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Basham brawl.

Basham Brawl

Intentional or not, Charles D. Basham uttered what has to be the understatement of the year when he described A. John Grillo II as a "disgruntled employee."

On July 19, Grillo filed a lawsuit in Pulaski County Chancery Court accusing Basham of fraud, mismanagement and more.

The charges were in connection with a variety of commercial developments and property in west Little Rock, Sherwood and Hot Springs.

For good measure, Grillo filed an eight-page violations report with the state Real State Commission. The report contains allegations of misrepresentation and incompetence that could cost Basham his real estate license.

Grillo also mailed letters to investors, clients and bankers informing them of Basham's alleged misdeeds.

The actions qualify Grillo as much more than a disgruntled employee of Basham & Co.

Basham made Grillo a former employee by firing him the same day the judicial sparks began to fly.

Grillo wasn't the first person in line to file suit against Basham. Now, however, he is identified as the man who opened the floodgate of litigation and foreclosure actions against his former boss.

Getting rid of an employee is one thing.

Getting rid of a business partner is another thing entirely, and Grillo is still a partner with Basham in West Markham Properties Inc.

The corporation is at the heart of the heated dispute between the two men. The question is whether Basham's son, Drew, retained his ownership in WMPI or sold out when he left the company earlier this year.

Grillo claims to own half of WMPI.

Basham claims Grillo only owns one-third of the corporation.

That means one of the men is lying.

Drew Basham doesn't have much to say about the matter.

"My leaving Basham & Co. happened before . . . these lawsuits and had nothing to do with all of this," he says. "Charlie and I sat down, and I told him about my decision. We were in agreement that it was the right decision to make."

But did Drew Basham relinquish his interest in WMPI to his father and Grillo?

"That's something for the attorneys to decide," Drew Basham says.

Lawyers, creditors and judges will decide the fate of the $10-million real estate fiefdom created through Basham & Co.

A series of foreclosure suits filed by bankers, investors and subcontractors show that Charles Basham is in a cash crunch, unable to pay bills and taxes.

Meanwhile, Basham's legal battle with Grillo represents a power struggle over who will be calling the shots at WMPI.

Grillo is dodging reporters. Basham occasionally surfaces, although he declined an interview request from Arkansas Business.

"They're absolutely untrue," he told the Arkansas Democrat when asked about the various charges. "The people who filed those suits had no business filing them."

The true owner of WMPI will have a legal claim to whatever can be salvaged in the aftermath of this real estate brawl.

Why Is WMPI Important?

WMPI has a direct interest in three west Little Rock developments, The Colonnade Shopping Center, West Markham Shopping Center and Hinson Corners Office Building.

Backed by a 50 percent claim in WMPI, Grillo brought his fraud suit against Charles Basham. In the process, Grillo claimed other properties that appear to have no connection to WMPI.

His suit claims that Basham was using WMPI as a conduit to funnel money to and from other projects.

For example, money might come to WMPI from its West Markham Shopping Center project and go to the Sherwood Oaks Shopping Center, in which Basham has part ownership.

Because of such alleged transactions, Grillo is making an equity claim in Sherwood Oaks and other projects he thinks received funds from WMPI.

Did Basham indeed use funds from some projects to make up for short-falls in others?

Did other owners not know of the transfers made by Basham in his position as property manager or general partner?

Were the transferred funds recorded properly or even repaid?

If Grillo's charges are true, Basham wouldn't be the first real estate developer who has found himself in a financial jam and shuffled money between projects.

But there's a point of no return when nothing short of a financial windfall will set things right.

That could be the case for Charles Basham.

Some of his partners have attempted to recover ledger books and working papers to have a look for themselves. Basham is fighting to retain management control over the projects.

Earlier this year, Basham & Co. managed eight retail properties totaling 129,949 SF. The projects were about 84 percent leased with an average rate of $10 per SF.

The important question, of course, is not how full the properties are, but are the tenants paying enough to cover the debt service.

Some lenders aren't being paid what's due.

Officials at Leader Federal Savings Bank of Memphis, Tenn., which financed the West Markham Shopping Center, and Jackson Exchange Bank & Trust of Missouri, which financed The Colonnade, say their mortgages are in default.

Basham's general contracting firm, Vanguard Inc., is also at risk. Vanguard was the first Basham entity to be hit with lawsuits. The suits were filed by unpaid subcontractors such as James Culberson & Associates of Little Rock.

Culberson & Associates, which did work on the Hinson Corners Office Building, filed an $11,000 foreclosure suit for unpaid services in May.

"It appears to me that Charlie's empire got a little overextended, and he was robbing Peter to pay Paul," says Danny Traylor, a Little Rock attorney representing Culberson. "It will all come out before long."

Dynamic Duo

The temperaments of Basham and Grillo add fuel to the unfolding drama, which will be playing at the court-house for weeks to come.

Both businessmen are aggressive and full of pride. At times, they can be arrogant.

Basham's short temper is legendary. Grillo doesn't mince words in the heat of an argument, either, but he's better at holding his temper in check.

"To do business with Charlie Basham it to end up hating him before it's over," says one player in the Little Rock real estate market.

At the same time, Basham's misfortunes are drawing sympathy from some real estate developers thinking, "That could be me someday."

Basham is a longtime player on the Pulaski County real estate scene. He has a reputation for operating on the brink of financial ruin - highly leveraged and almost overextended.

His involvement in real estate dates back three decades to Oliver & Basham Co. Basham and his partner, Earl Oliver, developed houses and apartments in southwest Little Rock, then a hot spot of growth.

They also bought and began developing a tract of land along Rodney Parham Road between Arkansas Valley and Hidden Valley drives. Oliver died in the 1970s, but Basham retains an ownership share in the Pleasant Valley Corporate Center the men built. Four lenders and a fraud suit by property owners now threaten to remove Basham from the development.

"If I were him, I would be coming after everyone with a vengeance," says one Basham supporter. "With the banks and everyone trying to get a piece of him, he has a right to be testy."

Basham has filed a suit claiming Grillo owes him money and took a company car. Basham recently launched another suit, trying to get a restraining order placed on Grillo and remove attorney Ned Wright from the proceedings.

The one surprise is that Basham hasn't filed his own violations report against Grillo with the Real Estate Commission.

"There has been a complaint [against Charles Basham], and it is under investigation," says Roy Bilheimer, the commission's director. "We have not received a formal complaint against Mr. Grillo."

Grillo, a former loan officer at what is now Worthen National Bank of Arkansas, worked with Basham for more than four years. He was a steady producer, as reflected by his membership in real estate's "Million Dollar Club" from 1987-90.

Like Basham, Grillo is no stranger to financial difficulties. He once ran a retail business in west Little Rock that ended its operations through a bankruptcy liquidation.

Grillo probably would like nothing better than to pull Basham into bankruptcy court, where Basham's business records would be opened for all the world to see.

If Basham's misdeeds are as extensive as Grillo claims, such an open forum would do nothing but help his case against Basham.

"I'm surprised he hasn't filed bankruptcy before now," a real estate veteran says of Basham. "Charlie has been in a lot of scrapes in the past, but he's managed to skirt them."

Basham has deeded back properties to a growing list of lenders. However, the list of creditors continues to grow.

All it takes is for three unrelated creditors to join together to force an involuntary bankruptcy.

Caught In The Middle

Tenants at the various projects operated by Basham & Co. are receiving letters from Grillo, Basham and financial institutions.

At the West Markham Shopping Center, the opening salvo came July 24 from Grillo on his attorney's letterhead.

The message was that tenants should no longer make their monthly rent checks payable to Basham or a Basham entity. They should instead make the checks out to West Markham Center Inc. and reroute the payments accordingly.

The letter was signed by Grillo, and by John May and Mark Goodridge, the two investors in West Markham Center Limited Partnership.

Grillo followed with a meeting of the tenants, alleging that Basham had improperly handled money.

On July 31, a letter issued through Basham's attorney directed the tenants to pay their rent to Basham.

Basham also held a meeting with tenants, alleging that Grillo was guilty of misconduct.

Trailing the letters from Grillo and Basham were hand-delivered letters from Leader Federal, which financed the project.

Guess where the Tennessee lender wanted future rent checks sent?

Should tenants send the rent to the bank?

Send it to Grillo?

Send it to Basham?

Or maybe put it in an escrow account until a judge decides what to do?

"There are enough uncertainties in business without worrying about who's your landlord," says Morty Kessler, part owner of the Blue Rooster Grill & Smokehouse, a tenant in the West Markham Shopping Center.

The biggest quandary of all is faced by Drew Basham. He is caught in a crossfire between a former co-worker and his father.

Some unpleasant choices await.

PHOTO : TROUBLED TRIANGLE: Millions in debt and numerous lawsuits are crushing the real estate portfolio of Charles D. Basham (above). A lawsuit alleging fraud, filed by business partner A. John Grillo II, is the catalyst in the avalanche. The ownership role of Basham's son, Drew, likely will determine who gets what, if anything is left.

PHOTO : FORMER CO-WORKERS: A. John Grillo II (above) is fighting to gain control of West Markham Properties Inc. At the heart of the struggle is the question of whether Charles Basham's son, Drew (right), retained or sold his interest in the venture.
COPYRIGHT 1991 Journal Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

Article Details
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Title Annotation:includes related article; Charles D. Basham's Basham and Co. under barrage of lawsuits
Author:Waldon, George
Publication:Arkansas Business
Date:Sep 8, 1991
Previous Article:The battle for real estate supremacy.
Next Article:Landing a whopper.

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