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 defense team, meanwhile, wanted jurors to see Beneke, a former trial lawyer, as the lead player. By doing so, they could show that both sides were putting hard, cold business decisions before friendships or alliances.

The defense team also wanted to focus on Beneke's decision in September 1999, unbeknownst to his partners at the time, to have his family trust buy $4 million worth of CompUSA stock. Their point: Beneke, too, profited from the sale of CompUSA to Slim. Beneke, they argued, was the one first responsible for bringing a litigation lawyer on the scene. He had made designs early on coming to the courthouse for a payday, the defense argued. "You will see that Ron Beneke is behind this lawsuit 100 percent," said defense counsel Mark Josephs.

McBride concedes that had he not known Halpin as a friend, his proposal may have been ignored, but he denies that CompUSA agreed to his franchise proposal solely based on the relationship. "The proof is the April 1998 executive meeting. That was a corporation that decided. That was not a deal between me and Jim Halpin," he says.

Mark Werbner led the team that sued Slim, Halpin and CompUSA. He so impressed the jury that its forewoman, a teacher, invited him to speak to her class.
Mark Graham
Mark Werbner led the team that sued Slim, Halpin and CompUSA. He so impressed the jury that its forewoman, a teacher, invited him to speak to her class.
Mark Werbner led the team that sued Slim, Halpin and CompUSA. He so impressed the jury that its forewoman, a teacher, invited him to speak to her class.
Mark Graham
Mark Werbner led the team that sued Slim, Halpin and CompUSA. He so impressed the jury that its forewoman, a teacher, invited him to speak to her class.

After getting the corporate go-ahead, the COC partners and CompUSA turned to their lawyers to draw up a franchising agreement. Nearly a year passed before the draft was completed. Even then, enough outstanding issues existed that the two sides only signed the top page--a point the defense lawyers emphasized during the trial. The defense played the COC partners' own attorney's videotaped testimony for the jury. "I'm not aware that the master franchise agreements were ever executed," testified Rob Vinson, who handled the transaction for COC.

Despite delays, McBride and his partners were confident enough of their exclusive arrangements that they exhausted time, money and shoe leather fishing for investors in Mexico City. In September 1999, the partners finally believed they had a whale to show Halpin: Carlos Slim Helú.

A mathematics instructor at the tender age of 20, Slim also helped out when he was young in his family's general store, called the Star of the Orient. Slim later became a floor trader at the Mexican Stock Exchange. Setting up a brokerage house of his own, he acquired the telecommunications powerhouse he presides over today. As chairman of Telemex, if Slim wished to stop all telecommunications in Latin America, he likely could. His reach stretches to Guatemala, Honduras and Brazil.

Before the Dallas jury in February, however, the 61-year-old Slim was, relatively speaking, a lamb.

"He didn't come across as domineering," says juror Nelda McGhee, a 73-year-old small-business operator. "He was just like any other businessman. Out for himself."

As early as March 1999, the Dallas partners had begun bumping into Slim's people as they sought Mexican investors. The first was Fernando Chico Pardo, who sits on the board of the Slim-controlled Grupo Carso. Chico asked COC for confidential business information about CompUSA, and the partners complied. At trial, Werbner unveiled a chart that showed Slim began buying CompUSA stock shortly after COC gave his ally Chico the nonpublic information.

In May 1999, McBride and Cunningham went directly to Slim's son- in-law Arturo Elias Ayub. Initially, Elias showed little enthusiasm for the proposal. "I am not delighted by what they are proposing to us. But it has to be checked with [Slim's son]," the son-in-law wrote after meeting with the partners in an internal company memo. In a postscript he added, "Today I would send them packing."

But by September 1999, Elias had a change of heart. It was this flip-flop that some jurors say helped them decide against Slim and his companies because it seemed so expedient for Slim's side and so exploitative of the Dallas partners.

One possible motive for Elias' switch may be that the Dallas partners had started talks with America Online's Latin American subsidiary one month earlier. COC and America Online were discussing an exclusive deal that arguably threatened to compete with Slim's interests in Prodigy. Both Prodigy and AOL wanted to make arrangements with retailers like CompUSA to have exclusive marketing deals. Under such arrangements, customers would walk into a CompUSA store surrounded by the Internet provider's logo and see its welcoming page on the computer screens. When they stepped up to buy a machine, they would be offered a deal for an Internet service contract.

Because of his Prodigy ownership, Slim wouldn't have welcomed another investor backing CompUSA stores coming into Mexico.

McBride and Cunningham were aware of that connection. They made sure that Slim's son-in-law knew they were talking to AOL Latin America.

On September 7, 1999, shortly after the Dallas partners had written to him about their AOL Latin America negotiations, Elias called COC. He asked Cunningham and McBride to fly to Mexico as soon as possible to discuss a joint operation. On the stand, Elias conceded that Slim requested he make the call.

In that same telephone conversation with Cunningham, Elias revealed another secret. "'Oh, by the way, did you know that we're now the largest stockholder in CompUSA?'" Cunningham testified Elias said. Grupo Carso had acquired almost 15 percent of CompUSA's stock.

Happy to have an investor, particularly one as rich as Slim, McBride and Cunningham flew to Mexico City the next day. They started negotiating an exclusive arrangement with Elias to work toward franchising CompUSA. The deal also called for the Dallas partners to stop talking to AOL Latin America.

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