By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
By Eric Nicholson
Lawrence McBride had reason to celebrate when he met James Halpin for dinner that spring night. With help from his pal Halpin, then chief executive of Dallas-based CompUSA Inc., McBride had just pitched a deal to expand the retail chain south of the border, a project he hoped would one day make him rich.
Halpin initially had been lukewarm about expanding the computer and software chain into Mexico, fearing that the market for personal computers there was too soft, but he nevertheless cleared the way for McBride--a Highland Park neighbor and friend--to sell the idea to his board.
Halpin purposely stayed away when McBride and his business partners made their presentation to other company executives on an April afternoon in 1998. The partners promised that if the company gave their team exclusive rights to open stores in Mexico, they would do all the legwork and find an investor. For more than a year, McBride had discussed the idea with Halpin, but on that day the CompUSA CEO simply introduced everyone and exited the boardroom before McBride launched his presentation. Halpin did not want to give the appearance that he was interfering, McBride says.
When the other CompUSA corporate officers liked the proposal, Halpin invited McBride to celebrate. The two men went alone to Bob's Steak and Chop House and toasted the Mexico plan; the CompUSA CEO paid the bill.
"Now you are on your own," McBride remembers Halpin told him. Just how little McBride could count on his friend wouldn't become clear until many months later.
Unfortunately for McBride, the idea of CompUSA in Mexico would transform into something altogether different for Halpin after McBride and his partners started wooing Carlos Slim Helú, reportedly the richest man in Latin America, to invest in their franchises.
Three years later, McBride's deal is dead. So is his friendship with Halpin. Slim owns CompUSA. Yet McBride still might become a very wealthy man, thanks to 12 Dallas jurors who taught CompUSA and its former chief executive a simple $454 million lesson: Friendship and business don't mix.
The verdict is an eye-popping amount even for Slim, the man caught in the middle of the deal gone bad. With a net worth of nearly $8 billion, according to Forbes magazine, Slim's various entities control the retailer Sanborns; the Mexican telephone monopoly Telemex; Mexico's largest restaurant chain; insurance, mining and manufacturing companies; Prodigy Communications in Mexico as well as a part of the U.S.-based Internet company; and a joint-venture Spanish-language Web portal with Microsoft. Since his investment company Grupo Carso paid $702 million in January 2000 for the 75 percent of the company it didn't already own, Slim also controls CompUSA.
In early February, after a three-week trial, a Dallas jury ordered CompUSA, Halpin, Slim and the Mexican financier's companies to pay McBride and his partners $90 million in actual damages and $364.5 million in punitive damages for breach of contract. The jury decided that they had unfairly squeezed McBride and his partners out of the franchising relationship McBride initially proposed.
Mark Werbner, the lawyer who took the lead at trial representing McBride's group, argued that Halpin, Slim and the financier's relatives and associates duped the Dallas businessmen. "You are going to hear a story, a true story, of greed, abuse of power and corporate conniving and how a friend sold his friend down the river, how Slim stole this company cheap," Werbner promised in his opening statement.
A San Antonio native with a nasal voice and hunched posture, Werbner does not dominate a courtroom physically, but he nevertheless impressed the jury with deft digs at opposing witnesses He impressed them enough that after the trial the jury forewoman, a high school French teacher, invited Werbner to speak to her students.
In contrast, Halpin, who enjoys the good looks of a television anchorman, a large head full of thick auburn hair and a prominent jawline, earned the disdain of most jury members. "He would sell his mother," one juror suggested in an interview after the trial. The panel targeted Halpin to pay personally slightly more than half of the punitive damages.
Halpin may yet slip away unscathed. The former CEO, who departed CompUSA two months after Slim bought the company, left with a golden parachute worth $21 million and a contract that might require CompUSA to pay any judgments entered against him. "If we had known that, we may have decided differently," says one jury member about Halpin's contract, which she read about in the newspaper after deliberations.
In a hearing last week, Joe Harrison, the lawyer Halpin employed after the verdict, joined the other defense counsel in arguing again that CompUSA never completed a deal with McBride's group and that Slim was never bound to invest in it. Therefore, they contended, McBride and his partners had no legal rights to claim anything when Grupo Carso announced it had bought CompUSA for $10.10 a share.
The story that the defense told was simple. McBride and his partners failed to deliver a viable Mexican franchise proposal for CompUSA. Halpin and his board, having been introduced to Slim by McBride, agreed when the Mexican financier offered to buy the company. Everything else--like a soured friendship--mattered little and, more to the point, called for guesswork. "The plaintiffs got the jury all stirred up speculating about phone calls and e-mails that might have been. They [the jury] wrote their own script," Harrison told the judge at the post-trial hearing last month.
No question, Slim's and Halpin's lawyers had a paper record--or rather the lack of one--in their favor. McBride and his partners could not produce any signed contract that showed they owned exclusive franchising rights. Any agreements that CompUSA had made with McBride's team had, on paper at least, expired by the time Slim bought CompUSA. Even one of McBride and his partners' own transaction lawyers testified in a videotaped deposition played at trial that the document the plaintiffs had submitted as proof of their proposed deal was never completed.
But arguments about documents and contracts pale when they must compete against the emotional tug of a deceived friend. The defense lawyers have asked District Judge Carlos Lopez to dismiss the verdict, and if they fail on that front, they say they'll ask to have the case retried. But, for jurors, the contrast between Halpin and McBride made the pickings easy. The contrast between Halpin and McBride was great. The former CompUSA CEO propped his foot up on a chair while testifying, as if in his living room in front of a television set, and referred to his former friend McBride as a "puppy dog."
McBride grew emotional and choked up on the stand.
The irony is that a Dallas jury stuck the Mexican owner of CompUSA with a whopping verdict because of the arrogance of an American CEO who claims he never really believed a Mexican market existed for his stores in the first place.
"In spite of all the time it took, it really was a pretty simple case," concedes Harrison. "But something got under the jury's skin."
When Scot Scher, the lawyer who filed McBride and his partners' lawsuit, speaks of Halpin, he quickly turns to what he calls "the personal incident in the elevator." During one of the days of the trial Scher found himself returning from a break riding in the same courthouse elevator as Halpin and some of his lawyers. Scher recalls that as he entered the elevator, Halpin turned to his counsel and said in a clear voice, "Something smells in here." Offended but undeterred, Scher greeted the former CompUSA CEO by name. "How are you, Halpin?" he asked.
When Halpin didn't reply, Scher says he joked to the defense lawyers, "I'm going to have to object to your client as non-responsive."
"Fuck you," Halpin blurted out, stunning everyone into silence.
The son of a Chicago fireman, Halpin started work sweeping floors 40 years ago at the age of 12. Though he did not graduate from college, he rose from being a worker on the truck dock to a top management position at Zayre Corp., a Chicago-based discount retailer, earning $300,000 annually at the age of 36. He subsequently took chief executive officer positions at BJ's Wholesale Club, which operated on the East Coast, and then HomeBase, a chain of 85 home supply stores based in California. At age 41, having accumulated roughly $15 million in net worth from executive stock options, Halpin retired. He returned to the executive suites in 1993, when CompUSA, then a 45-store chain on the verge of bankruptcy, recruited him to become its president and chief executive officer.
With the boom PC market of the '90s, Halpin expanded CompUSA to a 225-store chain. In 1996, a local business magazine identified him as one of the two highest-paid corporate executives in Dallas, earning $21 million annually in compensation and stock options. In 1998, Business Week honored him as one of the 25 top managers worldwide.
In the retail industry, Halpin was the go-to guy when layoffs were coming. He cut 1,900 jobs in 1999, his last year at CompUSA. "Halpin is a tough guy. But he also has a big heart," says Theodore Daniel, a lawyer representing CompUSA.
Certainly, Halpin's bark is loud. McBride's partner Roger Cunningham, a commercial insurance broker, compared talking to Halpin to spending time with bored hunters in a duck blind: The language is always coarse. Halpin himself described the culture at CompUSA under his reign as "a cross between a college fraternity and a boot camp."
On the stand, Halpin seemed unaware of any gaps between his and the jurors' incomes. When Werbner asked about his lucrative parachute, Halpin complained, "I don't get $21 million. Just like everybody else in the world, you see $21 million, then you see what Uncle Sam gets, and then you see what you get afterwards, and it's nowhere near $21 million."
Halpin first met McBride in the early '90s. A newcomer to Texas who commuted to Dallas from his farm in Boston, Halpin joined the local chapter of the Young Presidents Organization, an exclusive group that offers membership to company presidents between the ages of 40 and 50. For rising young executives, YPO offers a chance "to get together and get advice from folks," Halpin testified. The organization has hundreds of members who are divided into smaller groups, called forums, of 10 or so executives.
Halpin joined the same YPO forum that McBride had been invited to enter less than a year earlier. An Abilene native and graduate of the University of Texas at Austin, the 49-year-old McBride owned an irrigation systems sales company. He didn't have the stature of Fortune 500 executives such as Halpin or Dallas Stars and Texas Rangers President Jim Lites, a member of the same YPO forum. But McBride, whose market included Mexico, had served as chairman of the North American Free Trade Task Force, a presidential appointment and prestigious post.
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.
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.
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.
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.
Before going to Mexico, however, McBride telephoned Halpin and told him about CompUSA's largest shareholder. "Nobody buys my company without talking to me," McBride remembers Halpin responded.
After making the arrangements with Elias, the Dallas partners were eager to show the CompUSA executives what they had set up and to introduce the son-in-law to the company. Within less than a week, McBride and Cunningham scheduled Halpin and other CompUSA executives to meet Slim and his son-in-law.
Halpin accepted McBride's offer to make the arrangements. But the CompUSA CEO, who had hired an investment bank to look for potential buyout candidates for the company, also initiated his own, separate relationship with Slim. Before going to Mexico, Halpin telephoned Slim and asked about the meeting that the Dallas partners had scheduled. "Would that be a good time to come down and meet you personally and talk to you about what CompUSA is doing and what this company that [you] bought 15 percent of does?" Halpin asked.
At Slim's office in Mexico City, Cunningham was awestruck. The edifice seemed more like a bunker than a place of business. Slim's quarters had no windows. Armed guards stood at the doorway.
Moments before Halpin and the Dallas partners entered Slim's well-secured chambers on September 14, 1999, the CompUSA CEO warned McBride and Cunningham that they may not get to participate fully. "I took [the partners] aside and said, 'I've never met Mr. Slim. I don't know what's going to be discussed. He's our largest shareholder. There may be a time that comes up where something is to be discussed of a confidential nature. If that comes up, I may have to ask you to leave,'" Halpin testified.
That little chat stung, Cunningham told the jury. "I felt damaged by that...that just immediately reduced us in stature at that meeting," he said.
What Halpin said after the meeting ended was the subject of much controversy at trial.
McBride and Cunningham both testified that he said, "I've got mine. I hope you get yours."
Cunningham said, "I was stunned by that. I thought it was so cold and harsh."
But Halpin testified that he never uttered that statement. Instead, he said McBride came into his office after a subsequent meeting with Elias in Dallas and said that he wanted to build a personal-computer factory in Mexico "I said, Lawrence, you don't have the ability...you don't know anything about it. Just do your franchise in Mexico. And he said, 'Jim I don't how many more years you are going to work, but here is what I know. OK. You got yours, I need to get mine.' And at that point, I just excused him from the meeting," Halpin told the jury.
Controversy also surrounds the conversation that Halpin shared with McBride and Cunningham at a dinner in Mexico City that evening after the first face-to-face meeting between the CompUSA CEO and Slim.
"'You guys ought to be thinking about an exit strategy,'" Cunningham testified the CompUSA CEO said. "I wasn't really sure what that was...but as I had time to reflect on it, it became clear that what he meant was, you guys are in the middle, you are in the way, you need to get out of the way." Cunningham remembered Halpin said something about offering him and McBride $5 million to give up their rights. "This business opportunity was significantly worth more than, a lot more than $5 million," Cunningham told jurors.
In an interview after the trial, Cunningham said he believes that Slim could have come up with some number that would have satisfied the partners. But the Mexican financier never tried before the lawsuit and never came close to the plaintiffs' expectations for a settlement sum once the suit was filed.
On September 22, 1999, Elias flew to Dallas to look over CompUSA facilities. Cunningham and McBride, who had invited the son-in-law to Texas and were still putting the finishing touches on their deal with Slim's companies, picked him up at the airport and took him to their office in Addison. "It was a very empty place," Elias testified. "There was no people there, only us. It was business hours. They told me they had a company, so I thought I was going to some offices that were running like a normal office, and I even thought they rent that place only for the meeting."
That comment didn't sit well with everyone on the jury. "A lot of people don't have big offices when they are starting out," says the juror McGhee.
During Elias' two-day Dallas visit, the COC partners were at his side almost constantly, but at trial Werbner made sure to dissect what happened for the few moments they weren't. Halpin and Elias rode alone in Halpin's two-seater Mercedes when they drove from CompUSA's North Dallas headquarters to the company's Fort Worth call center. With this, Werbner hit pay dirt--what jury members would later say seemed like evidence of Halpin's backstabbing of McBride.
In the car, Halpin said, "Mr. Arturo asked me, you know, given the fact that Mr. McBride has no experience in retail and no experience in franchise and no experience in computers, why did you give him the opportunity to come to Mexico?
"Truthfully, I said Lawrence was having some financial problems that were affecting his marriage, and I was giving him an opportunity that could help him. And his answer to that, 'So you're helping a friend.'"
In a brief interview with the Observer, Elias said that he thought Halpin was being "nice" when the CompUSA executive explained his reason for selecting McBride for the franchise operation. Asked if the CEO's comment didn't seem to be a betrayal of his friend McBride, Elias shrugged and suggested that no one would hold marital difficulties against a prospective business partner. "If I didn't do business with all the people who are divorced, I wouldn't be doing much business."
Shortly after that September 1999 car ride, however, as far as the Dallas partners were concerned, Elias dropped out of sight. In the months following his September visit, COC could not get Elias to answer multiple letters, faxes and phone messages.
"You also seem like a very courteous man...I'm just a little confused about why you ignored call after call and letter after letter and Federal Express after Federal Express?" Werbner posed to Elias during cross-examination.
"I think I did a bad job on letting them know that we not able to continue the negotiations and things happen and I'm sorry," Elias conceded.
But Elias' contrition only presented opportunity for Werbner.
"Did you ever [apologize] before doing so for the benefit of these 12 people? Did you ever say you were sorry to those people?"
"No," Elias acknowledged.
Not one to worry about overkill, Werbner also asked the father-in-law about the unanswered calls to the COC partners.
"Well, I think that when you are looking for a girlfriend and you talk with her and you have meetings with her and she decides not to go with you and you call and call, you need to understand that she doesn't like you anymore," Slim testified.
"But we are not talking 13-year-old people calling for a date. We are talking about grown businessmen who spent time and money with experienced business people discussing a major business transaction," Werbner scolded as the defense team stayed inexplicably mum.
Frustrated with the truncated communication with Slim's people, Cunningham and McBride went to Halpin in late October 1999 for help. The CompUSA CEO's response to them also relied upon a metaphor about unrequited love.
"You know, if you are trying to get a pretty girl to go to the dance, to go to the prom...if she won't go with you, then ask out a prettier girl. If I were you, I would send those guys a notice and tell them you're not going to continue discussion with them and that you are going to begin talking to other people about bringing CompUSA to Mexico," Halpin told the COC partners, according to Cunningham's testimony.
Halpin said he never told the Dallas partners explicitly to terminate the deal.
Nevertheless, believing they were following Halpin's advice, the COC partners sent what Werbner coined "The Prom Letter." In it, the partners terminated their deal with Slim's company and told Elias they were looking for another investor. No question, the Dallas partners' termination of Slim's obligations could have been perceived as helpful to Halpin if he wanted to ensure that he was not interfering with that contract when he negotiated the CompUSA buyout.
On November 4, 1999, Halpin flew to Mexico to discuss with Slim what Halpin insisted--during one of his most disingenuous moments at trial--was the "valuation" of the company rather than a price negotiation. In plain English, Slim was offering Halpin $7 a share for the company, about $1 more than its trading price, and the CompUSA CEO wanted more.
Halpin was not in the best bargaining position. CompUSA's stock had been battered that year, a reflection of the losses the company had suffered, including $12 million in the previous quarter.
For Halpin, the most personally lucrative scenario would have been a change of control at the company before his contract expired in August 2000. If the company was sold before then, Halpin's contract called for him to receive $21 million.
Mystified by his so-called friend's secretiveness about his trip to Mexico, McBride decided to follow Halpin. At the time, McBride was already under pressure from Beneke. The Dallas real estate investor, speaking regularly about the COC franchising deal with his lawyer Scher, was convinced that something was amiss. "You're getting hosed," Scher says he had warned Beneke.
On the same day as Halpin, McBride caught a flight to Mexico City and registered at The Four Seasons Hotel, where the CompUSA CEO always stayed. Halpin was not happy about the tail. He testified that McBride was following him around like a "puppy dog."
The evening after Halpin met with Slim, McBride found the CompUSA boss at the hotel bar. Halpin told McBride that he was talking to Slim about CompUSA's start-up Internet provider service.
McBride knew when Halpin's flight was scheduled and, troubled overnight by a growing sense that he was being duped, he went to confront Halpin at the Mexico City airport.
Halpin brushed him off.
With Halpin in Mexico and stories in The Dallas Morning News as well as the Mexican press about plans to open CompUSA in Mexico, McBride was the only one among his partners who held out hope that the deal might still work.
He sent Halpin a fax that warned his friend and tried to reopen the communications. "Since we terminated our discussions with Slim, Beneke would like some comfort from you on this matter."
Halpin testified that he took that fax as a threat. By November 15, 1999, he responded accordingly. For the first time, the Dallas partners claimed in court, Halpin started insisting that they meet a December 31 deadline to present a proposal with an investor behind it, and in doing so made it clear that he thought they weren't going to make it.
The trick was cruel, Werbner told the jury. With his "Prom Letter" advice, Halpin had been the one to suggest they terminate with Slim. And now he was insisting on a deadline they obviously wouldn't make without Slim as an investor. They did manage to serve up another potential investor, Carlos Gonzales-Nova, chairman of Commercial Mexicana, a retail company, but the CompUSA executives rejected him.
On January 25, 2000, CompUSA announced that the board had accepted the offer to sell Grupo Carso. At trial, Halpin insisted the negotiations to sell the company had started only after the Dallas partners terminated their relationship with Slim.
Two weeks later, the Dallas partners filed suit.
Shortly afterward, the moderator of the YPO forum to which Halpin and McBride belonged called a meeting to discuss what to do in the instance of one member suing another.
McBride was under siege from other YPO forum members for initiating a lawsuit against a comrade. At the meeting, his YPO friends gave McBride two and half minutes to explain his side of the story. Dallas Stars President Lites recounted at trial what McBride told the group members. "He was sorry that he felt he had to do it, and he felt he was being pressured by his investor here locally," Lites said.
McBride was kicked out of the YPO, Lites testified.
In the end, the jury had no sympathy for Halpin. "I'm sure he is a smart man or he wouldn't be where he was, but he was wanting to answer questions that weren't asked," says juror McGhee.
"I thought he seemed to be just a little bit arrogant, the way he carried himself on the stand," said one of the three male jurors.
During deliberations, both sides wondered nervously when they heard peals of laughter come from the jury's quarters. Several of the jurors say they spent a good deal of time laughing about the trial events. "It was like a Grisham novel, with all the emotions," says one juror, who asked not to be named.
Halpin, Slim and the Mexican investor's companies shared the same defense team at trial--an expensive combination that included New York-based attorneys from Cleary, Gottleib, Steen & Hamilton, the Dallas white shoe firms of Jackson & Walker and Jenkens & Gilchrist, as well as the jury expert psychologist Phil McGraw, a regular guest on the television show Oprah.
Despite its pedigrees, the defense team seemed strangely ineffective before the jury. "They were always diving down to the floor to get papers," recalls one member of the panel. One lawyer representing Slim's companies, who did not want to be identified, says that lawyers from the New York firm dictated the trial strategy and hamstrung the other attorneys.
The defense team made few objections while witnesses who were supposed to help its case were left helpless on the stand in the face of Werbner's aggressive questioning. "There is always a fine line between objecting too much and too little. In any event, most of what Werbner was doing was incurable," says Ted Daniel, a Jenkens partner representing CompUSA.
Halpin, who had been sharing representation with CompUSA, has hired his own lawyer, Gardere & Wynne partner Joe Harrison, who says he believes his client might have wanted someone fresh to look at the case after the verdict. But another lawyer from the defense side says Halpin reluctantly retained separate counsel after Slim determined that given how the jury put much of the blame on Halpin, Slim or his companies might have a conflict with the former CEO.
Before the trial, McGraw's consulting firm tried the case before a mock jury--a service for which his outfit charges $29,500 a day. (The plaintiff side had its own mock trial.) Nevertheless, at the real thing, the defense team seemed surprisingly unfocused about what it wanted in a prospective juror.
"We had a lot of considerations," says defense counsel Mark Josephs.
In a questionnaire passed out to prospective jurors to help the lawyers select who to seat on the jury, the defense team introduced queries to weed out CompUSA customers (it apparently didn't want to take a chance with dissatisfied buyers) and those with biases against Mexicans.
The jury was a racially and otherwise demographically varied group. Ages ranged from 20 to 70. Three blacks and three Hispanics were on the panel. A North Dallas homemaker and member of the Junior League was seated along with a Raytheon assembler.
Benningfield did not return phone calls for this story, but her fellow panel members say she handled deliberations generally with authority and decorum.
It didn't take long, juror Gloria Veloz says, for her to recognize that she had an uphill battle as one of the few panel members who didn't buy the plaintiff's case fully. Although she and Benningfield ate lunch together every day during the trial and remained cordial, Veloz says that the forewoman tried to persuade everyone to decide her way. Veloz had particular concerns about a fellow panel member who spoke little English.
She did spend the better part of a day, Veloz says, trying to persuade the others that Slim had not necessarily interfered with the Dallas partners' contract.
She believes many of the jurors were confused about the legal issues involved. The judge declined to answer three queries the jurors sent out about the definition of illegal interference with a contract.
Veloz also remains convinced that some of the members were just plain biased against Hispanics. "I didn't feel good about the verdict. I think a lot had to do with the defendants being Mexican," Veloz says. She claims bigoted comments against Mexicans ricocheted in the jury room.
"There were open statements in the jury room. 'We don't want them here. Let them pay a lot of money,'" she says. "Some of the blacks said things like, 'They probably do cocaine.'"
Fatigue and the pressure of the majority, Veloz says, made her give in.
In one post-trial motion, which they later withdrew, the defense contended that Werbner and his team had stirred up anti-Mexican sentiment among jurors, referring to the defendants as Mexicans and the plaintiffs as the Dallas partners. Jenkens partner Daniel says the defense team may return to that argument on appeal if the judge doesn't dismiss the verdicts, as it has asked him to do.
In talking with the Observer, the jurors often mentioned the nationality of the defendants.
"They pulled a fast one on these Americans," says one juror, who like many asked not to be identified by name.
But in fairness, the plaintiff lawyer Werbner never openly expressed anti-Mexican sentiments to the jury. Instead, he emphasized a torn friendship, a tack that had resonance. Beyond that, when asked why they decided against the defendants, the jurors had specifics.
One noted Elias' "out of the blue" telephone call to Cunningham in September, when it was convenient for Slim's interests to stop the Dallas partners' negotiations with AOL Latin America. Another cited Elias' failure to return telephone calls. And most found fault with the former CompUSA CEO.
"I feel Halpin was messing with everyone, playing with their heads. I hope he does get held accountable," says one juror.
Even the plaintiff lawyers were willing to cut their opposing counsel some slack because they had to deal with Halpin.
"Throughout this case, we were thinking we were missing something. They are out of track. Something was really bizarre on that side," says Scher. "I think Halpin is a very difficult client."
McBride, however, seems surprisingly less eager than the others to heap scorn on Halpin. Indeed, despite the jury's vindication of his story, the Dallas businessman seems bittersweet about his court victory. He doesn't like to talk at length about the case.
"You know the rest," he says, stopping after he tells the beginning of his dealings with Halpin, as if the end still smarts too much to recount.