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Court records cast doubt on Buchanan's success story

By Susan Taylor Martin, Times Senior Correspondent
In print: Sunday, September 21, 2008

House Speaker Nancy Pelosi, left, administers the oath to Rep. Vern Buchanan, R-Sarasota., during a swearing-in ceremony. Buchanan’s victory was still being challenged at the time.
	[Associated Press (2007)]

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BLOOMFIELD HILLS, Mich. — It's an inspiring story.

One of six kids in a blue-collar family, U.S. Rep. Vern Buchanan put himself through college and grad school. While still in his 20s, he founded American Speedy Printing, a Michigan-based chain of franchised print shops. The company boasted 720 stores and $150-million in sales by the time Buchanan sold it in 1989, took an early retirement and moved to Florida.

At least that's how Buchanan, a Sarasota Republican, has often told it.

In reality, voluminous court records show, Buchanan left Michigan just as American Speedy verged on a spectacular collapse. Angry franchise owners accused him of mismanagement, deceit and outright fraud. Michigan's attorney general was threatening to shut down the company. In 1992, American Speedy landed in bankruptcy court, followed by dozens of store owners, some of whom lost their life savings.

Buchanan, meanwhile, was building a spacious lakefront home in Tampa as questions arose over what had become of a $15.4-million loan from Merrill Lynch intended to help prop up the company.

"There was a pot full of money from Merrill Lynch to get things going,'' says Alvin Feingold, who bought a franchise in Tampa shortly before American Speedy went bankrupt. "The fact that Vern supposedly ran off with all that money didn't make anyone very happy.''

Buchanan says he had no obligation to repay the loan then, and he offers no apologies now.

"For 15 years it was a profitable company,'' he says. "I'm proud that we created thousands of jobs and hundreds of businesses.''

The businessman

Since moving to Florida, where he now lives in a $7-million gulf-front mansion on Sarasota's Longboat Key, the 57-year-old Buchanan has built a new business empire based on cars. His Buchanan Automotive Group includes Ford, Toyota and Honda dealerships. He also has two offshore reinsurance companies, a charter boat business, an aircraft leasing company and substantial real estate holdings.

In 2006, with American Speedy well behind him, Buchanan ran for Congress.

Despite $5-million of his own money and appearances by President and Mrs. Bush, he barely squeaked past Democrat Christine Jennings in what became a painful reminder of the 2000 Florida election debacle. Jennings drew national attention when she challenged the results, claiming a machine malfunction caused an 18,000 undervote. But she lost the fight, and Buchanan took the seat for a district that includes all of Sarasota, DeSoto and Hardee counties and much of Manatee.

One of the richest members of Congress, Buchanan is seeking re-election on the slogan, Honest. Independent. Fighting For Change. He again faces Jennings, in a race that has focused less on his congressional record than on his personal business dealings.

In eight lawsuits filed since May, former employees accuse Buchanan of bilking customers of his auto dealerships, employing illegal immigrants to help build his house and violating federal campaign finance laws by reimbursing donors for campaign contributions.

Buchanan denies the allegations and says they are politically motivated. They surfaced so close to the election that he has virtually no time to disprove them in court.

But the court record is settled in Michigan, where Buchanan left a trail of lawsuits, judgments and settlements.

"Whatever he's involved in, at best he's being opportunistic," says Ben C. Maibach III, among the American Speedy franchisees who sued Buchanan. "You won't find many people in Michigan who have any respect for Vern or anything good to say about him."

Not so amicable

Tall, trim and affable, Vern Buchanan is often called a born salesman. He began in marketing for the Burroughs office machine company in Detroit, but eager to be his own boss, bought a franchise that sold motivational and training materials.

Buchanan liked the franchising concept so much that in 1976 he and James W. McDonald started American Speedy Printing Centers and began selling franchises. Similar to Kinko's, American Speedy offered an attractive business opportunity at a time when technological advances meant mom-and-pop operations could compete with big commercial printers.

As Buchanan would later describe it, the partners amicably parted ways, with Buchanan buying McDonald's interest in American Speedy and controlling interest in Business Card Express, a separate franchise company McDonald had started.

In fact, they had a bitter falling out. It led to extensive litigation, including a lawsuit in which 10 Business Card store owners claimed Buchanan and American Speedy had wrongfully transferred assets between the two companies, sold "antique" equipment to stores and vastly overstated the earnings potential of franchise locations.

"Plaintiffs for the most part are indigent, some having lost their homes in their dealings with the defendants," the suit said. The store owners won a $1.54-million judgment against American Speedy and a confidential settlement with Buchanan.

Despite grumblings from some quarters, the company seemed to prosper. It moved into lavish new headquarters in the wealthy Detroit suburb of Bloomfield Hills. Buchanan traveled in a Cadillac limo and was named "Entrepreneur of the Year" by the local Harvard Business School club.

Among those who bought into American Speedy were Betty and Jerry Deese, who wanted a business they could run as a family.

In 1986, the Deeses moved from Illinois to Florida and bought an existing franchise in Melbourne. Though Deese, an accountant, had reviewed American Speedy's financial statements, the couple quickly discovered that "none of the numbers were what they were supposed to have been," his wife says. Revenues were half the expected $8,000 a month; labor and supplies ran far higher than projected.

The Deeses struggled four years before declaring bankruptcy, running up $100,000 in debt and watching American Speedy sell another franchise just a mile and a half up the road.

"That was the nail in the coffin," Betty Deese says. "In hindsight, I think there was something fraudulent. As hard as we worked and as much as we put into it and never reached the break-even point, something was not right."

The same year the Deeses opened their store, Buchanan hit on a new way of growing his company: For $1-million or more, a "master franchiser'' could buy the right to sell and service up to 200 stores in a specific area.

American Speedy sold 13 master franchises, many to businesspeople Buchanan knew through the Young Presidents Organization and the Oakland Hills Country Club (where former caddies still remember him as an avid golfer who called everyone "Babes.'')

In 1989, Buchanan suggested to a couple he knew socially, Linda and James Greenfield, that Jacksonville would be a good area for a master franchise. Only after buying the franchise did the Greenfields learn that a corporation in which Buchanan was a director and stockholder had operated stores in Jacksonville that failed, leaving angry suppliers with more than $250,000 in unpaid bills.

Buchanan never mentioned the stores, which he had allowed to fail "in order to return them to his other company (American Speedy) for resale,'' the Greenfields claimed in a lawsuit.

A former insider concurred. "American Speedy did not care if the franchises failed,'' Pamela Murphy, once head of site develop­ment, said in an affidavit. "The policy was stated by Vern Buchanan at strategic planning sessions: American Speedy was only concerned with the selling of more franchises.''

In 1989, a slowing U.S. economy and mounting legal bills began to take a serious toll on American Speedy. That June, Merrill Lynch loaned the company $3-million. It also loaned Buchanan $15.4-million, secured by his American Speedy stock.

After moving to Florida, Buchanan repeatedly described the 1989 transaction as the outright sale of American Speedy.

Yet over the next two years the company paid him an annual $400,000 salary plus $2.1-million in dividends to cover the interest on his loan. Buchanan remained so active that he negotiated the sale of a master franchise in 1990 to stockbroker Thomas Tybinka, entertaining him at the Oakland country club and meeting with him at a fancy Manhattan hotel.

Tybinka and his partner later sued Buchanan, claiming they were sold a territory that was supposed to include all of New York City, even though Buchanan knew parts of the city already were under contract to someone else. The men settled for a confidential sum.

In 1991, American Speedy's sales of new franchises plunged to 37, from a peak of 151 just three years earlier. In default on its loans, the company was still negotiating with bankers when another master franchiser won an $816,000 judgment.

Unable to pay, and with debts of more than $20-million, American Speedy filed a Chapter 11 bankruptcy on Feb. 3, 1992.

Just a few weeks before, Buchanan had severed his last ties to the company.

Bankruptcy and vision

With Congress back in session, Buchanan's aides said he did not have time for an interview. He took written questions from the St. Petersburg Times and responded by e-mail.

On why he so often said he "sold'' American Speedy in 1989: "I was trying to explain a complex transaction and I may have oversimplified.''

On franchise holders who say they weren't told about American Speedy's true financial condition: "Our policy was to provide full and complete disclosure.''

On whether he repaid the $15.4-million Merrill Lynch loan. "I had no obligation to repay the loan. I had my stock as collateral. When American Speedy filed Chapter 11, I lost all my stock in the company.''

Some franchise holders are still angry that Buchanan was able to walk away with at least part of the $15.4-million.

"Why Merrill Lynch struck a deal like that with no collateral (except Buchanan's stock) always baffled me,'' says Maibach, who bought a master franchise in the Mid-Atlantic region.

President of a large Michigan construction firm, Maibach was among a group of American Speedy creditors that sued Buchanan in federal court, alleging fraud and excessive compensation. In 1999, Buchanan paid $1.5 million to settle the case.

American Speedy emerged from bankruptcy a year after its Chapter 11 filing, purchased by a group that included Detroit Pistons basketball star Isiah Thomas. Now part of Allegra Networks, American Speedy has 55 franchises nationwide. Buchanan has no connection to Allegra, though his brother Darryl is vice president for franchise development.

That American Speedy wound up in bankruptcy was due in large part to the recession and savings and loan crisis of the early '90s, Buchanan said.

"(It) caused many banks to tighten their lending polices, which lessened the availability of many franchises to get sufficient capital,'' he said. "But the parent company and some franchises continued to do well.''

Among them were Pat and Therese Mahoney, who joined American Speedy in its early days and had five successful stores in the Ann Arbor, Mich., area.

"He's exciting, he's got vision, that's why we went along with him,'' says Mahoney, who has remained friends with Buchanan. "We're supposed to see him in Washington so we hope he gets re-elected. We'd like to see it with a congressman.''

Cars and politics

In 1992, the same year American Speedy went bankrupt, Buchanan bought his first auto dealership — a Honda/Acura store in Ocala. He was attracted to the car business when a friend who owned dealerships showed him a financial statement.

"When I looked at his bottom line, my eyes popped,'' Buchanan told Dealer magazine.

Buchanan quickly established himself as one of Sarasota's movers and shakers, joining numerous high-profile boards, including those of the Ringling Museum of Art and Mote Marine Lab. He also became active in Republican politics, raising money for Gov. Jeb Bush and U.S. Sen. Mel Martinez and paving the way for his own 2006 bid for Congress.

A social conservative who opposes abortion, gay marriage and federally funded stem cell research, Buchanan has a more moderate record in other areas. He sponsored a bill requiring greater transparency on "earmarks'' — those pork-barrel projects so reviled by Republican president nominee John McCain — though he touts his success in getting federal money for several local projects, including $27.8-million for a new VA national cemetery in Sarasota.

Republican polling shows Buchanan far ahead of Jennings, a Sarasota banker, who has raised $1.35-million compared to his $3-million.

Over the years, some who knew Buchanan in his American Speedy days lost track of him. But they weren't surprised to hear he is now a member of Congress.

"The guy was an absolutely incredible marketer and salesman,'' says Thomas Budzynski, a Detroit lawyer who handled one of the many lawsuits against Buchanan. "Could he sell himself to the people and get elected? Of course he could.''

Susan Taylor Martin can be contacted at susan@sptimes.com.