With Friends Like These...

CompUSA and Latin America's richest man get a $450 million lesson from a Dallas jury: Friendship and business don't mix.

The YPO forum was supposed to be an informal place where members could relax and talk about personal finances, marriage problems or their own businesses. "It was a good place to just kind of lay your cards out on the table and say, 'Here is what I am doing right now; does this make any sense?'" McBride told the jury.

Lites, who testified at trial for the defense, said that McBride talked at YPO meetings about his ailing business. "In Larry's case, it was relatively negative on a consistent basis, having trouble with the devaluation of the peso, having trouble with getting paid by the customers, selling systems to getting stuff in there on time. It was a pretty bleak picture," Lites told the jury.

McBride, who one juror aptly described as comparable to the stuffy character Major Burns from the M*A*S*H television show, conceded that his irrigation systems enterprise had lost its luster. He initially sold equipment in the Middle East, but the Gulf War had made those markets tougher. As an alternative, he had tried peddling his products in Mexico.

Scott Scher, the lawyer who originally conceived of the CompUSA lawsuit.
Mark Graham
Scott Scher, the lawyer who originally conceived of the CompUSA lawsuit.
James Halpin, the former CompUSA CEO, never graduated from college, but he climbed the retail industry ladder, earning $300,000 annually by age 36.
James Halpin, the former CompUSA CEO, never graduated from college, but he climbed the retail industry ladder, earning $300,000 annually by age 36.

While his business struggled, McBride's friendship with the CompUSA CEO was thriving. Tired of commuting each week from Boston, Halpin moved his wife and children to a rented house in Highland Park within walking distance of McBride's home. The men's preteen children began to play together. "You know, families usually have a greater connection than just individual men," McBride testified.

In an interview, McBride wanted to avoid further details about his friendship with Halpin, as if despite the verdict, the events were too painful to recount. "I'll leave that to the others," he said when asked about the former CompUSA CEO's reputation as a verbal bruiser.

Before the litigation, McBride said he would have ranked Halpin among a circle of 25 friends but not among his five best friends. McBride says he dined with Halpin about once a month. "He was the kind of guy you did want to go hunting with. He always had a good joke."

But McBride considered the relationship unequal. "I knew and cared more about his personal situation than he did about mine. That's just the kind of guy he is," McBride says.

(Halpin declined numerous requests to talk to the Dallas Observer.)

In the late '90s, McBride and Halpin began to talk about franchising CompUSA, which had hit saturation point in the United States. "You ought to expand internationally," McBride remembers coaxing Halpin as early as 1995. "I asked him if I could look at it.'"

Halpin initially put him off. The CompUSA chairman had alternative projects. He was trying to buy the rival retail chain Computer City and establish a personal-computer factory.

By 1997, however, the picture had changed. Halpin had commissioned a $250,000 study about structuring franchises. He gave a copy to McBride. That summer, before McBride made his pitch to CompUSA's exec, Halpin had company lawyers give McBride a letter to take with him to Mexico to show prospective investors that he had exclusive rights to set up stores for CompUSA.

Before pursuing the plan further, McBride turned to Cunningham. A commercial insurance broker fluent in Spanish and a graduate of the Thunderbird American School of International Management in Arizona, Cunningham was a friend of McBride's and had a wealth of business contacts in Mexico. He had sold oil field equipment south of the border before turning to insurance, and nearly all his clients were Mexican.

A silver-haired 50-year-old, who speaks in a voice filled with conviction, Cunningham performed in sharp contrast to Halpin during the trial.

To the jury, Cunningham presented himself--literally and figuratively--as a Boy Scout. He testified that he was on the way to Boy Scout camp when he persuaded Ron Beneke to join the partnership. The trio formed COC Services, whose name is an acronym for Computer Overseas Corp.

Beneke, a longtime Dallas real estate investor, testified that he took an interest in McBride's plan because while growing up in South Texas he had witnessed the enthusiasm Mexican immigrants had for American retailers. "We knew the Mexican people, and we knew that the Mexican people really crowded into stores [in the United States] because the distribution system was so poor in Mexico," Beneke testified.

During the two years that the partners pursued the franchising effort, Beneke invested nearly $1 million--with Cunningham and McBride adding together about $65,000. With their investment, the partners paid lawyers fees to draw up contracts, salaries to McBride ($190,000 a year) and Cunningham ($150,000) as well as traveling costs. Then Beneke put up another nearly $2 million to pursue the litigation after the deal failed, with the other two partners chipping in $10,000 each.

Beneke is not, however, the face that the COC's lawyers wanted to present to the public. "We don't want him to be in the forefront," Scher said when declining for Beneke a request for an interview. "He is not the person doing the day-to-day stuff."

He is also not the person the COC legal team needed to advance its story of a betrayed friendship. But Beneke will most likely profit more than his partners will if a court orders any judgment to be paid to COC. Beneke's family trust now owns 50 percent of COC, while McBride and Cunningham split the remaining interest.

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