KNOX NEWS TEAM
A light snow
fell on the crowd snaking outside the Carl Sandburg College auditorium in
Galesburg. It was Dec. 1, 1990. Some shivered, some came on crutches. All of
them were applying for jobs. A blind ad in the local newspaper the day before
read, "Please Join Our Director of Human Resources To See What The Future
May Hold For You!" On nothing more than that vague promise, 1,000 people
waited until the interviewer from a company called Wittek arrived at 9 a.m.
Wittek Industries
was a suffering hose clamp company from Chicago that
was considering consolidating its three operations into one location -
Galesburg - to cut costs. Representatives from the company came without enough
applications for those already in line, but Galesburg Chamber of Commerce staff
members were on hand to help. They copied new applications until they ran out
of toner in their new copy machine. By the end of the next day, 4,000 people
had applied for what were only 400 potential jobs.
Galesburg was
desperate for hope, and Carmen Viana, Wittek's flashy Brazilian CEO, delivered.
She brought Galesburg the glimmer of a stable future - and a touch of class.
Viana was dark and curvaceous, her straight black hair precisely pulled back.
She was 41 when she became CEO in 1990. Viana had an exotic accent, 13 fur
coats, big sunglasses, a way with voodoo and a charm that made it difficult to
tell her no. Galesburg plunged before looking at her empty resume.
Times were
tough in Galesburg. In 1984, the warehouse operations of the Outboard Marine
Corp., one of the city's largest employers, were outsourced to Mexico and
Mississippi. Some 2,500 primary jobs disappeared. Nine months later the state
closed the Galesburg Mental Health Center, a large mental hospital employing
900 people. Unprepared for the losses, local suppliers subsequently folded, and
the city's retail business, real estate market, tax base and schools were
devastated. Galesburg was in steady decline. Local cars carried bumper stickers
playing off the famous phrase: "Will the last person in Galesburg please
turn out the lights?"
Trying to ward
off economic ruin, the city
The Players
|
Carmen Viana
Became owner and CEO of
Wittek Industries, consolidated plants and moved to Galesburg. The company
missed its first payroll and by 1993 the company was evicted from its
facility at the former OMC building on 519 McClure St. Now living in Brazil,
she's wanted on a number of criminal charges related to Wittek. Brazil doesn't allow the extradition of its
nationals.
|
George Hook
An attorney at McBride
Baker and Coles in Chicago, he met Viana while back in Galesburg for an
alumni function at Knox College. Soon after, Hook left his job to do legal
work for Viana and Wittek. At one point, Hook was providing legal
representation for Viana and Wittek in 80 lawsuits. Two years after the plant
closed, Hook and Viana were indicted on charges of money laundering, wire fraud
and theft of an employee benefit plan. Hook served seven years in prison for the crimes.
|
Jay Hedges
Worked for the Illinois
Department of Commerce and Community Affairs and helped deliver a $1.5
million grant before leaving to work as a consultant with a real estate
broker, the Alter Group, in Winetka. Wittek hired the Alter Group and Hedges
ended up leaving that job to become executive vice president of Wittek.
Seeing the writing on the wall, he left before the company went under.
|
John Darrah
Owned Wittek Industries
before giving the company, heavily in debt, to Viana in 1988. He bought
Wittek, which manufactured clamps for rubber hoses, along with other
companies in the early 1980s.
|
Fred Kimble
As Galesburg mayor he
took the lead in bringing Wittek Industries to Galesburg in 1990, which
included the city pitching in $300,000, left over from a state grant, to help
Wittek set up its plant. He was also Wittek's insurance agent. He's now the
economic development director in Westmont.
|
John Pritchard
Owner of local radio
stations and chairman of the Galesburg Economic Development Council when
Wittek came to Galesburg.
|
built an
industrial park on the edge of town, complete with streets, sewers and lights,
and waited for business. But nobody came.
Soon residents
were so desperate for jobs that the city entered the running to build a
medium-security prison, a previously unpopular idea. Galesburg donated the
vacant industrial park to the state, and in 1986 the Henry C. Hill Correctional
Center rose on the southwest edge of town. However, Galesburg continued to
struggle.
Then Viana came
to town.
It was a
combustible mix. Galesburg was looking for a fix and it had the still-vacant
OMC building for lease. City leaders knew Wittek had to consolidate in 45 days
or go bankrupt. Galesburg's business and political leaders needed to score and
so did Viana.
Despite the red
flags, hope overshadowed caution. Desperation justified bad decisions. With
Wittek's first blind ad, Wittek seized the advantage and kept it until the bitter
end. Galesburg was flirting with disaster. And to the city's leaders today, the
Wittek experience should herald both a message and a warning.
Instead,
history may be repeating itself. In 2002, Maytag Refrigeration, Galesburg's
largest employer, announced it was relocating its factory to Mexico. Now that
the company has left, local business and political leaders are again looking
for a fix. And eerily, another empty industrial park sits waiting on the
southeast side of town, waiting for tenants.
This is a story
of promise and broken promises. The same story has occurred in town after town
throughout the modern, post-industrial Midwest. It just happened that
Galesburg's industrial savior came to town in five-inch spike heels.
Viana becomes unlikely owner of Wittek
The events that
brought Wittek into Carmen Viana's lap began at a boat show in the mid-1980s.
Viana owned a company that imported cheap products from Brazil, and she hoped
to sell some vinyl inflatables she had in her stock for use as ballast in
boats. At the show she attempted to make a deal with a Florida-based
entrepreneur named John Darrah, who had made money during the leveraged buyout
craze of the early '80s and owned several turnaround companies, including a
boat manufacturer and Wittek.
Because Viana's
Brazilian-made products did not have the ISO 2000 rating, an international
safety standard required by American laws, she never was able to forge a
business partnership with Darrah, but they kept in touch and a different sort
of partnership emerged.
"At that
time I fell in love," Viana said from Brazil, where she now lives and is
unable to leave due to U.S. warrants for her arrest in connection with her
dealings with Wittek.
Darrah, a
prominent figure in Panama City, Fla., is circumspect about the relationship,
only saying, "You believe the things you want to."
The
gray-haired, handsome businessman speaks with an irreverent self-deprecating
charm that makes you feel like you have been buddies for life - or that you are
being had.
Darrah had
recently acquired Wittek. The company made hose clamps, which are found
wherever a rubber hose makes a connection. Charles Vitek, the company's
founder, invented the clamp - a slim quarter-inch wide band of stainless steel
with a screw set flush for tightening - in 1917. He soon sold the company to
his brother, who began the name Wittek Industries, apparently a play on their
surname. Wittek clamps were used in famous aircraft, like Charles Lindberg's
Spirit of St. Louis, the U.S. Army's P-51 Mustangs in World War II and NASA's
spacecraft in the Apollo missions. The clamps were also used in washing
machines and refrigerators, including those manufactured by Maytag.
After Wittek
invented and patented the post-drive clamp, where the screw is perpendicular to
the strap of the clamp, automakers became the company's biggest customer. Screw
guns on car assembly lines needed only to drill straight down on the post-drive
clamp to tighten as opposed to drilling parallel to typical C-clamps. This
straight-down drilling on post clamps guaranteed efficiency and saved time
because they would not slip.
During Viana
and Darrah's relationship, two of the five mills in the world that produced the
thin steel necessary for Wittek clamps closed and Wittek's costs began skyrocketing.
"In one
week we went from making a profit to breaking even," Darrah says.
"The next week we were in the hole." The Big Three automakers refused
to pay more for the clamps, so Darrah cut salaries at Wittek by 46 cents an
hour and ended vacation time, severance pay and the pension plan to try to stay
afloat.
Viana gets Wittek reins
"One day
he called me," Viana recalls. It was in 1988. "I remember I had just
had a heart attack. He called me at the doctor's office that morning: 'I know
you want to run an American industry. I have a company, and with your guts I'm
sure you can recoup it.' "
Viana agreed to
help.
"He gave
me the company because he had $500,000 of personal collateral in the
loan," she says. "All he wanted was someone to throw the thing at, (but)
when I got there, I realized the company was far from dying. Eighty-seven parts
in Ford cars were made by Wittek. Eighty-seven Ford parts were in our
hands."
Viana
negotiated deferred payments with Wittek's suppliers. "In the month I was
there it started turning a profit. I said, 'I want to be CEO' - remember it was
me and him against the world - and he said, 'Go right ahead.' I wanted to prove
to him how great I was."
Two years
later, Chrysler decided to float Wittek a loan to solidify its supply of post
clamps. Ford and General Motors had already invested money to switch to other
connectors instead of the post clamp because Wittek had been so unreliable in
the last few years. The other automakers still bought different clamps from
Wittek and would benefit from Chrysler's help, but Chrysler had no choice in
the meantime. An unreliable company could delay production - an automaker's
nightmare. Chrysler would also switch, but until then it needed the post-drive
clamp Wittek had.
Chrysler
offered to assume Wittek's debt from General Electric, a customer which had
financed earlier Wittek loans with Darrah, even though Viana had no experience
in the auto industry and only a few troubled years with her own import company.
"Chrysler
believed in her," Darrah said, "so I let them have it."
Chrysler's biggest stipulation, however: Viana was not allowed to participate
in the negotiations.
"They made
a deal I couldn't refuse," she said. The papers were signed in early 1990
and she became the sole owner of Wittek Industries.
"I call it
damage control," Darrah says. "It was the least worst
alternative."
In exchange for
a $3 million loan, Chrysler mortgaged Wittek's three properties for $4 million
and gave the company a month to consolidate its operation. Wittek closed and
sold off assets in Pineville, N.C., the plant in Chicago, and its headquarters
just outside of the city in LaGrange Park. The company decided to seek a new
location outside of the Chicago area for the cheaper rent and electricity and a
non-union workforce. Only a dozen upper-level management positions would move
with the company. In early 1990, Wittek began the search.
Wittek finds home in Galesburg
Wittek
Industries and Carmen Viana met the city of Galesburg thanks to a man named Jay
Hedges. A tall man who wears his pink Polo shirts neatly tucked in, Hedges
first came across Galesburg when he was director of the Illinois Department of
Commerce and Community Affairs, a powerful state economic development agency.
When the state closed Galesburg's mental hospital in 1985, Hedges awarded the
city a $1.5 million DCCA grant to rehabilitate the site.
By 1990, Hedges
had left his state job and was consulting with The Alter Group, a commercial
real estate broker in upscale Winnetka, which Wittek hired to write a new
business plan and find a new building. Because it needed state and local
funding for the move, Alter sent Hedges to meet Wittek's management team in
LaGrange Park.
"I was
intrigued by it because I could see the value I could add. One facility could
reduce their operating costs and overhead," Hedges said from the local
Peoria coffee shop where he meets with his entrepreneur friends a few days a
week. He now owns a window company downstate.
When Hedges
first met the CEO, he says, he was "a little startled" by her
appearance. "She was over made-up and overdressed, and always wore these
spike heels. She claimed that she had been a former Miss Brazil or some sort of
beauty queen, (but) nobody could ever really document that. I sort of knew she
was a psychopathic liar because little things I knew were not true she would
just fabricate in meetings with people."
But these
little things apparently raised no red flags for him. After finishing the
business plan, he flipped through his Rolodex and found contacts in cities with
former state mental hospitals. He knew these cities would have grant money
since he had helped to provide it, and he also knew they would have a need for
jobs.
On Nov. 29,
1990, one week after Thanksgiving, Hedges called the Galesburg Economic Development
Council and learned that the city had a vacant building. When he told Viana,
she said it was the perfect size and promptly chartered a plane to fly them to
Galesburg. They toured the old OMC building at 519 McClure St., a
228,000-square-foot orange-and-brown aluminum low-rise that had sat empty since
1984. "There were about three inches of pigeon s--- on the floor,"
Hedges remembers. "The birds had just taken over this building because it
had been abandoned.
Cleaning up the
hazardous material would have cost Wittek $30,000, but Galesburg sent the city
street sweepers do the job for free soon after the tour.
The next day
Wittek ran the blind ad in a few newspapers to test out the local job market.
The day after that, those thousands of job-seekers waited in line in the snow.
Wittek executives were impressed by the turnout, so Hedges began more serious
negotiations.
Easy to say yes
"I wrote
grant (proposals for Galesburg) and presented the project in an honest way, but
in a way that made it very appealing," he says now. "I packaged it in
a way that was easy for them to say yes," using money left over from the
mental hospital grant that had to be spent or returned to the state. Galesburg
would pitch in $300,000 to finance Wittek's move to town. Knox County and the
EDC would also give $50,000 each, for a total of $400,000.
"It was a
very legitimate attempt at creating three or four hundred jobs, but a high risk
venture," Hedges says. And, as he had calculated, just how high a risk
seemed to matter little to town leaders. Instead, the city acted fast due to
competition. Not only was Wittek nearing bankruptcy, but it was also looking at
Cameron, Mo., which offered to lease a 109,000-square-foot building at $1 per
square foot per year for five years, and free for the next five years. The
state of Missouri would throw in $400,000 for moving expenses. In mid-December 1990, Galesburg agreed to make a
deal.
John Pritchard,
owner of a chain of local radio stations and the former chairman of the EDC,
now says he was surprised at how fast Galesburg's then-new mayor, Fred Kimble,
threw the city's hat in the race. "He just kind of leaped in front of us
and we didn't get to do our job completely," Pritchard says. "I'm
sure we didn't obviously spend enough time checking out Carmen's
background."
If they had,
they would have discovered that Viana knew nothing about the delicate balance
of the auto industry and that her experience lay not in hose clamps, but in
metaphysics and spirituality. As a result, Hedges says, what might have been
"a 20 percent chance of success" went down to zero. "That's what
was frustrating about it."
"We
understood the risks," said former Mayor Kimble, now the economic
development director in Westmont. "This was a company in transition. They
were in bankruptcy and trying to get out. Even if we did front this money,
there was no guarantee that they'll make it."
In Part 2, read about Wittek's first days of operation in Galesburg,
Viana's opulent lifestyle and free spending and how Ford, Wittek's biggest
customer, turned away after Viana denied its request for a financial disclosure
statement.
Special Report
Galesburg
lands hose clamp manufacturer in five weeks
Hedges joins firm, adds
credibility
BY DEVIN HOGAN
KNOX NEWS TEAM
Wittek
Industries, a manufacturer of hose clamps for cars, was looking to locate in
Galesburg in 1990. Local leaders were impressed with the company's patents,
something rare in the auto supply industry, as well as the coveted ISO 2000
rating. Wittek also had a long and storied history with big name clients and
was a Quality 1 supplier to Ford - all of which had happened before Carmen
Viana became owner.
Local bankers
ran the numbers and found Wittek might have a chance
after a few years in Galesburg.
Wittek owner
and CEO Carmen Viana had already secretly decided on Galesburg anyway.
"I took
pity on the people waiting in the snow, in wheelchairs applying for a
job," she says.
She asked Jay
Hedges to be her executive vice president around Christmas 1990, and he asked
for a $125,000 salary, a number he now says he knew was too high. Viana agreed
to pay it, and Hedges took the job.
The project
finally had what city leaders needed. "(We thought) this must have a much
greater chance of success than we really expected because this is a really
smart guy and he's jumping in with both feet," Galesburg Economic
Development Corp. Chairman John Pritchard says. "It gave credibility to
Carmen."
Unfortunately,
however, Hedges had no more corporate experience than Viana. Rather, he had
been in government for 13 years and he wanted to switch careers. "That was
a risk I was willing to take," he says. "IBM wasn't knocking on my
door and I really wanted to be in manufacturing," he says. This career
move for Hedges sealed the deal. Just before the new year, Wittek signed a
10-year lease for 519 McClure Street, the largest commercial lease in the state
of Illinois in 1990. In addition to the $400,000 grant, the state provided $1.2
million to train new employees.
The press
conference announcing Wittek's move to Galesburg was a big production. Viana
rented the banquet room at Jumer's Continental Inn, the nicest hotel in town,
and kept secret the announcement until the conference. Only five weeks had
passed between Hedges' first contact with Galesburg and the day of the
announcement Jan. 8, 1991.
Viana told
those assembled that Wittek would expand worldwide, that it would break into
the Fortune 500 and that this was the first of her many business ventures.
"It was
just like, 'This woman has chutzpah,' " Pritchard said. "She's got a
difficult situation here and she's interested in all these other things. It was
an aggressive kind of attitude that I thought was extreme, beyond
realism." But Pritchard said nothing.
Mayor Fred
Kimble shook Viana's hand as he passed a 10-inch brass key to the city. The
audience applauded. Wittek began operations in Galesburg two weeks later.
Wittek starts operations in Galesburg
To celebrate
Wittek's debut, Viana held a lavish black-tie affair on the factory floor.
Local elite in tuxes chatted over hors d'oeuvres and champagne to a string
quartet. Four hundred metal-stamping machines sat silent, ready for production
the following Monday.
"It was
the social event of the season," Hedges says. "I was a little
embarrassed by the whole thing because I was already seeing that this company,
in order to survive, really had to spend wisely." But he did not object.
In the middle
of the plant floor sat a brand new black Ford Mustang with a giant red bow. At
the end of the bash, Viana gave the car to production engineer Jim Baughman for
his hard work in consolidating Wittek's three locations into one operation.
This gift-giving became a regular occurrence.
Every so often
Viana would gather the employees on the floor, single one out and present a
lavish gift.
"There was
a lady that we worked with that was very poor," recalls Roxanne Ronk,
Viana's secretary at the time. "Carmen heard about it and bought a bike
for her child. Just gave it to her. And the cynical part of me thought, well,
that was a $60 con job because now this girl went back and told everyone how
great she was."
Galesburg's
$400,000 grant went to remodeling Wittek's 14,000-square-foot office. Wittie,
Viana's rare and expensive Himalayan cat, ran around the boardroom table that
had 30 high-back leather chairs. Viana's office had statues of big cats
arranged around her black-glass-topped desk that rested on glass pillars.
Exotic tapestries hung above her white leather couch. The back room of her
office had plumbing set up for an eight-person hot tub, but Hedges finally objected
to her opulence when the town found out. It was never installed.
Viana made
people wait. Suppliers, bank representatives and vendors often had to cool
their heels for hours until she was ready to see them.
"She'd be
sitting inside her office, having a cup of coffee," Ronk says.
Some would stay
and absorb the decor. Others got angry and left.
"I never
knew what she'd say behind those doors," Hedges says. "She would get
on the phone with vendors who we owed money to and made some agreements:
'Forgive 90 percent of what I owe you, and I'll give you 10 dollars a month for
the rest of my life. Ship me a new product.' And they would do it."
"It was
like a cult," Terry Tulin, Wittek's former quality control manager,
recalls. "People were just so overwhelmed. Or brainwashed."
Viana's
personal life was just as high-flying as her business style. Just as Wittek
missed its first payroll, Viana renewed her bid to buy the old City Hall.
Galesburg had just finished a new building and was taking bids for the original
structure from 1906. Viana proposed to buy it for $1 and have the city finance
a $100,000 loan to build herself a condo on the second floor. There was much
ado about which corner would have the master bedroom, but she eventually
withdrew her bid.
Wittek paid
Viana $200,000 a year, but thanks to company credit cards, she began to live a
millionaire lifestyle. She would fly monthly to visit her family on Long Island
or Darrah in Florida. While on a European business trip, she flew to Russia to
buy a new fur coat (at a discount). The new shiny black Ford Mustang went on
Wittek's tab. Her credit card bills reached $30,000 a month.
A local
newspaper asked where all of her money came from. She responded, "Well,
it's a matter of perception, I dress well; I live well; I travel well."
Her down
payment for the largest house at Oak Run - a lake community 20 miles outside of
town - went on the credit card. Somehow Viana had the deed put in her name
without paying off the mortgage. She held an open house with waiters in tuxes
carrying hors d'oeuvres there, too. It was a mandatory event for the vice
presidents.
The floors,
furniture and walls were white. She had a library upstairs, complete with a
globe and classical literature. In the basement she had a personal gym with Nautilus
equipment, and a small room with an altar in each corner, one each dedicated to
earth, air, water and fire. The room also held what became the most famous
bookshelf in Knox County: books on black magic next to books on voodoo,
witchcraft and mind control. Also on the shelf was a book called "How to
Beat the IRS."
Viana was never
able to beat the IRS. By 1992, it began placing liens on Wittek's equipment and
creditors repossessed the Ford Mustang. Wittek's controller suspended her
American Express card. Viana fired him.
Ford dumps Wittek; creditors line up
Wittek began
its second year in Galesburg by severing its relationship with Ford, its
largest customer and the source of 35 percent of its gross revenue. Though Ford
had dropped the post clamp, it still used some of Wittek's five other clamp
types. Ford, like the other two U.S. automakers, wanted to streamline the
amount of suppliers used per car. Automakers had survived by pitting suppliers
to underbid each other's price, but the costs to keep up that game were
immense. Fewer suppliers meant fewer tools - the most expensive production cost
on the assembly line. In order to single-source a part, Ford had to guarantee
that the supplier was financially sound or risk delayed parts and stopped
assembly lines.
Accordingly, in
January 1992, Ford sent representatives to Viana with a request to fill out a
95-page financial disclosure statement.
"She just
went ballistic," says Tulin, the former quality control manager. "She
said, 'It's none of their g-- d--- business how I run my company.' "
She sent Ford
packing.
Evidently,
Viana expected Ford, which bought 3 million clamps from Wittek yearly, to come
crawling back on her terms, but despite attempts from other management staff to
patch relations, Ford did not. Wittek laid off 100 workers later that week.
Word got out in
the industry, and General Electric and Whirlpool stopped buying from Wittek
soon afterward.
"We didn't
realize what those types of (financial) reports would show," Tulin says.
"There was no way she could admit or fake what was going on."
The numbers
showed that, thanks in part to Viana's high spending habits, the company had
been operating at a loss since June 1991 and was insolvent to more than 70
creditors. So what had come across to employees and the city as a costly
mistake was a victory for Viana. She kept prying eyes off her books and
maintained the image that Wittek would still make it.
Perceiving betrayal, Viana fires staff
Even without
financial problems, the writing was on the wall. Wittek's equipment was
literally antique, producing the same clamp from the 1930s for an industry that
no longer needed them. "You used to have 22 hose clamps under the hood of
a car," says Thorne Gould, president of Murray Corp., a clamp company in
Baltimore. "Nowadays you'll find maybe four."
Today's focus
is on better connections within the hoses and the Constant Tension Clamp, a
spring-loaded connector with memory developed by Wittek's European competitors.
Gould says the CTC is more expensive and not as snug as a typical screw-driven
clamp, "But the quality of the installation is more uniform," he
says. "And that makes all the difference in the world."
Soon after Ford
left, Viana secured a $750,000 loan to Wittek from First Illini Bank in
Galesburg, pledging the company's assets as collateral. Wittek's immediate
future seemed secure. The next month, however, Crain's Chicago Business
reported that Wittek was under investigation by the FBI. While Viana was out of
town, someone issued checks to several vendors without sufficient funds in the
account, and Viana believed someone maliciously contacted the FBI. She flew to
Galesburg and concluded that she was in the middle of a coup. Viana prepared
for battle.
"I came
there and fired everybody," she recalls. "I had to run the company
without anybody, the attorney, the production director. Everybody (was
gone)." On March 31, 1992, Wittek sued four former employees for their
alleged conspiracy to take over the company and sought $5 million in damages.
"In the
last two weeks alone, several crucial suppliers have threatened to stop
providing the company with material; numerous customers have withheld payments;
one long-time customer cancelled its order to buy goods; and one of the
company's banks terminated its account with the company," the suit read.
"On information and belief, all these developments have been a direct
consequence of defendants' actions. If unrestrained, the defendants' efforts
will destroy Wittek."
At the
preliminary hearing at the Knox County Courthouse in Galesburg, Judge Daniel
Roberts admitted his bias and probably foretold the future when he said,
"My ultimate goal is to keep Wittek in business. We need the business. But
I don't know if that can be done."
'We do not cash Wittek checks'
Wittek rumors
plagued the city. Some heard the Immigration and Naturalization Service also
was investigating. Others thought Viana was running a drug cartel. Wittek
employees had trouble renting apartments. Signs at several local banks read,
"We do not cash Wittek checks." Employees would have to rush after
work to the banks that still accepted Wittek checks so as to be the first to
cash them while there was still money in the account. Meanwhile, Hedges
contacted the FBI, who said there was no investigation.
A week after
the conspiracy lawsuit, 50 Wittek employees attended a Galesburg City Council
meeting and pleaded for the rumors to end. The company now had only 200
employees, down from a peak of almost 500. Mayor Kimble said the city could do
nothing about private business matters unless it violated city ordinances.
But that wasn't
how Kimble responded privately. For the past 13 months, Kimble had been paid a
$1,000 monthly commission as Wittek's insurance agent. A few days before the
company's employees appeared before him at the City Council meeting, he
terminated the account for non-payment of the premium. "I wish I hadn't
gotten involved in that," Kimble says now. "That allowed me to
witness first-hand her mismanagement, her misdirection of funds for purposes other
than for which they were intended." He still maintains that his actions
were ethical.
Viana 'unmanageable,' Hedges jumps ship
Around this
time Hedges began searching for a new job because he could no longer handle
Viana.
"She had
her own methods of turning the company around, most of which had to do with
rituals. Rituals and lying to people," he says. "It took me about six
months to figure that out and another 10 months to get out of there."
He says Viana's
actions were not just a show. "In the micro sense, she could get things
done. She can get a loan from First Illini Bank, but she couldn't in the macro
sense put it all together," Hedges says. "She was unmanageable."
Hedges says he
decided to leave after he discovered Viana was employing her Brazilian relatives
without the proper immigration paperwork and that her credit card sprees were
illegally never reported to the IRS. But another banner moment was when he and
his wife went to Viana's house for dinner.
That night,
Hedges says he took a wrong turn to the bathroom and ended up in the master
bedroom. It was empty except for an altar, some statues and three daggers
stabbed into the hardwood floor.
"There
were pieces of paper under each dagger, and the edges of the paper were
burned," he says now. "But I could see there was writing on each
piece of paper. And I went over and looked at the daggers and it was the names
of the defendants in the lawsuit." Hedges
resigned June 10, 1992, citing "philosophical differences."
Voodoo, a
common religion in Brazil, seemed shocking to Galesburg. At the time, a local
newspaper asked Viana if she practiced it. "I wish I did," she
responded. "There would be people croaking around town."
In Part 3, read about Chicago attorney George Hook's attempts to defend
Carmen Viana and Wittek.
Special Report
The
bitter end
Firm crumbles, unable to
pay workers, bills
BY DEVIN HOGAN
KNOX NEWS TEAM
Attorney George
Hook entered the Wittek picture the weekend before Executive Vice President Jay
Hedges left. Hook thought he could save Carmen Viana and Wittek from the
conspirators Viana said were undermining her operation. Hook was a Chicago
lawyer. He had gone to Knox College in Galesburg, and he first met Viana there
at a party after the college's 1992 graduation.
"I
remember the day he came up to me and said 'You look really proper. Who do you
use as an attorney?' I said, 'Nobody,' " Viana recalls. "I was still
the little girl of Galesburg."
She took his
card. Soon afterward, Hook left his secure, respected position at Chicago legal
powerhouse McBride Baker and Coles and set up a business for himself in order
to become the lawyer for the incredibly high-risk Viana and Wittek.
An independent
financial adviser had told Viana that Wittek's North Carolina pension was
under-funded, so she and Hook scheduled a meeting with Drake Boutwell, his
former colleague, who concentrated in the Employee Retirement Income Security
Act of 1974. ERISA law delineates what investments can and cannot be made in
pension plans.
Viana suggested
to Boutwell that the plan's money be transferred to Wittek, and that Wittek's
operation could build up the income of the plan. Boutwell said transferring any
money from the plan into Wittek would be against ERISA law, but they could
create a real estate corporation, use pension money to fix up the Pineville
property, sell it and take the profits to fund the plan. Hook and Viana soon
incorporated the Pineville Real Estate Operating Corporation and transferred
the Pineville property from Wittek to PREOC.
Carmen's story of deceit and mystery
|
"So you want to know
why I had a bad time in your country?" Carmen Viana asks me forcefully.
I take a gulp and say
something submissive akin to "Yes, ma'am." Carmen establishes her
dominatrix role surprisingly fast. Some say the first stage of dealing with
Carmen Viana is utter fear. I agree.
That's how the interview
began in Brazil in November 2005. I had dealt with Carmen for several weeks
before this meeting, each phone conversation as stressful and scary as our
in-person meeting.
In fact, the first thing
Carmen Viana told me was that I would hurt her.
Struggling to hear on a
pay phone in Argentina, I didn't get her bizarre opening line. Carmen had all
of the advantages - she didn't have to meet with me and she was safe from the
U.S. government. I soon realized this woman, whose success is based on a
series of false images, was giving me a show.
Carmen was never rich, at
least not while in Galesburg. Using company credit cards, however, she
dressed the part.
Despite what it looked
like, nobody more than Carmen wanted Wittek to survive. Without the company,
she lost the source of her power - the image of successful CEO.
Without that image to
intimidate me, Carmen needed options to assert her dominance. Playing off her
sexuality wouldn't work over the phone, never mind the issue of our age
difference. So she said I would hurt her like the rest of Galesburg did, putting
me on the defensive. Now I was the antagonist, and I was scared out of my
mind.
That was our phone
relationship. I had to grovel to Carmen, to feed her ego, and I had to pass a
series of tests to prove I wasn't a spy: She called her old secretary still
in Galesburg (whom I know) for the first time in 13 years to see if I was
"legitimate."
Carmen demanded details
about my project, and about once a week I would call her to report them.
And I always got a
brusque response.
Then I'd follow up with
an e-mail.
Always with no response.
Carmen is notoriously
paranoid and with due cause. She is a fugitive on the lam from the U.S.
government.
But Carmen clearly
enjoyed her game with me. She had this hapless American kid dancing in
circles for her, just because she could.
Carmen finally agreed to
meet with me in Rio de Janeiro if I gave her all of my hostel information
beforehand, so I did.
"To send an
assassin?" I wrote in my journal. I had been warned before undertaking
the trip. "Please keep in mind that there is an element of risk
involved, and a history of physical violence," wrote a professor in an
e-mail.
But I still flew to
Brazil, and waited.
And waited.
Carmen didn't call the
hostel despite her promise. So I called her, and she didn't answer. I called
three more times that day. It became a ritual.
Every day for a week, I'd
wake up, put on my Havaianas flip-flops and walk two blocks to the cluster of
pay phones next to Ipanema beach.
Despite the prevalence of
pay phones in Rio, most just didn't work. I'd spend the rest of my day trying
to find a working phone, call Carmen, and get no answer.
After the seventh day, I
slammed the handset in frustration and moped angrily toward the hostel. I was
to leave for the United States the next day, and my chance to meet Carmen was
slipping.
I went straight for the
backup phone on the noisy street. Waiting for a break in the traffic, I
dialed Carmen's cell phone number. It rang. She picked up. "Hello Devin,
I am planning on meeting you tonight at the shopping center called Downtown
in Barra da Tijuca." The light changes and diesel engines spit on me.
"What?" I shout. I can barely hear her. Barra da Tijuca is the
ritziest part of Rio. "There is a Cinemark in the middle of the
mall," she tells me. "There is a pay phone in front of the
Cinemark. Call me from there at 8 o'clock."
Click. She hung up.
After a quick shower, I
took a taxi to the nice side of town. We drove past the palm trees and high
fences of downtown, and into the gates of the mall.
And here I am, sitting on
the fountain in front of the Cinemark, looking at the orelheao I just used to
call Carmen. She will be late by 20 minutes. She asked me to describe myself
(long blond hair, khakis, nice shirt), and I wonder if she was not hiding in
a second floor office with a sniper, focusing the target on me. Maybe she is
just around the corner, wondering if I'm not doing the same for her.
A hand on my shoulder.
"Devin?"
I turn around and see an
old woman. Carmen's hair (her usual tight bob) was all gray, her eyebrows
painted on. One might think the stress of being an international fugitive
must have worn on her, but I know that's not true. Carmen lost her beauty a
long time ago, artificially maintaining it by telling people she was once a
beauty queen. Lesser people would take Botox injections.
She takes me to Sharm
el-Sheikh, an Egyptian restaurant named after the resort town on the Red Sea
- hookahs, pillows, and intoxicating Egyptian music complete with exotic
horns and sitars.
"I just want you to
write my own good will. I just want the truth," she said.
I said something about
objectivity and she gave me an "I'm reading your mind and know you are
lying" look.
I had to meet Carmen in
person to understand her. All I had was Galesburg's perceptions of her and
that built nothing but a caricature. As the interview progressed, however,
Carmen kept spouting American truisms and movie quips. "Sorry
Charlie." More than three significant events happened to Carmen on
"one beautiful day." She swore a lot.
In the first hour of the
interview, I realized that Carmen really is a caricature. Her English is
built from the parts of American culture that seep into the rest of the
world, like Clint Eastwood and Jerry Springer. Because Carmen came to
Galesburg before the power of the Internet, nobody could track her previous
history. Carmen tailored the movie of her life how she pleased. Then she got
lost in the plot.
I spent the majority of
the interview trying to understand her complex and bizarre story full of
deceit and mystery. I knew half of it was a lie, but I still had an urge to
impress her.
I also had to fend off
her attempts to buy me off. Midway through dinner, she offered black orchid
oil "to give to your girlfriend" (that I didn't have). I politely
declined, but she gave it to me anyways. You can't say no to Carmen Viana.
Slowly the interview
turned from fearful to awkward, and finally, relaxing. When Carmen stopped
being aggressive, everything she said became comforting, almost like that
cool aunt who would take you to the zoo as a kid.
A cover of "Big
Pimpin" by Jay-Z comes over the speakers, the melody played by sitars.
"I could have easily paid some guy on the street $50 to shoot you in the
head," she says. "But in the end I listened to my heart."
I knew she was
showboating, but I really did appreciate that she didn't send an assassin.
At the end of the night
she said, "If I had known you weren't a spy, you could have stayed at my
house."
She invited my parents
and me to her place the next time I came to Rio de Janeiro. And I thought it
was a good idea.
I caught myself. Carmen
had just convinced me that it was a good idea to stay in her house. By
myself. I was too busy being distracted by her attempts to buy me off with
gifts to notice that I had already been sold.
Then Carmen Viana got in
a taxi and disappeared into the muggy Brazilian evening, mysterious as ever.
She's good.
|
Devin Hogan is a 2006
Knox College graduate. He interviewed Carmen Viana as part of his honor's in
journalism project at the college.
|
Manufacturer's
Bank in Detroit, the holder of the pension plan, was initially skeptical of
transferring plan money into PREOC. Boutwell sent a letter assuring the
legality of the transaction by saying the funds would not be used by Wittek,
and he made Viana trustee of the plan. Manufacturer's Bank demanded that Viana
be replaced by an institutional trustee before it would wire any money to
PREOC's account at Harris Bank in Northbrook. Hook then wrote a letter to
Manufacturer's Bank saying that Harris Bank would accept trusteeship and
provided a trustee account number. But no such arrangement was made with Harris
Bank, and the number Hook provided was the PREOC checking account. In
installments throughout the summer of 1992, Manufacturer's Bank wired the
$600,000 from the plan to Harris Bank, and Hook used it as collateral for loans
he then transferred to Wittek's operating funds.
In the
beginning of July, Judge Stephen Evans in Knox County dismissed all but one
count of Wittek's $5 million conspiracy lawsuit. In response, the four
defendants counter-sued Wittek and its law firm of Grippo and Elden for
damages. Hook joined Grippo and Elden in representing Wittek in the civil case.
Hook became
famous for his day-long cross-examinations.
"Nobody
knew where George was going with his cross-examinations," remembers former
Galesburg Mayor Fred Kimble. "I guess some people think if you drag things
out in legal proceedings long enough somebody will settle, but there was
nothing to settle. He was in love."
Hook, who was
married at the time, said in a recent interview that his only interest in Viana
was professional. He also maintained that the conspiracy was true. Judge Evans
sided in his favor by dismissing the countersuit after a 17-month-long case.
Bottom falls out for Viana, Wittek
At the end of
the summer in 1992, Hook found himself representing Wittek and Viana in more
than 80 lawsuits and counter suits across the country. Vendors sued for unpaid
bills. Wittek's Galesburg landlord sued for back rent. Former employees in
North Carolina sued for back wages and benefits. First Illini Bank sued for its
collateral. The IRS began placing liens on Wittek's equipment. The bottom was
tumbling out.
By the summer
of 1993, Wittek stopped paying employees. Some stayed around, some left.
Juanita Berry, one of the people who had pleaded Wittek's case at the City
Council meeting 15 months earlier, sent a letter to The Peoria Journal Star in
July 1993. " 'Inside Wittek' has become like a morgue. There are not
enough machines running, or enough people present to even classify the place as
an open factory," she wrote.
"Since the
month of May, there has been a promise of pay to employees. On Friday, the
promise is next Tuesday. On Tuesday, it's next Friday. Once in awhile they
change the day to Monday. Yet all of these days of promise have passed with no
sign of payroll, except for partial pay to the small select list. Then the
owner's son takes a few chosen ones to the grocery store for groceries on his
credit card. Fifty-dollar handouts on three different occasions in the past
nine weeks figures to about $2.38 per day. That will not even buy beans let
alone any seasoning to cook them with."
Soon afterward,
the Illinois Department of Labor sued Wittek for the back pay it owed to 139
Galesburg employees, ranging from $15.23 to $7,333. The state also sought
$150,000 in damages. One by one, Viana fired her remaining vice presidents, and
her 21-year-old son Giovanni took their positions.
Workers laid
off by Wittek had the option to stay on and pay for the company insurance under
the COBRA plan. Wittek accepted the COBRA payments but never forwarded them to
the insurance company, which former workers discovered only when the insurance
company refused to pay their hospital bills. On Oct. 12, 1993, Illinois Power shut
off all electricity to 519 McClure St. because of unpaid bills totaling
$55,000.
When local
reporter John Pulliam arrived to interview Viana the next day, he found six
cars in the parking lot and the factory doors locked. Even in Wittek's lowest
lows, Viana still had a receptionist, who wore a coat and gloves because it was
so cold in the building.
"Enough
light came through Carmen's window that we could have an interview,"
recalls Pulliam, now business editor at The Register-Mail. "She still said
it was IP's fault, this is all a big mistake, a big mix-up, and IP was out to
get them, too."
The next
afternoon, the Knox County Sheriff's Department entered Wittek's offices.
"It's time
to leave, Ms. Viana," said a deputy as he served an eviction notice. After
a 15-month trial, the landlord had won a lawsuit for back rent of $725,000.
A crowd of
curious locals and journalists greeted the seven remaining employees as they
emerged. Viana was the last out. The sheriff's department changed the lock and
shut the door. "We're going to the appellate court," Viana said as
she left. "We're going to the Supreme Court. I'm going to the Civil Rights
Commission."
Viana, Hook indicted on federal charges
Two years
later, in 1995, the United States government indicted George Hook and Carmen
Viana for four counts of money laundering, three counts of wire fraud and three
counts of theft of an employee benefit plan. Manufacturer's Bank had notified
the Department of Labor when it discovered Hook's transfer of the pension fund
was illegal. Because Wittek failed, Hook and Viana were unable to repay the
loans that used the North Carolina pension fund as collateral. The bank seized
the collateral, leaving the pension empty.
Hook attended
the preliminary hearing, but Viana, who had not been seen for a year and a
half, did not. Most assumed she went back to Brazil, where the constitution
forbids the extradition of nationals.
Hook pleaded
not guilty. He represented himself with the help of another attorney in the
four-week federal trial. Like the many Wittek cases in Knox County, it focused
on excruciatingly small, unrelated details and lengthy cross-examination of
witnesses, like Jay Hedges. On Hedges' second day of questioning, Hook asked
him, "Isn't it true that you had a sexual affair with Carmen Viana?"
"I just
chuckled," Hedges says. "It wasn't embarrassment; it wasn't anything
more than just chuckling. And I said, 'No Mr. Hook, that's not true.' "
Hook himself
was still in love, Hedges said. Hook also was found guilty and went to prison
for the next seven years.
Viana: 'I did not run'
Carmen Viana
now lives among the palm trees and pristine white sand of Rio de Janeiro. She
agreed to an interview at an exotic Egyptian restaurant on the rich side of
town.
She is still
adorned in elegant black clothes and expensive heels, though this time they are
open-toed flat-bottom pumps rather than five-inch high heels. Her hair, pulled
back in her usual tight bun, is all gray. Such a thing would have worried the
Carmen Viana who came to Galesburg 16 years ago.
"I was a
tough broad with a lot of courage who believed in honesty, and when you did
that God would reward you," she said.
Viana is bitter
about her time in the United States.
"When I
saw that movie 'The Devil's Advocate,' I thought that was the picture of
America. The lawyer: they bait you and take your soul away."
Viana has lived
in Rio ever since leaving the United States in early 1994. "I did not run.
I did not run. I figure they'd cut my ear off for that," she said. "I
was so committed to the company and the people that they would come every day
into my office and say, 'You've got to save us Ms. Viana. We are starving. We
are going to die. So I didn't run. That was bull----. They tarnish my
name."
She said she
did not know the government was going to indict her.
"I don't
know anything about pension plans. How could I know? What I knew was about bras
and underwear and swimsuits. I knew nothing about the car industry. I knew less
about pension law, much less the ERISA law. It was a very specific law."
Viana said she
only knew something had happened when George Hook's law firm called her in for
an urgent meeting. "They said, 'Oops. The transaction we gave to you was
an illegal transaction.' "
She found out
about the warrant for her arrest, she maintains, when she applied for a
passport in Brazil. "They said, 'You can't leave anywhere. You have an
Interpol warrant on your arrest.' This is bull----. I never killed anybody or
robbed anybody."
Viana now a spiritual counselor
Back at home,
Viana has begun a new business. She has a career in spiritual counseling, a
continuation of her hobby in Galesburg.
"I am a
physicist and I am interested in the other kind of reality," she says.
"Where does the soul go? What is this all about? Why do we go to Hell?"
Viana said she
helps heal clients through spirituality. She has visions that are on the
cutting edge, and hard science always proves them exactly one week later. She
says, for example, that she saw World Trade Center on fire the Tuesday before
Sept. 11, 2001.
In the end,
Viana said she is content.
"I live in
a beautiful country; I have a very good life. I live near the ocean, my clients
love me and my work is very well respected because of the many thousands of
newspapers and magazines and TV articles about it," she says, leaning back
and slowly turning out her right hand, her wine glass dangling loosely.
"And
Galesburg loses. So there is justice after all, right?"
This ends a three-part series that originally ran in our print edition
Dec. 3, 4 and 5, 2006. The series was provided to The Register-Mail by Devin
Hogan through Knox College and its journalism department.
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