Court Victory Hasn't Meant Much to Eclectic Company.

WHEN it comes to strange-bird public investment vehicles, Los Angeles has its share.

But perhaps none is more unusual than Beverly Hills-based Westminster Capital Inc. For starters, it's traded on the American Stock Exchange and never puts out a press release, except for the standard earnings variety.

In addition, 78-year-old Monty Hall of "Let's Make a Deal" fame is a board member, and the company is actually the corporate successor to the long-defunct Far West Savings & Loan, which was seized by the old Resolution Trust Corp. in 1991.

Before Far West went down, it filed some lawsuits against Drexel Burnham Lambert (the old security brokerage, also long defunct), that alleged Drexel had sold it bad junk bonds, and knew it, or at least should have.

(Those with elephantine memories will recall that Far West, along with Columbia Savings, the old Executive Life insurance company, and a few other financial shops, were big local investors in Drexel junk bonds back in the 1980s).

In any event, the courts awarded Far West $27 million from the carcass of Drexel in payments that ran from 1993 though 1997.

But there's more. The Belzberg clan of Canada, which ran Far West (they used it to buy high-yield bonds that financed Drexel inspired takeover plays), retained control of the corporate holding company and changed the name to Westminster.

With the Drexel dough, the Belzbergs have executed an eclectic business plan. Current operations (all acquired) include Westland Associates Inc., a group-purchasing service for car dealerships; One Source Industries Inc., a provider of packaging and point-of-display materials; Matrix Visual Solutions Inc., an audiovisual and computer equipment company; and Physician Advantage LLC, a group-purchasing service for physicians.

Westminster also makes short-term loans, but this year sold off a telephone company that provided service to U.S. soldiers and sailors.

The three Belzberg brothers -- William, 67, Hyman, 75, and Samuel, 71 -- own two-thirds of Westminster's stock. The Belzbergs may have scored some hits in the 1980s, but they haven't with Westminster, at least by Wall Street's reckoning. Westminster trades at $2 a share, for a market capitalization of only $16.6 million -- pretty pallid, considering the company garnered that $27 million from Drexel in the mid-1990s.

Had Westminster management socked the cash into a balanced stock fund, shareholders would be far better off.

Weak earnings are the culprit. In the second quarter ended June 30, Westminster reported a net loss of $108,000 (1 cent per share), compared to a net profit of $1 million (13 cents) in the like period a year earlier. Revenue was $10.5 million vs. $8.6 million.

William Belzberg, CEO, is perhaps sensitive to the weak performance of Westminster. In a prepared statement attached to the last earnings release, he said: "To capitalize on the many business opportunities that arise for our operations, we have committed significant resources for their development. With highly qualified management and over $35 million in cash and current assets, we have confidence that future returns on our investment will outweigh current temporary losses."

Belzberg could not be reached for further comment. In any event, it doesn't seem that too many investors are concerned.

In the Yahoo message board devoted to Westminster, there are just 13 posts, by just four investors, including one who has held stock since the Far West days. The veteran investor said he hadn't done well with the Belzbergs at the helm of Far West and didn't expect much now.

Staying Away

A few weeks back, the Securities and Exchange Commission announced enforcement actions for fraudulent reporting practices against two Southland companies, Vernon-based Sirena Apparel Group Inc., and Cerritos-based Craig Consumer Electronics Inc.

Concerning Sirena, the SEC charged that the company chairman and CEO told employees to "hold a quarter open" until enough revenue and earnings had been posted to meet targets.

The allegation amounts to a variation of the old theme of posting receivables as income as soon as possible, a chronic accounting abuse that has bedeviled regulators and auditors since GAAP was invented.

At Craig, the SEC said the company undercounted product that had been returned to boost reported receivables, which were then used to secure a line of credit from a federally insured bank. Taxpayer-insured deposits were ultimately lost as a result of the accounting gimmicks at Craig, according to the U.S. Attorney's Office in Los Angeles.

Officials at both companies are fighting the allegations in court, and it should be noted that no one has been found guilty of anything at this point.

Putting aside the moral and legal issues, do these stocks appear to be good investments? Both have been de-listed from Nasdaq, and trade on the Over the Counter Bulletin Board, that refuge for stocks that don't meet capital or other minimum listing requirements.

Local money managers, at least those with the slightest shred of conventionality, said investing in such fallen stocks is not for them.

"I regard stocks like this as radioactive," said William "Bill" Mason, a professor at Pepperdine University and money manager with Cohen, Fortier Asset Management in Woodland Hills. "You never know when the next shoe is going to drop."

Concurring with Mason was Robert Gipson, president of Century City-based Alpha Analytics Investment Group LLC. "Typically, money managers find that any time honesty is questioned in management -- that there is a question of defalcation, or not being straight - you find bad news, then more bad news, followed by more bad news. Bad news never seems to travel alone," said Gipson.

Mason laughed when he pulled up share prices of Sirena and Craig on his computer screen, and his observations seemed to confirm the worst.

"Well, you have Sirena trading on the (OTC) Bulletin Board at a half-cent," he said. "That's pretty good, when you compare it to Craig. They trade for a tenth of a cent (per share)."

Contributing columnist Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal.