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Stalking Back

Trying to collect a half-million-dollar debt from Floyd Warmann, the hunter becomes the hunted


For three years now, John Foley has been flying in and out of St. Louis: Three years of airline meals and hotel rooms. Three years of stalking his quarry. On his latest visit this winter, he found himself driving down boulevards and narrow side streets, his 6-foot-3 frame wedged behind the wheel of a rented Saturn. To the Omaha native, St. Louis seems like a maze at night. Streets twist and bend, start and end like broken spokes of a wheel. It's an older city, after all. The neighborhoods patched together like a crazy quilt, layer upon layer, follow the contours of the land leading to the Mississippi. Up Skinker, down McCausland, over Southwest -- strange names to an outsider.

Cutting over Macklind Avenue, Foley asks what first drew Italian immigrants to the Hill. It is one of the few times he allows his mind to stray from the purpose of his visit. He is soon reminded of his task. Turning east, he passes slowly by the small frontyards of well-kept bungalows. At the corner of Elizabeth Avenue and Edwards Street, Foley stops to look at a light-colored brick storefront adorned with green awnings over the front and side windows. In the past, Floyd C. Warmann used the address as a mail drop for two of his companies. Foley has made it his business to find out about these corporations and the man who owned them. At first sight, the location doesn't seem like the kind of place that would ever be associated with multimillion-dollar business deals, but Foley knows better. He knows better because he's spent a good portion of his time over the last three years investigating business transacted here. It's a fragmented tale that involves politicians, banks, casino interests and a lucrative riverfront lease. Foley came to understand the size and shape of the story by patiently gluing it back together like the shards of a fractured vessel. Before the man from Omaha came to town, nobody had taken the time to find the missing pieces.

Buying other people's financial troubles for pennies on the dollar has been a profitable enterprise for Foley. The 47-year-old Nebraskan's company, Interim Holdings Inc., specializes in collecting "nonperforming" loans. By definition, Foley's work involves forensics, making him a modern-day bounty hunter. His experience as an assistant director of banking in his home state prepared him to enter the field. To Foley, investing in bad debt is no different than owning an apartment complex or dealing in real estate.

In 1997, Foley bought a package of bad debt that had landed in the lap of the Federal Deposit Insurance Corp., just as he had done many times before. Among the encumbrances was a tab of nearly $500,000 attached to Warmann.

When Foley purchased the bad debt, he had never heard of Warmann, never seen Warmann's name dropped in the gossip or society columns of the St. Louis Post-Dispatch: Warmann at the opera, Warmann dancing at a charity ball, Warmann tipping glasses with patrons of the arts, Warmann dropping by a benefit for the Humane Society of Missouri, Warmann attending a St. Louis History Museum gala, Warmann dining with the late Gov. Mel Carnahan. He didn't know that Warmann's brother Gene served on the St. Louis County Police Board or that Warmann himself would be appointed to serve on the board of the St. Louis Zoo-Museum District. Foley was unaware that Warmann contributed heavily to candidates running for city, county, state and federal offices or that his generosity has helped forge longstanding alliances with influential elected officials at all levels of government.

Foley had no idea of Warmann's connections or his clout, but he was about to be given an expensive civics lesson, courtesy of the old school of St. Louis business and politics.

Earlier in the evening, he had lugged a satchel full of legal documents into Riddle's Penultimate Café & Wine Bar, on Delmar Boulevard in the University City Loop. Foley had just come from his lawyer's office, where the latest deposition had been taken that afternoon. In his trench coat and a Stetsonlike hat, Foley looks the part of a high-plainsman. His features are sharp and angular, and his height adds to his commanding presence. When the waitress suggests a small corner table, he asks instead to be seated in the middle of the room, at a table set for six. Once he is seated, there is no time for small talk. He immediately digs court exhibits from his bag and starts explaining the finest details of the case, barely taking time to eat part of his pork chop when it arrives. Over the course of the next few hours, he recites names, dates and places with the certitude of an IRS accountant.

Beyond the legal parlance and bottom line, the saga that Foley tells is rife with shattered promises and unbridled greed. But Foley is less concerned with those matters than he is with his singular pursuit. "I want to be paid," he says flatly. "I want my money back. The judgment is for a half-a-million dollars." With interest, the outstanding debt is approaching $1 million.

In 1964, when Foley was only 11 years old, Warmann joined the staff of Warren Hearnes, who was then running for Missouri governor. After Hearnes took office, Warmann became his chief administrative assistant. Press accounts from the time describe the 31-year-old aide as a savvy, cigar-chomping insider who often attended social functions in the company of attractive female companions. More important were reports that Warmann maintained de facto control over the state's patronage system and its hundreds of jobs. As the governor's right-hand man, Warmann developed into a masterful behind-the-scenes negotiator and consummate deal-maker, learning skills that have served him well ever since.

Although his back-channel ways have been effective, they have also at times stirred controversy. At least two grand juries subpoenaed Warmann -- as a witness, not a target -- as part of investigations into corruption within Hearnes' scandal-ridden administration. By the time the second grand jury was empaneled, Warmann had left government and returned to the private sector, becoming a partner in Total Communications Inc., an advertising, public-relations and management-consulting firm. Then, in 1972, he inherited Warmann Oil Co. on the death of his father, Gus Warmann. After taking over leadership of the company, Warmann expanded operations. By the end of the decade, with a branch office in Houston, Warmann's Missouri Terminal Oil Co. supplied 26 independent MoTer gasoline stations in the St. Louis area. The company's tanks on the St. Louis riverfront had the capacity to store almost 9 million gallons of gasoline. The facility also had the added advantage of being hooked directly to a pipeline running from Lake Charles, La., to Chicago. Besides the oil trade, Warmann has dabbled in a variety of other enterprises over the years, ranging from nursing homes to restaurants. Warmann's corporations also own a long list of commercial and residential real estate. One of his companies, St. Louis Concessions, moored a barge on the riverfront below the Gateway Arch that was home to a Burger King. Warmann's floating tourist attraction also included a World War II-vintage minesweeper and a heliport. He paid the city of St. Louis an annual fee of just over $3,000 to lease the site, less money than a typical city resident shells out to lease a Dogtown apartment for a year.

But by 1992, Warmann found himself in dire financial straits. His businesses were on the skids. Two of his oil firms were sold to a holding company controlled by one of his lawyers, and Warmann Oil Co., the mothership, filed for bankruptcy. Boatmen's Bank then sued Warmann to recover $1.7 million in debt. At the same time, Warmann allegedly reneged on a $500,000 real-estate loan from First Exchange Bank. The Cape Girardeau-based thrift had established itself as a high-stakes player in St. Louis in the wake of the savings-and-loan debacle of the 1980s, snapping up the assets of failed financial institutions. Before long, the bank's two local branches were themselves doling out questionable loans to homebuilders and commercial developers. After homebuilder James P. Davis -- a political donor and campaign manager for St. Louis County Executive George "Buzz" Westfall -- became chairman of one of the St. Louis branches, he approved millions of dollars' worth of loans to companies in which he had interests. When the FDIC finally took over First Exchange in 1992, it cost the government insurer an estimated $250 million. Although Warmann was not accused of wrongdoing, the collapse remains the largest bank failure in state history. After the U.S. attorney for eastern Missouri announced a string of indictments, two of the bank's officers -- a husband and wife -- died almost immediately in an apparent murder-suicide pact. Another First Exchange executive later hung himself with an electrical cord while serving time in federal prison.

Foley knew nothing of these sordid details when he first became Warmann's creditor. Neither did he know that with the advent of legalized riverboat gambling, Warmann's control of mooring rights on the levee had flooded him with cash from a casino vying for a gaming license.

It didn't take Foley long to figure out it would be difficult to collect from Warmann. A credit check carried out at the behest of the FDIC in 1992 had indicated that the only worldly possession Warmann held in his own name was a 1979 Ford van. This prompted Foley to examine his options. In so doing, he discovered a possible crack in Warmann's cast-iron defense. To secure a prime location at the foot of the St. Louis levee, Argosy Gaming Co. had advanced millions of dollars to Warmann as part of a deal to acquire his coveted riverfront lease. It was a marriage of convenience: Warmann needed quick cash to stave off his creditors, and Argosy desired an anchorage for a gambling boat.

So when his initial efforts to compel Warmann to pay up went by the boards, Foley decided to add Argosy's deep pockets to the civil action he was pressing in St. Louis County Circuit Court. The amended filing took place in 1999, after the casino operator rebuffed other attempts -- by the FDIC and other creditors -- to garnishee payments it made to the businessman. Foley's lawsuit, called a "creditor bill in equity," alleged that Argosy took part in a scheme to shield more than $3 million of its own payments to Warmann from his creditors.

According to a copy included in Foley's lawsuit, on July 23, 1993, Argosy signed an agreement stipulating that Warmann would receive $33.5 million in Argosy stock for the sale of his riverfront lease. As part of the deal, Argosy advanced $2.5 million in cash to Warmann and one of his companies, St. Louis Concessions, as a loan, making it exempt from creditors. Foley says the money actually went to pay down debts owed by Warmann and Warmann Oil to Boatmen's Bank. Despite this fact, Argosy represented the $2.5 million it gave Warmann as a "secured and guaranteed loan" to stockholders for the next three years. In other words, the money fronted to Warmann was shown to be an asset in the company's books and its annual report. Argosy maintained that Warmann had sufficient collateral from 1993-95, when he didn't repay any of the principal or interest on the $2.5 million "loan" and had other creditors pounding on his door.

In effect, Argosy had been helping keep Warmann afloat. On Aug. 1, 1993, a week after signing the sales agreement, Argosy entered into another deal with WPW Ventures, the Warmann-owned real-estate firm. Under that arrangement, WPW and Warmann received $15,000 a month in consulting fees. The day that consulting contract was sealed, during the history-making flood of that year, Warmann's riverfront-entertainment complex, Spirit of the River, broke loose from its moorings. The barges were valued at $2.7 million. Part of the claim was paid by Lloyd's of London. Warmann's local insurance agent, who brokered the settlement, was Michael Ribaudo, brother of then-state Rep. Anthony "Tony" Ribaudo, a business associate of Warmann's and a director in St. Louis Concessions, the company that owned the floating entertainment complex and the riverfront lease.

Although they publicly professed confidence to their stockholders, Argosy officials were concerned about Warmann's faltering financial situation. Memos included in Foley's lawsuit indicate that on Jan. 7, 1994, for example, Argosy board chairman William Cellini expressed considerable dismay over a high-interest loan that Warmann was forced to take out on Dec. 15, 1993, with A.G. Enterprises Inc. That company was run out of the law office of Amiel Cueto, a Belleville attorney who was later found guilty of interfering with a federal investigation of Thomas Venezia, a notorious East Side racketeer. Foley has a copy of an agreement indicating that the A.G. Enterprises loan, which was doled out in six monthly installments, totaled $300,000. In return, Warmann's creditors wanted a serious cut of the casino action. Warmann was expected to repay the $300,000 loan with $2.4 million in Argosy stock. The rate of return on the loan smacked of usury. Perhaps Warmann had made the Faustian bargain because the legitimate bankers were hounding him and he felt as if he had nowhere else to turn.

Cellini, a Republican powerbroker in Illinois, had been told of A.G. Enterprises' predatory move by Peoria banker John P. Dailey, who was involved in cutting the deal between Warmann and Argosy. (Dailey, another top-ranking Illinois Republican, later pleaded guilty to money-laundering and bank fraud in an unrelated case.) By signing off on the A.G. Enterprises loan, Warmann had potentially opened Argosy's door to the wolves. In one memo to Argosy's chief executive and two board members, Cellini complained about what Dailey had told him: "Floyd had to give his soul away -- along with stock -- to get his much-needed funds."

It was a setback, but Argosy had not given up. In February 1995, the company extended its purchase agreement with Warmann. Under the terms of the agreement, Argosy started paying St. Louis Concessions $50,000 a month. After the city's approval of the sale was successfully challenged in court by a group of aldermen, Argosy ended its relationship with Warmann in July 1995 by writing off his unpaid loan as a "development expense." When the company finally divulged the existence of the consulting contract with WPW, in June of that year, the specifics of the agreement still weren't spelled out.

In his battle to collect the debt, Foley took the extraordinary step of becoming an Argosy shareholder. For the past three years, he's attempted to redress his grievances at annual meetings. In each instance, his overtures have been shunned or ignored by Argosy's board of directors. He also contacted gaming commissions in the five states in which Argosy operates, papering regulators with letters and speaking before them in person. Foley's harping has cast a pall over Argosy and continues to jeopardize the renewal of its casino licenses in Missouri, Illinois and other states. Argosy owns and operates a gambling boat in Kansas City, as well as the Alton Belle. At stake are hundreds of millions of dollars in gambling revenue.

Instead of settling up, Argosy decided to dig its feet into the riverfront muck. At first, the gaming company tried to move Foley's case against it to federal district court in St. Louis. When that failed, Argosy countersued him for falsely accusing the company of wrongdoing. That case is pending in the U.S. District Court for Southern Illinois in East St. Louis.

Argosy's countersuit says Foley sent threatening letters to Argosy officials and unleashed a stream of negative press releases to government regulators and the press, which publicized false accusations against the company. In addition, Argosy alleges, Foley became a stockholder in the company solely to further his personal gain at the expense of the other company investors. For these reasons, Argosy accuses him of intentionally defaming the company.

Foley argues that everything he has released to state gaming commissions and the press is supported by evidence gathered during the course of his lawsuit. Argosy has failed to abide by acceptable accounting practices as mandated by Missouri gaming regulations, he says, adding that he is appalled by the gaming commission's indifference. "They [Argosy] are supposed to be clean as the driven snow, virgins," Foley says. "Does this look like a clean-as-the-driven-snow transaction? They have to follow generally acceptable accounting principles. That's required in the gaming statute. Did they do it? They say I'm defaming their name, that I've given the gaming board false documents. I don't give them false documents. These are their documents!" Foley exclaims. "I emphasize that this is a publicly held, licensed gaming company. The Missouri Gaming Commission has all this information. I gave it to them. And they did everything, but tell me to go [fuck] off."

Patricia Churchill, general counsel for the gaming commission, says that the regulatory body is taking a wait-and-see position: "We're closely monitoring it and have been from the beginning to see if things come to light or if there's any facts that come out under oath that cause us concern."

Meanwhile, Foley's suit against Warmann and Argosy was dismissed last month by St. Louis County Circuit Court Judge Kenneth M. Romines, who ruled that the four-year statute of limitations on the "creditor's bill in equity" complaint had expired. The judge also ordered Foley to pay Argosy's legal fees. Romines' decision did not address the merits of the case. Foley has filed an appeal.

Warmann and Argosy have had little to say about the latest legal twist. The oilman referred all questions to Thomas Connelly, his attorney. Connelly could not be reached for comment. An Argosy spokeswoman declined to say much, other than "The court's ruling speaks for itself."

Foley is more candid: "We've been trying to negotiate like nice people, and it's gotten us nowhere," he says. "These aren't the kind of people who you call and work out a debt. We tried that. They don't do that. This is a knock-down fight-'em-in-the-street bloodbath." Last Friday, Foley filed a new suit in circuit court, accusing Argosy of conspiracy and fraud. He contends that if the case goes to trial, he will quickly prove his point.

So far, Foley has spent more than $200,000 on lawyers' fees, travel expenses, court reporters and process servers trying to collect a debt that initially amounted to less than $500,000. He's flown to St. Louis more times in the last three years than he cares to recall. His quest has also taken him to the Chicago offices of the Securities and Exchange Commission, where he photocopied thousands of pages of microfilmed documents. After all this legwork, he hasn't collected a penny. In fact, with Argosy countersuing him, the hunter has become the hunted.

Foley still doesn't know exactly what transpired between Argosy and Warmann. To be informed of the details of the transaction, says Foley, Argosy demanded that he sign a confidentiality agreement, which he refused to do. When Foley's lawyer summoned Warmann to be deposed, the businessman's attorney indicated that his client would plead the Fifth Amendment against self-incrimination. Warmann's confidante Julia VonWellen, secretary of St. Louis Concessions and president of WPW Ventures, also invoked the Fifth Amendment hundreds of times. Her deposition amounts to 125 pages of unanswered questions. VonWellen invoked her constitutional right not to incriminate herself four times in response to the following request: "Please admit that WPW Ventures Inc. was being used as a front by yourself and Floyd Warmann for the purposes of diverting funds and payments from Argosy Gaming Company out of the reach of creditors of Floyd Warmann, including FDIC." The only facts VonWellen affirmed were her name and address.

Every step of the way, Foley has been held in check, either by Warmann or by Argosy. He wonders aloud about a city where elusive debtors are held in high regard. "Generally," says Foley, "we don't see debtors, with millions of dollars of judgments against them, appointed to civic boards to oversee the allocation of tax dollars."

Last month, Warmann attended the Zoo-Museum District's board meeting at a high-rise office building on Forsyth Boulevard in Clayton. During the session, a priest sat at one end of the conference table. Warmann, tanned and dressed in a dark business suit, sat at the opposite end next to former Lt. Gov. Ken Rothman, another member of the board. He made small talk with Rothman and others. His manners were suave, and his shoes were shined. There was a brief discussion of the district's annual budget of $30 million, which the board voted to approve. After the meeting, Warmann was polite and courteous when asked about Foley's lawsuit, but he declined comment.

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