur must pay investment bankers a commission--usually about 10 percent of the amount raised--to market, or underwrite, the offering.
Wettreich offered entrepreneurs a way to dodge much of that trouble and expense by merging their ventures into existing public companies. Through press releases, Wettreich would promote a company's newly acquired assets, boosting the stock prices and--at least temporarily--the value of the company. According to deposition testimony, Wettreich's firm typically received a fee of $20,000 to $30,000 for such services. Wettreich could also make money if he had invested in the stock and managed to bolster the price.
Wettreich would scan financial reports and classified advertisements to find dormant public companies, concerns that were trading at low stock prices and had few, if any, performing assets. He would then place his own classified ads in newspapers nationally, announcing that he had clean, publicly traded shells to offer.
The practice was an enormous bookkeeping undertaking. Wettreich testified that he cannot even recall all the names of companies he acquired and merged with shells. SEC searches for companies affiliated with his name have yielded lists of more than three dozen.
The transaction that Wettreich does proudly recall produced Phoenix Network, a company now traded on the American Stock Exchange. In 1987, San Francisco entrepreneur Tom Bell saw Wettreich's classified ad offering a shell company for sale. Deeply frustrated, Bell had been trying unsuccessfully for years to raise capital for his business concept of selling trunk-line telephone service directly to companies and then going back and subcontracting the service from big common carriers, including U.S. Sprint.
Bell flew to Dallas to spend time with Wettreich and his family. "I found him to be a very straightforward guy," says Bell. "If he said he was going to do something, he did it."
Bell and Wettreich merged the start-up telephone-service company with an inactive shell company, christened the new entity Phoenix Network, and began selling stock.
It worked. Bell acquired the capital he needed to launch operations and the deal was also profitable for Wettreich. Bell estimates that Wettreich earned $2.5 million by the time he sold his shares and quit his company directorship in late 1989. Although Bell expresses disappointment that Wettreich pulled out so soon, he doesn't complain. Phoenix's stock price has continued to rise. The company is now worth about $105 million. "Danny makes things happen," says Bell. "He is just looking to hit the big home run."
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