By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
By Eric Nicholson
Harold Holigan and his son Michael, who have ridden a nationally televised home-improvement show to minor Dallas celebrity, are being accused by their equally well-known investors of diverting proceeds from the show and using them to build a huge Preston Hollow mansion.
Olympus Real Estate Partners, which was founded by Tom Hicks' investment group, alleges that the Holigans took income from Michael Holigan's Your New House and used it to build father Harold Holigan's new house. The 16,000-square-foot, 11 1/2 bathroom neo-traditional number on Meaders Lane was built in large part with materials that advertisers had provided the show, including bricks, lumber, heating and air conditioning systems, roofing materials, doors, cabinets, chandeliers, plumbing fixtures, a large pool and spa.
Olympus, which filed suit against several Holigan entities in early September, wants to seize the grand, pink-brick pile, presumably to sell it and recoup some of the $12 million it sunk into its money-losing partnership with the Holigans.
Dean Leipsner, senior vice president for marketing for the Holigan-controlled MH2 Technologies, says Holigan indeed built his house with products intended for the show, but he denies any wrongdoing.
Leipsner says Holigan's house was used as the location for about 30 episodes in the 2001-2002 season, and the products were put into it as they are into any home used as a backdrop for the program. "We have lots of products that we generally exchange to the owner in exchange for using their house as a location," Leipsner says.
Tim Smith, an Olympus lawyer and spokesman, declined to comment.
The behind-the-camera dispute, which appears to be well beyond the negotiating stage, arose after an auditor for the Olympus-Holigan partnership quit last year and a new firm began going over the books, the lawsuit states. The internal review is continuing.
Although Olympus is not talking, the lawsuit gives a detailed history of the multibillion-dollar investment firm's partnership with Holigan, a story that follows along the lines of a dot-com startup bleeding cash, but develops its own continuing story line with the ongoing production of Your New House. The formulaic how-to show, which mixes product pitches with building tips from its woodenly photogenic cast, is broadcast in 140 markets nationwide, often in the wee hours of the morning. It airs in Dallas on KDFW-Channel 4 at 6 a.m. Saturdays and 10 a.m. Sundays.
Harold Holigan, who seems to have a nose for Texas booms, got his start in home construction in the early 1980s when he began building mobile home parks in the West Texas oil patch. In the early 1990s, he formed Holigan Homes with his son Michael and began building suburban subdivisions in Nashville, Tennessee, and in the Midwest. They began building in Dallas as it was emerging from recession in the early 1990s, with subdivisions in Sachse, Frisco and other distant suburbs.
The TV show--which was titled This New House until the producers of This Old House complained--started as a set of infomercials promoting Holigan homes. In 1994 it developed into its own ad-sponsored home-improvement show following the step-by-step construction of a new house. In its current season, corporate sponsors such as Home Depot and Delta Faucet support it.
In late 1997, Olympus decided to invest $6 million in the Holigans' venture and formed Oly Holigan, a partnership managed by Harold Holigan. The two companies were to be equal partners in home-building and "Internet, media and technology operations," which include the TV show as well as the development and marketing of an Internet-based system designed to help contractors manage their projects.
In 2001, Hicks, Muse, Tate and Furst spun off Olympus to another investment group, but the stand-alone company remained committed to Holigan. The suit alleges that Harold Holigan told Olympus in early 2001 that the partnership would become profitable by the middle of the year, but when that time came, he pushed back projections to the fall.
In July 2001, The Dallas Morning News published a lengthy, upbeat profile of the Holigans in which Michael Holigan said the company had reached break-even and that revenues would be $30 million in 2001, and double that in 2002.
Executives at Olympus must have been happy to read it. "During this time," the lawsuit states, "[Olympus] continued to fund the dot-com operations, eagerly awaiting the anticipated and projected positive cash flow, with the accompanying prospect of a return of invested capital."
Instead, in December, Harold Holigan "suddenly announced a need for an additional cash infusion of $4-5 million," the lawsuit states. Olympus borrowed $6 million and turned it over to the partnership, specifically, the Holigan-run MH2 Technologies.
Around that time, the suit relates, Olympus discovered that the auditor for the media and dot-com operations resigned without explanation and the Olympus partners began to get nervous. They brought in the audit firm KPMG, which began its own investigation prior to taking over the auditing work. The alleged Holigan diversions then began coming to light.
The suit states that Harold, who runs the production of the weekly series, arranged to sell advertising to the show in barter transactions--building products in exchange for advertising--and "Holigan specially instructed sales representatives for MH2 to concentrate on selling to companies for barter arrangement that would result in the transfer of goods and services to Holigan's personal residence."
The result was to siphon income from the partnership and into the grand house, which is appraised for tax purposes at $2 million. The lawsuit accuses the Holigan entities and Harold Holigan personally of intentional deception, self-dealing, diversion and unjust enrichment. It requests unspecified damages and requests that the Meaders Lane house be placed in a trust so it can be used for compensation.
Leipsner, with MH2, says the Holigans deceived nobody and are continuing to run the 100-employee business in Addison despite the lawsuit from their chief investment partners.
Leipsner declined to comment on the company's current finances, except to say "the financial picture is positive and continues to improve daily." The company's operations are centered on the building management system, which is being used by seven of the nation's top 10 builders, rather than the TV show, he says.
If Olympus gets its way and Harold Holigan is put out of his house, he will hardly be left homeless. He and his wife, Hermena, own another $1 million house on Lakehurst Avenue, and son Michael owns a 5,500-square-foot, $750,000 place built two years ago on Preston Bend Drive.
Not that the Holigans have not had house trouble in the past.
On Christmas Eve in 1997, Harold Holigan's 10,000-square-foot Far North Dallas home burned to the ground while the family was visiting relatives in Missouri. The fire, which Holigan told reporters could have been the result of squirrels chewing wires in the attic, caused an estimated $1 million in damages. Seven years earlier, again around Christmas, a fire all but destroyed the same house.
Holigan rebuilt, bigger and better.