TMCnet News
Hahn has seen ups, downs in business(Omaha World-Herald (NE) (KRT) Via Thomson Dialog NewsEdge) Sep. 17--LINCOLN -- David Hahn often touts his business background as he campaigns for Nebraska governor, saying he would bring innovation and fresh thinking to state government. Yet Hahn's business experience has not been an unqualified success. Between 1999 and 2004, Hahn settled three lawsuits seeking $387,000 in disputed deals involving his computer technology businesses. He had liens totaling more than $25,000 placed against his businesses for unpaid payroll taxes. He bounced two alimony and child support checks totaling $4,800. And, some former employees say, he bounced payroll checks. Hahn's father, Harry Hahn of Kearney, a retired building manufacturer, rescued his son's foundering company in 2005. The elder Hahn purchased $1.5 million in promissory notes held by Pinnacle Bank in Lincoln for $650,000, according to court records. David Hahn emphasized that his business problems have been resolved and that he met his financial commitments to both his family and employees. He said his financial woes proved his ability to survive tough times. "I did manage it," Hahn said. "I'm still here and growing. A businessman is a risk-taker. If you judged a farmer on one failed crop, that would be unfair. It's also unfair to judge a businessperson on one difficult business cycle." Hahn, 51, of Lincoln is a political newcomer. He was the only candidate to seek the Democratic nomination when others shied away from the possibility of facing U.S. Rep. Tom Osborne, a Republican, in the general election. Gov. Dave Heineman, however, knocked off the former Nebraska football coach in the GOP primary and faces Hahn in the Nov. 7 election. As a young man, Hahn had considered becoming a Lutheran minister before deciding on the University of Nebraska College of Law. He became an expert in bankruptcy law, then walked away from a legal career representing farmers and ranchers to hitch a ride on the Internet boom of the 1990s. Friends and business associates describe Hahn as a man who seizes opportunities. "Oh, he's fearless," said longtime friend Ron Smith of Hickman, a member of Hahn's Bible study group. "I like it when he sets his mind to things, because things happen." The early years for Hahn's companies were prosperous, Hahn said, but his business was pounded by the stock market downturn of 2000, and the troubles were compounded by the Sept. 11, 2001, terrorist attacks. He lost customers. Lucrative contracts and Internet companies that owed him money evaporated. His bank's new owner, Pinnacle Bank, decided the Internet was too risky. Hahn's father agreed to take on the financing. According to Lancaster County District Court records, Harry Hahn purchased the promissory notes in January 2005. The assets of David Hahn's companies, Digital Partners and ISPI Inc., were transferred to Harry Hahn, who then leased the assets back to a new holding company, New Digital Holdings, in which David Hahn is the majority shareholder. David Hahn said he still owed the full amount of the original loan -- to his father, a man who required his son to sign a $300 promissory note for his first car, a red Corvair. Harry Hahn could not be reached for comment. Lincoln lawyer Vic Covalt, who aided the Hahns with the bank transaction, described it as a "good deal" that protected the father's investment while saving the son's company. "Dave's been up, and Dave's been down, but he's never been on the public dole," Covalt said. Hahn said the three lawsuits relating to his Internet companies involved contract disputes. He said disagreements were frequent in the "wild" days of Internet startups, when companies often changed hands. All of the lawsuits were settled out of court. Three tax liens filed by the Nebraska Department of Revenue showed that Hahn did not pay nearly $21,000 in withholding taxes on behalf of his employees between Oct. 1, 2001, and Dec. 31, 2002. All the taxes were paid by January 2003. A lien from the Department of Labor showed he did not remit $3,959 in unemployment insurance tax for the 2002 tax year. Those taxes were paid in August 2003. Hahn said he did not evade his tax obligations. He filed his tax returns, as required, even though he did not have the money at the time to pay the taxes. Two former employees, who spoke on the condition of anonymity, said they and other employees had two or three paychecks returned for insufficient funds in 2002 and 2003. Hahn eventually covered the checks, they said. Hahn said he could not discuss the paychecks without knowing the employees' identities. His divorce records indicate two checks for alimony and child support, dated Oct. 3, 1999, and June 6, 2001, each for $2,400, were returned to Lancaster County District Court for insufficient funds. In addition, a third personal check, for $2,174 and dated May 5, 1998, also was returned. Hahn covered all three checks within days. Hahn said he did not remember those checks. He stressed that he has met his financial obligations to his children -- a fact confirmed by his ex-wife. Hahn said he doesn't know his net worth. He never has had more than 100 employees, he said, and today has fewer than 50. He remains majority shareholder in New Digital Group and said his business model has changed to reduce risk. He said the company is stronger than ever. As of mid-June, he and his business had contributed $120,000 of about $160,000 raised by his campaign, including a $35,000 personal loan. Hahn's early experience was as a lawyer, when he helped hundreds of farmers and ranchers reeling from the 1980s farm crisis. A crash in land prices and escalating interest rates left many owing more than their land was worth and unable to keep up loan payments. Congress created Chapter 12 bankruptcies in 1986, designed to allow farmers to reorganize and pay down debts. Hahn saw an opportunity and took it, making Chapter 12 his specialty. "He was the king of Chapter 12s," said David Aiken, an agriculture law specialist at the University of Nebraska. "He was extremely effective. He was one of the few people doing ag stuff who didn't have to back down at all from the bank lawyers. They were used to getting a little better deal than they got from Dave." Part of it was personal, says Deborah Weston, Hahn's former wife and former law partner. Hahn helped Weston's parents, who owned a ranch in Keya Paha County, an elevator in Valentine and other ag-related businesses, sort out their financial woes in the pre-Chapter 12 days. "David did an incredible law practice," Weston said. "He was very committed to keeping farmers, ranchers and families on the land." By the mid-1990s, Hahn's interests had shifted. Lincoln lawyer Vince Powers, who also handled a lot of agriculture bankruptcies, said he was standing with Hahn in a federal courthouse hallway when Hahn broke the news. "He turned to me and said, 'I'm getting in the Internet business and leaving the law,'" Powers recalled. "I was dumbfounded. How can you make money off that?" Weston said it started when Hahn adapted an existing software package so it could be used by law offices. He called it "Caseload" and established a small company, Praxis Inc., to sell it to other lawyers. As a supplement to his law income, Hahn sold about 400 copies of the software to law firms across the upper Midwest. He became one of the first people to offer Internet services in Lincoln in the early 1990s. His new company was called ISPI (Internet Service Providers Inc.) of Nebraska. Dan Shattil, general manager for the Daily Nebraskan, said Hahn showed up one day with a Web interface system he wanted the student newspaper to try. The newspaper became the first trial user of a system that eventually spread to 150 college newspapers. But amid the flurry of business activity, Hahn's marriage was breaking up. Hahn and Weston had married in January 1981, the second semester of their final year in law school. After a brief stint working in a Kearney law office, the Hahns moved to Santa Fe, N.M., where they worked for a commercial law firm. Their son Alex, born in 1981 and the oldest of three children, was diagnosed with autism at 25 months. The Hahns returned to Nebraska because their home state had better special education services, and to be closer to their families. Deborah Weston, who spent much of her time caring for the children, became increasingly interested in disability law. She now serves as executive director of Arc of Nebraska, an advocacy group for people with developmental disabilities. Weston filed for divorce in 1997. Hahn remarried in 2000, to Ruth Davidson, a New York City ballet dancer he met at a reception after a performance that Davidson had choreographed. She was immediately charmed by Hahn. "He courted me," she said. "He was such a gentleman. He sent me flowers every night when I was on tour." While the couple was honeymooning in Bali, the dot-com stocks plummeted. "It was like 1929 for me, to be honest," Hahn said. He said hard times have made him a better business manager. He's had to fire people for the good of his business, and he would do the same for the State of Nebraska. But he's also gained empathy for financially struggling Nebraskans. "I know what it's like not to make the next mortgage payment, not to be able to pay taxes, to have to go to the coin jar before you go to the next sales call," Hahn said. "It gives me greater sensitivity that I don't think our current leadership has." Copyright (c) 2006, Omaha World-Herald, Neb. Distributed by McClatchy-Tribune Business News. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. |