Fallen execs still building palaces
Bloomberg News Service
Boca Raton, Fla. — The accounting scandals coursing through corporate America have destroyed many dreams. Not so the multimillion-dollar dream homes being built for executives of WorldCom Inc., Enron Corp., Global Crossing Ltd. and other companies.
Bloomberg News Service
Scott Sullivan, ousted as WorldCom's chief financial officer late last month after the company said it hid $3.9 billion in losses, is building a mansion on a $2.45 million waterfront lot in Boca Raton, complete with a private lagoon and boathouse.
The construction of an 11,400 square-foot mansion for former Enron chief executive Andrew Fastow continues in an exclusive Houston neighborhood, his October firing notwithstanding.
When Enron chief financial officer Andrew Fastow was fired in October, construction crews were working on his 11,400-square-foot house on a $1.1 million lot in the River Oaks section of Houston. They still are.
High-echelon executives, even those on the way down, seem to take literally the expression, "a man's home is his castle."
"They live in a rarified atmosphere of power where everyone around them is bowing to them and saying how clever they are," said psychologist Hodge Golson, president of Management Psychology Group in Atlanta. "There's a disconnect from reality that sometimes results — a feeling of invincibility."
Sullivan's Mediterranean-style estate, which has a two-story porch facing an hourglass-shaped swimming pool, is under construction in a gated community where homes sell for $2 million to $8 million. Sullivan lives in a five-bedroom, ranch-style home in another part of Boca Raton that he bought for $170,000 in 1990.
Fastow lives in a 4,600-square-foot home in a less- fashionable area of Houston while work on his River Oaks mansion continues.
Enron filed for bankruptcy protection in December. Since then, Enron has lost almost half its work force.
Global Crossing has also declared bankruptcy and fired workers. That hasn't interfered with the $15 million remodeling project at Chairman Gary Winnick's $90 million estate in Los Angeles' Bel Air section.
"We saw a lot of this in the dot-com bust — executives building palaces fit for sultans while running their businesses into the ground," said Christopher Lane, senior managing director of Welling & Woodard, a management consulting firm in San Francisco. "Today the goal is to advance their own net worth, not to protect the interests of shareholders."
Martha Stewart, the chief executive of home decorating company Martha Stewart Living Omnimedia Inc., is under investigation by the U.S. House Energy and Commerce Committee on suspicion of insider trading related to shares of ImClone Systems Inc.
Stewart has denied wrongdoing. Her homemaking projects include the renovation of two homes she owns on a 153-acre farm bought two years ago for about $15 million in Bedford, N.Y. She also plans to build a 4,500-square-foot home and a barn on the estate, she said in a lecture in May to the Institute of Classical Architecture. A spokeswoman for Stewart didn't return a call for comment.
Some second thoughts
Sometimes, scandal-tainted executives unload their works-in- progress. Paul Frame decided to sell a mansion he was building in Houston, pricing it at $15 million in late May. A few weeks later he resigned as chief executive of Seitel Inc., which sells seismic data to oil and natural gas drillers, and the company said he may have misused company money.
Bloomberg News Service
Frame couldn't immediately be reached for comment.
Scott Sullivan, ousted WorldCom chief financial officer, is building a mansion on a $2.45 million waterfront lot in a gated community in Boca Raton, Fla., complete with a private lagoon and boathouse.
A master carver spent four years working on the 14,000-square-foot house in River Oaks, according to Marilyn Thompson, a sales manager at the real estate company handling the sale.
"River Oaks is the Beverly Hills of Houston," she said.
In other cases, a collapsing stock price interferes with construction — at least temporarily.
Priceline.com Inc. founder Jay Walker stopped work in 2001 on a 24,700-square-foot home with a squash court in Ridgefield, Conn., after the company's share price fell below $2 a share, down from more than $150 in 1999. Walker resigned from the company's board in December 2000.
Construction workers are back on the site, according to Brian Platz, a building inspector for Ridgefield.
The home's building permit lists the estimated building cost at $6.47 million, he said. In the meantime, Walker makes do on his 3,912-square-foot colonial on two acres.
