Most of Dallas knows Larry North, or at least his name, which he has spent the last decade pumping up. The fit--and those who wish they were--work out at his health clubs, call his weekly radio shows for advice, and dine at his trendy new restaurant.
Tight-bodied and strikingly bronzed for mid-March, North is dressed in a finely tailored slate-gray suit with an ever-so-subtle plaid. He is flanked by three of his lawyers and one of his loyal club managers.
North is trying to explain how his plans to expand the club empire have come crashing down around him. Why the Internal Revenue Service is after his company for nearly $300,000 in unpaid payroll and Social Security taxes. Why he's embroiled in nasty lawsuits with his business partner of three years.
In the best businessman's jargon, North describes how he and former partner Stephen Mekuly "grew" the business. Starting with the two original locations--the flagship Larry North Total Fitness in chic Highland Park Village, and the Larry North Fitness Factory on Mockingbird Lane and Greenville Avenue--they added three more clubs practically overnight. They were ready when the health-fitness craze reached its zenith and private gyms and spas began popping up in strip malls faster than bagel shops. Competition was cutthroat. But, like most of the clients who joined the clubs, business at Total Fitness was beautiful.
Or so it seemed. But in the past few months North has learned that the books of his company rarely balanced during most of 1996, and the payroll taxes weren't being paid. Construction of a spectacular new gym in sprawling southwest Arlington--set to open in January 1997--is woefully behind schedule, and people who bought pre-opening club memberships are beginning to ask for their money back. Some of North's former employees are threatening to sue him, accusing him of being a petty bully who has cheated them out of wages.
As North discusses all of the trouble, he wears a pained expression that fairly shouts, how could I have known?
North says the revelations have rocked him to the core, and he lays the blame squarely at the feet of his former partner, Total Fitness Chief Executive Officer Stephen Mekuly. A veteran executive of the Bally, President's, and Jack Lalanne fitness club chains, Mekuly joined North in a partnership in 1993. North, acknowledging that he knows more about barbells than books, needed someone with business acumen to help him grow his business, he says. He placed his trust in Mekuly.
The 48-year-old Mekuly headed a management team created to run the clubs bearing North's name in Highland Park, on Mockingbird Lane near East Dallas' M Streets area, at Preston Center in North Dallas, in Addison, and in Plano. Mekuly was brought in to manage the finances, keep membership sales rolling in, and hire and fire personnel.
Freed from the daily headaches of running a business, North was to do what he does best--promote his name and persona, work the cocktail party and benefit circuit, host his weekly radio talk shows, and write an occasional book.
But early last year, even as North reveled in plans to lend his name and image to the tony new restaurant NorthSouth in the Quadrangle, business irregularities began to surface at the health clubs. Some of North's club managers, he says, voiced suspicions about Mekuly's secretive bookkeeping practices. A couple of the clubs were growing shabby. Things just didn't seem, well, right.
Still, a Kenworth semi could have rolled over the achingly upbeat North with the news of his crumbling empire, and it's doubtful he would have noticed.
"My biggest problem, Holly, is that I'm too nice," he says. (North, in that successful Toastmasters way, squeezes the first name of his conversation partner into roughly every fifth sentence.)
"Unfortunately, that sets me up to be taken advantage of. I have a name, and because of that, people want to tag on to me. I haven't been careful enough about that. I've trusted everybody."
True enough. North says he trusted Mekuly unequivocally. That trust is shattered now, the partnership ended. Last November, North and several investors sued Mekuly and two of his partners in Dallas County state district court, arguing that Mekuly mismanaged funds, breached his fiduciary duty, misappropriated corporate assets, failed to pay federal taxes, and then misrepresented that tax liability to investors.
Mekuly has denied all the charges, and argues that it was he who whipped the flabby Highland Park and Plano clubs into fighting trim. Mekuly has filed a response to North's lawsuit, along with his own counterclaims.
North and Mekuly each still own varying portions of the five clubs. North holds more stock in the Highland Park and Mockingbird facilities, so they effectively remain under his control. Mekuly and his partners have taken over control of the remaining three clubs. The former partners disagree on ownership of the Arlington facility--North says he has a 7 percent interest in the gym, but Mekuly says that North only has the right to 5 percent of personal training revenue from the yet-to-open club.
The breakup between the two men has spawned restraining orders and motions for contempt against North. Mekuly and several employees who joined Mekuly after the split claim that they have seen the true side of North, including an ego bigger than an Olympic-sized pool. In their pleadings, Mekuly's supporters claim that North physically threatened them, ordered one of Mekuly's managers handcuffed as she worked at the Preston Center club, even that North authorized the bugging of the Addison club office, from which Mekuly now runs the three clubs that remained under his control after the split.
Proving his charges in court may be troublesome for Mekuly, who brings to this current squabble a tainted business history, including a 1995 indictment on a felony theft charge stemming from his earlier employment with Bally. Mekuly was fired from Bally in December of 1992. The company claimed in court documents that an in-house investigation revealed that Mekuly had defrauded the company by submitting false expense reports and that he had sexually harassed and threatened former and current employees. Except for the theft charge, no criminal charges were ever filed in connection with Bally's claims, and Mekuly denies the company's charges. He fired back with a lawsuit, claiming wrongful termination. The entire case was settled out of court in 1995.
So did Mekuly's questionable business practices carry over to his partnership with North? A jury is scheduled to decide in September. As for North, if gross naivete and blind trust were crimes, he would be doing time right now.
Mekuly spoke only briefly with the Dallas Observer about his severed relationship with North, declined further interviews, and finally responded briefly in writing to questions about himself and the current troubles with North.
He calls the split a "business divorce," one that is particularly bitter. And like a divorce between a married couple, he says, "everyone gets hurt."
For his part, North is trying to draw on the coping skills he undoubtedly learned as the son of a compulsive gambler, a man so frequently on the lam from cops and creditors that North attended 12 schools in 11 years.
"This is just a pimple on my face," he says. "It'll be gone soon."
Yet, after two and a half hours of listening to North, watching his lip sweat and his hands splinter a ballpoint pen, it is clear that this is much more bothersome than that, and will take longer to go away.
There is not the slightest Texas twang in Larry North's voice, although he settled here 20 years ago. Lawrence Gerald North (everyone has called him Larry for as long as he can remember), now 36, was the oldest of Irving and Beverly North's three sons. His brothers, fraternal twins Adam and Alan, are 10 years his junior. When Larry was barely 16, Beverly Miller (she began using her maiden name a few years ago) fled the family's native Long Island in a beat-up car with Larry and the six-year-old twins. They landed in Richardson.
As North has told the story in countless interviews, it was an exodus born of desperation. Irv North, long on charm and always short on cash, was a gambling addict. The family lived on the run, moving many times across the country and back to New York. Irv served three federal prison terms, and Larry was forever being yanked out of school as his family tried to outrun the creditors. As the oldest child, Larry says he always felt the brunt of his dad's debilitating habit. Irv frequently lugged Larry to the horse races, and felt no shame in using his young son as a diversion in many of his scams.
In a 1993 Dallas Morning News "High Profile" story, North recalled the burning embarrassment of accompanying his father to the bank to withdraw non-existent funds.
The con was simple. Irv would deposit hot out-of-state checks, then quickly withdraw the money. "Dad would take me into a bank," North told the Morning News. "Then he would fix my tie, lick his hands and flatten my hair. I was supposed to be really calm, and he was really calm. Then he'd get the money and walk out, and he'd get very excited.
"He'd pick me up and say: 'We did it, Larry boy! We did it!' You'd feel you had been helping your father to do something he approved of." Then it was off to the track, the money practically burning through Irv's pocket.
Once free of Irv and resettled in Richardson, Beverly worked as a medical secretary. Larry was enrolled in J.J. Pearce High School and spent much of his free time supervising his little brothers. For the first time, he says, life seemed relatively normal. But he failed to graduate from high school and later obtained his GED. North has no formal education beyond that, save a few psychology and physical education courses from junior college.
During the '80s, North worked on his own body and began selling himself as a personal trainer to a few clients. He sold women's shoes and worked nights as a bouncer at several Dallas night clubs. Always, though, North would tell anyone who would listen that he planned to open his own gym. Not only would he have the club, he boasted, but he also planned someday to do his own fitness show on the radio. Eventually, he would have a TV show. And a book. North clearly had inherited the gift of gab from his dad. The difference, the son says, is that he actually began achieving his goals.
In 1989, backed by a loan and a few well-heeled investors, North opened the first of his tony fitness clubs--Northbodies, in Highland Park Village, which a few years later became Larry North Total Fitness. It was a small space, but a great location. Word spread throughout the Park Cities that Northbodies was the place to be spotted working your abs and pecs, and wearing your skimpiest Lycra.
North made the most of the buzz. He befriended some of Dallas' prettiest (and richest) people--Darwin Deason, founder of Affiliated Computer Services, who became the money man for North's NorthSouth restaurant; real estate magnate Henry S. Miller; and eccentric restaurateur/promoters Shannon and Angus Wynne. North also linked up with Dallas writer Skip Bayless, who became a client and a friend. Texas Monthly senior editor Skip Hollandsworth eventually ghostwrote North's first book, Get Fit! The Last Fitness Book You Will Ever Need. Last year, North updated the book slightly, and renamed it Living Lean. "Believe me, Skip [Hollandsworth] made me look great," North says, smiling wide. "I can barely write a sentence on my own."
North always seems to temper his self-promotion just that way--a sweeping boast punctuated with a self-deprecating dig. It's as if Irv the con man is doing the talking until young Larry, still toting the weight of his dad's dysfunction, steps in.
Irv North never beat his gambling habit, and he died of bone cancer in 1993. Since then, Larry has talked even more freely about his childhood and served on several government panels exploring the problem of compulsive gambling. When doing interviews, or on his two weekly radio shows on KRLD-AM and KTCK-AM, he'll squeeze in occasional comments about compulsive gambling which, quite naturally, segue into his peppy lectures against other destructive health habits--smoking, compulsive eating, even obsessive exercise.
The radio shows are also a result of North's talent for gab and self-promotion. He says he talked his way into a gig on KLIF-AM in 1989, shortly after opening his first gym. Over the next four years, he focused on his personal training business, the gym, the talk show, and the book. He met and married Melanie Peskett, who ran a low-fat catering business and formulated the recipes printed in her husband's books. Melanie, says Larry, is the creative genius behind the menu at NorthSouth, his trendy new restaurant that features a menu of traditionally prepared home-cooked favorites (the South way) and the same items prepared with low-fat and no-fat substitutions (the North way).
Sometime in late 1992, North, surveying his success, decided it was time to expand. But, as he points out in almost the same breath, "I knew I had no head for business."
That's when North decided to throw in with Steve Mekuly.
Mekuly had relocated from Chicago to Dallas with Bally in 1989. With ample experience in the health-club business, he seemed to be the partner North was looking for, and the two men began discussing a 50-50 partnership. What North wanted was a money manager, a CEO with brains and salesmanship. He knew Mekuly, 12 years his senior, to be a veteran of the tight-knit fitness-club industry. "Steve had worked everywhere, for like 25 years. Everyone knew him," North says. "Even today, his leadership skills have never been questioned."
North's contribution to the partnership was his name, clearly his most marketable asset. North says he has no idea how much money he was worth when he met Mekuly. But he has spent years getting his name out to the public--on the clubs, the books, the menus, even the shelves of 7-Eleven stores with his own line of low-fat deli meals.
North didn't have the time or the inclination to worry about business details, but by leaving them to Mekuly, he says, he sowed seeds for his current predicament.
As North continued to work the party circuit and the book signings--his bold-faced name appearing in an Alan Peppard or Helen Bryant society column at least once every three weeks--Mekuly oversaw the fine details of expanding the Larry North Total Fitness clubs. North says he willingly turned all the books over to Mekuly. Mekuly, in turn, worked closely with two club managers and minor investors, James Prochaska and Karen Tickman.
With Mekuly's business prowess and North's polished image, the Total Fitness chain grew from two clubs to five. Plans for the Arlington club were under way shortly after the two men joined forces in June 1993.
Under persistent questioning, North now concedes that he had heard "rumors" that Mekuly had problems with Bally's management even before the two men became partners. In January 1995--more than three years after Mekuly's dismissal from Bally--North was caught off-balance when Mekuly asked him to recommend a good criminal defense attorney, says James Sadler, North's lawyer.
But Sadler says "Larry had no idea Steve was in serious legal trouble, and at the time, he didn't ask."
Yet many details of Mekuly's controversial business history were available to all in Dallas County court records. North simply chose not to look.
It is unusually quiet inside the Larry North Total Fitness gym on Belt Line Road near the North Dallas Tollway in Addison. It is shortly before noon on a recent Thursday, and only a few treadmills and stair-climbers are in use.
"It isn't quite noon yet. This place will be hopping in a few more minutes," says office manager Christi Engelberger, as she hands over an envelope stuffed with letters and court papers she has gathered to support Mekuly's (and her own) complaints against Larry North, et al.
As it happens, Engelberger says, Mekuly--usually occupied with meetings or on business out of town--is available today. She points the way to Mekuly's office, a generously sized room crammed with furniture and an odd assortment of knickknacks, framed limited edition sports posters, motivational messages, and photos of his wife, Linda, and their three children.
Mekuly, the son of Greek immigrants who settled in Chicago, has the dark eyes and hair of his Mediterranean origins. Dressed in an ivory-colored cotton shirt with banded collar, his hair slicked back with gel, he rises from behind a massive ceramic-tiled conference table.
Offering a handshake, he says, "Hi. I'm Steve Mekuly," in a low voice that scratches like sandpaper. From the outset, Mekuly makes it clear that he will not discuss the lawsuit pending against him, or the countersuits he has filed against North. "It's a divorce, a business divorce," Mekuly says, behind a sad half-smile, apparently meant to show his resignation about the situation. "There is a lot I wish I could say, but I think it would be better if I didn't."
Mekuly, 48, is happy to discuss the mishmash of artwork that dominates his office. In one plexiglass case is a small statue, about a yard high, made of some kind of dark animal hide and mud. It is a little man, wearing a loin cloth and a shell necklace. A horn on the statue's head is turned downward, its shoulders are broad. The hands are near perfectly human.
"He was a gift from one of my former employees," Mekuly says. "He's from Iberia--not Liberia--but Iberia. The friend who gave him to me said he represents the keeper of a village."
Mekuly says he once had the statue appraised, but it is of little value. Mostly, it appears, Mekuly likes to gaze at the work and expound on its symbolism--maybe seeing it as it applies to him.
"He is a protector of the village. If you look at him, you can see he has an assertive stance, but he's not aggressive. That horn is pointing down, so he's not evil. He could run as fast as a deer. He could climb trees. He has a certain pridefulness, but his people felt completely safe in his presence."
After describing the high points of his office decor, Mekuly discusses how he and North became acquainted. "Larry had worked at President's (Health and Fitness Clubs) in Dallas, and I met him shortly after I moved here," Mekuly says. Mekuly himself transferred to Dallas in 1989 while working for the Bally health club chain--a hugely successful subsidiary of the gaming and casino company. He was named president of Dallas Health Clubs Inc., also known as Bally Total Fitness, and served as area director for 17 clubs in Dallas, San Antonio, Fort Worth, and Tulsa. Court records show that while working for Bally in Dallas, Mekuly earned $143,000 annually plus bonuses and incentives.
On December 10, 1992, Bally fired Mekuly. The company made its decision after learning the results of an internal investigation of Mekuly, set into motion by whistle-blowing employees, says Dallas lawyer John McFall, who defended Bally in a lawsuit Mekuly filed against the company alleging wrongful termination.
Court records filed in the case show that the ensuing year-long battle between Bally and Mekuly sometimes sunk to the quality of a bad television script.
In its answer to Mekuly's suit, Bally claimed that Mekuly had defrauded the company by falsifying numerous expense reports and by directing employees to make repairs on his Rowlett condominium. Bally also alleged that Mekuly sexually harassed former and current employees and obtained fictitious employee names and Social Security numbers so as to pocket extra paychecks for himself.
When McFall deposed Mekuly during the course of the lawsuit, the direction of the case took even weirder turns.
Among other things, McFall questioned Mekuly about allegations that Mekuly had sold gym equipment for his own profit, and used and sold cocaine and other drugs. Mekuly denied each of the allegations.
According to McFall, Bally did not initiate the claims about Mekuly selling equipment and using drugs. "He [Mekuly] raised those issues himself," McFall says. Mekuly apparently was trying to show that Bally had pressured dozens of Mekuly's employees and co-workers into signing statements containing false allegations of illegal activity.
McFall also questioned Mekuly about 21 long rifles and pistols that Bally officials discovered in a company warehouse, and asked Mekuly if he was involved in running guns to the Nicaraguan Contras. Mekuly denied the gun-running claim, but acknowledged that the weapons were his. A longtime gun collector, Mekuly said he had removed the guns from company property and taken them to his house.
Throughout the deposition, Mekuly denied the allegations McFall raised. In a written response to the Dallas Observer, Mekuly was adamant that the charges were unfounded.
"Of course those charges are not true, and I deny them," Mekuly wrote. "People have imaginations and sometimes those imaginations get out of hand. Those charges are unfounded."
Halfway through the week-long deposition, Mekuly was arrested by Dallas County deputy sheriffs. He was indicted by a Dallas County grand jury for felony theft over $750. Specifically, the bill of indictment charged Mekuly with six separate thefts from May 25, 1990, to June 24, 1991, for a total of $4,475.85. The thefts, according to the indictment, were cases of fraudulent expense reports, incurred while Mekuly was representing Bally.
Mekuly maintained in depositions during his civil case that all were legitimate business expenses; Bally provided credit-card slips and receipts from Hooters, TGI Fridays, and Texaco stations that suggested otherwise. Bally lawyer John McFall, questioning Mekuly in deposition, asserted that Mekuly asked a part-time Bally's employee who also worked at a Dallas-area TGI Fridays restaurant to give him a booklet of blank American Express carbons. That way he could fill in the carbons at will and turn the fraudulent expenses in for compensation.
The company, however, got wise when the carbons--which Mekuly turned in over an 18-month period--were all in numbered sequence from the same booklet.
On August 24, 1995, Mekuly pleaded no contest to the crime of "securing the execution of a document by deception." In exchange for the no contest plea, Mekuly was sentenced in Dallas County Criminal District Court No. 3 to three years probation and ordered to pay restitution of $6,234.51. On September 18, 1996--two months before North severed his relationship with Mekuly--Criminal District Court Judge Mark Tolle released Mekuly from his probation, set aside the judgment of conviction, and dismissed the indictment. Mekuly received no further penalties in the case.
"My probation was only one year, and then it was dropped with no record," Mekuly wrote in his response to the Observer's questions about the case. Additionally, his civil case against Bally was settled out of court. As a condition of the settlement, Mekuly wrote, Bally paid the $6,234 in restitution costs and $100,000 in attorneys' fees for Mekuly's Dallas lawyer, William E. Robbins.
McFall, however, says Mekuly's characterization of the settlement agreement is "completely false." Signed by Mekuly and his attorney, the agreement stipulated that Bally would pay no money to Mekuly, but would agree not to file a criminal complaint against him, McFall says. McFall says Mekuly agreed to pay $6,234 in restitution to the company. "At no time did Bally agree to pay, and in fact it did not pay, Mr. Mekuly's attorneys' fees," McFall says. "Whatever arrangements Mr. Mekuly made to pay his attorneys had nothing to do with Bally."
According to Mekuly, North knew everything about his legal problems, and in fact contributed to Mekuly's defense in the criminal case. "With Larry's influence, Larry's friend, David McDonald, helped me get my attorney, Doug Mulder. Larry North knew all of the material information about me when we went into business," Mekuly wrote in answer to questions.
By the end of September 1996, Mekuly hoped he had put the courts and the lawyers behind him. But by then, the IRS was beating at Larry North's door.
"It was about the end of March last year when we first started wondering what was going on," says Johnny de la Valdene, one of North's partners and a fellow plaintiff in the lawsuit against Mekuly. "Things just weren't making sense. I mean, I'm a partner and I manage a club. But when I went to Stephen and asked to see the books, he wouldn't produce them. They were so secretive. None of his staff would give us the books."
North says two other investors, as well as the company accountant, contacted him around the same time. "They were saying there were unexplained expenses and some funds were unaccounted for," North says. "It was the first time I'd ever been concerned about it."
By late summer, Lanny Perkins, a tax attorney with the Dallas law firm of Sumner & Schick, was called in to take a look at the situation by James Sadler, North's lawyer. The IRS had sent a final levy to the Preston Center club and was gearing up to close the doors of the facility.
"Our best knowledge is that some $200,000 to $300,000 in withholding and Social Security taxes have not been paid by Larry North Total Fitness," Perkins says. "Now sometimes, a tax bill can be overlooked somewhat innocently or naively. But that isn't our contention here."
North's legal team contends that Mekuly intentionally skipped out on the tax bill. Mekuly says otherwise. In his written responses to questions, Mekuly blames an unnamed subordinate who failed to bring the tax issue to his attention. He says he has taken steps to ensure the tax problem does not recur with the clubs he still controls. "We have now made arrangements with our payroll company that these taxes are automatically withdrawn from our accounts. Thus I know without question taxes are being paid promptly," Mekuly wrote.
As for the back taxes, Mekuly says that the early IRS notices were sent to North's accounting firm "and were not sent to me by that firm or any of the other owners."
Tax attorney Perkins says he is working with the IRS on a payment schedule that will satisfy the government and keep the clubs open. To that, Sadler quickly adds, "unfortunately the shareholders are scraping the bottom of the barrel to pay this bill, but the members are not suffering." Sitting beside Sadler, North vigorously nods his head.
Beyond the tax problems, North's lawyers say they are checking out other aspects of how Mekuly ran the business. James Guinan, a lawyer who shares office space at Sumner & Schick, was called into North's case recently to investigate the possibility of criminal behavior by Mekuly. "Legally, you cannot use the threat of criminal action to force a civil settlement, but if Jim finds anything noteworthy, he is bound to turn it over to the district attorney's office," Sadler says.
Specifically, Guinan says he questions a loan of $15,000 that was made by the Preston Center club to the Plano club. "We did indeed loan [the money]," writes Mekuly. "We had advised Mr. North and the other owners of Plano that a capital infusion was necessary, and they ignored my recommendation." Eventually, according to Mekuly, the loan was made--and North knew about it. "We received Larry's approval, so he not only knew about the loan, he approved it!"
Guinan says he has also been particularly active in investigating the sluggish pace of construction on the Arlington Total Fitness gym. The club, at Interstate 20 and Little Road, was scheduled to open in January. Its exterior is finished. But as of late March, much of the interior work remained to be done.
More than 1,700 memberships were sold to the club in anticipation of its January opening. The Texas Health Spa Act, a set of consumer protection laws, requires that health clubs refund prepaid membership fees if a facility fails to open within 181 days of accepting the money, Guinan says. "We have a suspicion they may be violating that statute," he says. Guinan has forwarded his information to the Economic Crimes Division in the Tarrant County District Attorney's office for possible prosecution. Division head Charles Brandenburg did not return calls to the Observer to discuss the matter.
Mekuly's office manager, Christi Engelberger, says that her bosses have voluntarily refunded money to 96 Arlington club members. "We are anticipating opening the Arlington facility in May 1997," responds Mekuly in writing. He blames the delays on haggling with the landlord over a lease and on unforeseen construction delays. Construction on the $1.5-million club is "now making excellent progress," Mekuly writes.
Still, Guinan says his investigation is showing that $178,000 of Arlington club money is "unaccounted for." Mekuly did not respond to a question regarding that money.
Although the disputes between North and Mekuly are not trivial, the two former partners have made efforts to settle their lawsuits. Both sides met in December for mediation, but made no headway. Sadler says he has encouraged both sides to settle the case. "But this is a very emotional case," he says. "Feelings are running high. I've told them they will spend far more money fighting this than they will settling it. This is a proud bunch."
Just how high are those feelings running? Perhaps the stack of counterclaims and allegations of contempt of court now piling up at the district clerk's office can illustrate. Mekuly's partners, Karen Tickman and James Prochaska, filed counterclaims and sought restraining orders against North last December, just days after North filed his initial suit against Mekuly.
Tickman is suing North and Texas Department of Public Safety employee Danny Lewis for the tort of "false imprisonment." She claims that on November 30, 1996, she went to the Preston Center Fitness Factory, which she managed, to help repair equipment and to stop flooding at the club. In her pleading, Tickman says she was "approached by Lewis [an off-duty police officer employed by North] who told her she had to leave the facility. Lewis, who stated he was acting under the direction and authority of North, told plaintiff she was violating a restraining order and ordered her to leave the premises."
Tickman denied being bound by a restraining order and refused to leave. She claims that Lewis then grabbed her, "twisted her arms behind her and handcuffed her in full view of many patrons and employees of the [club]." She adds that Lewis also injured her leg when he tried to force her up the stairs at the club. Tickman was never arrested or charged, and now seeks damages against North and Lewis.
In another motion claiming contempt of court by North, allegedly for violating a temporary injunction and restraining order, Mekuly, Tickman, and Prochaska have claimed that North has bullied them, threatened them, and even bugged their Addison office. North scoffs at the allegations. "That's preposterous," he says. "It never happened." Indeed, Mekuly's employees confirm that a private detective hired to search the office for listening devices never found any. "But [Mekuly] felt that someone had been tampering with the office," says Engelberger. "And Steve paid $810 for the guy to come in and check for bugs."
Engelberger herself, along with Jason McBride, a Total Fitness personal trainer, say they are also seeking back pay from North--money they say he is required to pay them by order of the court. According to conditions of a temporary injunction, North currently owes Engelberger $3,500 for work she continues to do for both sides of the former partnership. North has refused to pay her, claiming that he fired her immediately after his split with Mekuly. His lawyers add that Engelberger has failed to provide "adequate documentation" that she is owed the money.
"We have said that we will pay the money if they provide the documentation. We haven't received any," Sadler says. A judge will likely decide the outcome of Engelberger's claim, he adds.
The lawyer's response sends Engelberger, a fit blonde who worked her way up from a temporary employee to a full-time job, into a rage. "I spend hours every day working out problems that Larry North passed onto us," she says. "I've had to chase down insurance claims that his people in Highland Park refuse to deal with. I've helped process their W-2 forms. On top of that, I have to keep up with the work for Team Total Fitness (the Mekuly-Tickman-Prochaska development group that retains use of the North name).
"Larry North is petty and a liar," she says. "I remember working at a promotion for his 7-Eleven meals last year. I was wearing one of his Larry North T-shirts. I was so pumped. I was so proud to be associated with him. But I know what he's really like now. All I want is my money. I never want to see him again."
Carliz Sotelo feels the same way. She hopes never to work in the fitness industry again. Sotelo, who worked for another North-Mekuly venture, Women's Total Fitness in San Antonio, relocated to Dallas last fall to work as an assistant manager in the Preston Center club. Sotelo says she signed a contract--drawn up by Mekuly, who was acting as North's agent--for a monthly salary of $3,500 through January 31, 1997.
She moved to Dallas and jumped into her job; three weeks later, North and Mekuly split. North had served Mekuly with his lawsuit, and Sotelo was left with only $1,400 she had earned to that point.
"She doesn't have a contract," Sadler says of Sotelo. "To our knowledge, she had an oral agreement with Mr. Mekuly of $3,500 for three months. Our records show she quit on her own in early December. She told me she felt 'uncomfortable' with everything that was going on, and she quit.
"Ms. Sotelo was paid for the time she had worked."
Sotelo argues that she does indeed have a contract, and that once her troubles began, she secured a copy of the document from Mekuly. She says she took it with her to a scheduled appointment with Sadler on December 11. "He was gone when I got there," Sotelo says. "I haven't ever seen him."
There is something vexing about the peevishness both North and Mekuly seem to have shown their once-loyal employees. Every person interviewed for this story, after first revealing the animosity each feels toward his or her former boss, invariably moves on to a testimonial about the love, the respect, the awe North and Mekuly once inspired. No more.
Still, neither man seems the least bit interested in paying the few thousand dollars needed to quiet the angry masses. The recalcitrance baffles even North's lawyer.
"I try to see both sides of an issue, I truly do," Sadler says. "I don't often see an advantage to fighting. I make recommendations to clients all the time. I tell them if you're willing to swallow your pride, you can come out of this ahead."
The greatest risk in the ongoing legal battles is what will happen to the name of Larry North. Even Mekuly--still operating clubs that bear the well-known moniker--stands to benefit from North's reputation.
This is what the entire struggle comes down to. Mekuly and his people have vowed to fight to keep using North's name on their club, their publications, their logo. So far, North has made no legal move to strip his name from the clubs he no longer controls.
Last month, Team Total Fitness partner James Prochaska told the Arlington Star-Telegram "as it stands, we own the controlling interest in the name 'Larry North Total Fitness.'" But he added he did not know which name the new Arlington gym would feature on opening day. In the same story, North, in his lean, 6-foot-2, cock-of-the-walk way, vowed he would "never set foot in the Arlington club."
Given the chance, North will talk his name up and down the block. It's all he really has. The Lexus could go. The restaurant could go way south. If it wanted to, the IRS could seize his clubs tomorrow. But Larry North would still be here, and people would still value his name.
On the subject of that name, lawyer Sadler says North is striving to keep it clean and valuable.
"Larry will come out of this a little wiser and a lot more cautious about who he lends his name to. He honestly had no idea what he was dealing with. We're working with Larry on how to get a good grasp on what he's got and what he's working with."
North says he still loves partnerships, "but not always partners." With some capable legal advice, he appears to be creeping out of this corner. In the last four months or so, he's learned how to read a spreadsheet. "Hey, I'm telling you, Holly, I've learned something. From now on, if it's financial, I'm there. I'm right there," North says, his earnest gaze all but setting the conference room ablaze.
Perhaps there is something to it--the self-talk, the crash course in money management, the aching for everything to be all right. A few days after the interview at his lawyer's office, North was talking on the phone. Suddenly, as if visited by epiphany, North said he knew how much he is worth.
"Hey, this is a $6-million company," he said into the phone. "I need to know what's going on.
