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Big plans leave maze of legal woes(Atlanta Journal-Constitution, The (KRT) Via Thomson Dialog NewsEdge) Oct. 15--On warm spring days, Jim Richards could stroll across his 1,200 rolling acres along the Chattahoochee River and chat with top Olympic riders competing at his Foxhall Cup event. The course had been designed by Capt. Mark Phillips, former husband of Britain's Princess Anne. Richards sank $1 million into the project and signed a 25-year contract to host the event that put Atlanta on the map for top-ranked American equestrians. "We've talked about being the Augusta National of the sport," the handsome and well-spoken 40-year-old businessman said then. It was May 2000, and Richards was at the top of his game. In only a few short years, since leaving his family business, Richards had built a seemingly thriving investment firm and an exquisite north Atlanta mansion with sports cars in the garage. But six years later, Richards, son of business legend Roy Richards, who founded west Georgia wire and cable manufacturer Southwire, is spending more energy in court battles than on his farm, which is for sale. So is the mansion. His investment company is liquidating and one of its major investments, a low-end loan company called Titan Financial Group II, has filed for Chapter 11 bankruptcy protection, leaving creditors holding $28 million in debt with little or no security. In addition to the bankruptcy, there are at least four lawsuits. In a recent bankruptcy hearing, Richards and his various interests had four attorneys whose combined hourly fees top $1,500. Richards' former wife, Janet Chase Richards, sued him in 2003, alleging he mismanaged a trust fund he set up for their three sons, now aged 12 to 16. They divorced just months after the inaugural Foxhall Cup on 2000. In the suit, she said Richards pulled 60,000 shares of privately held Southwire's stock -- worth perhaps $25 million- from the trust and arranged with the trustee to replace it later with shares of his horse farm and shares of Titan Financial, which is now in bankruptcy. Richards' attorneys, in court papers filed this year, said Titan was a "prudent" investment for the trust fund, it was approved by an outside consultant, and that his dealings with the fund were "transparent." Janet Richards' suit was dismissed by the trial court and is on appeal to the Georgia Supreme Court. Richards, who is now married to Julie Burns Richards, an Olympic equestrian who trained at the farm, declined to speak for this story. But Gregory Ellis, his attorney, says Richards Capital, the investment company Richards established in 1995 with family money, was intended to have a 10-year life span. "I don't think Titan has anything to do with [the firm's liquidation]," Ellis said. In fact, Ellis said, Richards Capital was successful, averaging a 23 percent annual return before the Titan bankruptcy. Richards Capital is private, and financial documents are not available for review. On his own James Case Richards left the family company in 1995 to form Richards Capital Fund, an investment firm funded by family members. His goal was to buy controlling interest in mature Southeastern companies, install new management, grow profitability and sell them. It was a chance for Jim to blaze his own trail. In an interview with a Georgia Tech alumni magazine, Richards shared his aggressive philosophy: "I look for cowboy capitalists" to run the acquisitions, he said, people "willing to exchange comfort for risk, to take a leap of faith." "We expect 45 percent per year in equity return," he added, a claim that even in the exuberance of the pre-crash 1990s sounded optimistic. But aiming high was in his genes. His father, Roy Richards Sr., was a true-to-life Horatio Alger success who loomed large in the lives of Jim, his six siblings and the rest of west Georgia. A state historical marker commemorates his success. The elder Richards borrowed $856 in 1937 to string electrical line to rural west Georgia. In 1950, he started Southwire in Carrollton because manufacturers could not keep up with his demand. The company would develop a new process for casting aluminum and copper rod, transforming Southwire into a major player in the industry. He died in 1985, leaving Southwire in the hands of his two oldest sons, Roy Jr. and Jim, then 26 and 25. They later became co-presidents. Southwire flourished in the next decade. The company's annual revenue quadrupled to nearly $2 billion by 1995. But that year, Roy Jr. was CEO, and Jim left the company. Phone calls to the Richards family brought a return call from a Southwire spokesman. "He is no longer a shareholder or is affiliated with the company," spokesman Gary Leftwich said. A history of Southwire on the company's Web site does not mention Jim Richards, although it does Roy Jr. Richards Capital operated from a luxurious, 41st-floor company suite on Peachtree Street. "There were successes and failures, mostly successes," said Robert Heller, who was with Richards Capital for five years. One such success, according to Ellis, Richards' attorney, was the 2004 sale of Safemark Corp., a supplier of in-room safes for hotel rooms. Richards Capital held the company about eight years, and it was sold for a "substantial profit," Ellis said. One failure was Unarco, an Oklahoma-based shopping cart manufacturer, which was one of the first and largest of Richards Capital's corporate buyouts. Richards led a consortium of investors who paid $40 million to acquire Unarco. Russell Begley, then Unarco's president, said Richards' bid was a bit high for the aging but profitable company. Richards hired consultants, Begley said, and "brought in guys who, frankly, didn't know the business." In 1998, Unarco filed for bankruptcy. It was later sold for $6 million, Begley said. Chasing a dream As Richards' business grew, his personal life flourished. In 1997, he paid $3 million for a 16-acre tract in north Atlanta with two lakes and an old Caribbean English-style house. He leveled the structure, replacing it with a house that tax records list at 21,593 square feet. Richards had an eye for detail, and none was too expensive, former neighbor Jack Olden said. He built a pond for small, exotic fish, though the next heavy rain washed the fish away. He built a driveway, then had crews tear up and rebuild parts because the sight lines didn't look right, Olden said. Richards later bought Olden's home. He was afraid someone would tear it down and build a huge house that would ruin his view, Olden said. While he was creating an estate in Atlanta, Richards was chasing another dream, to bring world-class equestrian events to his Douglas County farm. He had hosted Olympic riders there who were training for Atlanta's 1996 Centennial Games. In 2000, he started the Foxhall Cup, a three-day national championship. Richards had ridden since he was a child, when his father led the family on Sunday afternoon trail rides. But in 1995 he was pitched from a horse during a polo game, badly injuring his spine. His riding career over, he had become a spectator with high expectations. In 2002, Foxhall Farm diversified, hosting an outdoor garden show modeled after the famed Chelsea Flower Show in London. It was another costly endeavor -- "in the seven figures," he said -- borne largely by Richards. Two years later, the flower show was canceled. The equestrian event ended later. Richards' Atlanta home, listed by a real estate agent as an "English Palladian Limestone Estate," is now for sale for $14.45 million. It listed earlier for $18.9 million. In her lawsuit, Richards' former wife said his business and personal interests threatened their children's trust fund. The suit says Richards pulled Southwire stock from the trust in 2001 and a year later arranged to have it replaced it with shares of his horse farm and shares of Titan Financial, the collection of small loan companies. Richards mortgaged Foxhall Farm as security for $10.65 million in loans, according to court and deed records. Janet Richards' attorney, Robert Threlkeld, told the court that Richards' intent was "to protect [Richards'] interests in the struggling high-interest consumer loan business." Her attorneys said, in court filings, that interest rates on most or all of those loans approached 19 percent. Janet Richards laid out her concerns in a deposition: "Jim in the past, ever since I've known him, not only has a communication problem but he has a spending problem. He lives in a $25 million home. He has a pool house. He's building an underground garage for his three Ferraris. "The way he's spending, I'm scared there will be nothing left for these kids for their future." Richards' attorneys, in court papers, said Janet was "attempting to get the income from the trust for herself." The attorneys stressed that Richards was a successful businessman properly managing his family money and that the transactions were approved by the trustee. They said, in court records filed this year before the bankruptcy, that the trust's investment in Titan Financial had "potential to generate significant income." "It's not somebody taking assets and spending it on champagne or something," Jim Richards' attorney, Lamar Mixson, told the court. A Fulton County judge ruled the ex-wife had no legal standing in the case because she signed away rights to the trust in the divorce and because the judge had appointed a guardian. The case is on appeal. Struggles in business Even while Richards' equestrian ambitions brought him success and attention, his business interests began to falter. He bought a group of small loan companies in 2002 and combined them into Titan Financial, which has 69 branch offices and 190 employees. The small-loan companies "struggled from the start," attorney Sarah Borders, who represents Titan, told the bankruptcy judge. Titan now owes more than $45 million. Bank of America, the secured creditor, says it is owed $17 million, including $3.7 million that would be paid to Richards Capital. An additional $28 million is owed to creditors with less-secured claims. About $8 million of that amount also is owed to Richards, his attorney said. Doug McDaniel, a former Titan employee with 20 years in the business, offered his view of the company's fall: "[Richards] had a lot of overhead and not a lot of experience." There are profits to be made in a business that loans money to desperate people at annual rates approaching 40 percent "if managed properly," he said. McDaniel is mentioned in a lawsuit against Richards and Titan filed by Bennie E. Hewett, who sold Richards the loan companies that became Titan. The suit says Richards fired McDaniel weeks before he would have been paid a $50,000 bonus. McDaniel says it is true he was fired just before he would have been paid the bonus. Hewett is listed in the bankruptcy as an unsecured creditor owed $3 million. He contends in his suit that Richards wrongly stopped paying him consultant fees. Richards responded that Hewett had breached his contract and stopping the payments was proper. Richards filed a counterclaim against Hewett in the bankruptcy, accusing him of selling him companies that were insolvent. Richards has also been sued by Brad Bylenga, a South Carolina software executive who said he was courted by Richards to invest in Titan. The suit says Richards agreed to guarantee $1 million of Bylenga's investment in Titan. Richards, in the lawsuit, denies he owes Bylenga money. Bylenga knew of Richards' Southwire pedigree and was impressed, he said. He was promised 12 percent annual interest on his investment. "I was told it was a very, very safe bet," he recalled in an interview last month. "Mr. Richards was supposedly a proven operator. I got pitched." Titan's bankruptcy filing lists Bylenga as being owed $6.6 million. Quick sale Bank of America and Titan pushed for a quick sale of the company because the bank burned through funds to keep Titan afloat. The biweekly payroll is $177,000. Titan executives hoped to sell the company for $17 million to $18 million. The high bid earlier this month was $14.5 million, which won't cover the company's debt to the bank, the only fully secured creditor. That leaves more than $28 million owed to creditors who have little recourse to collect. Most of the debt is unsecured, and it includes the $6.6 million owed Bylenga and $3 million owed Hewett. The unsecured creditors, in a court filing, are fighting the plan. Because part of that amount would be paid to Richards' Capital, they say, Richards will benefit from the sale while they "walk away empty-handed." Researchers Nisa Asokan, Sharon Gaus and Joni Zeccola contributed to this article. To see more of The Atlanta Journal-Constitution, or to subscribe to the newspaper, go to http://www.ajc.com. Copyright (c) 2006, The Atlanta Journal-Constitution Distributed by McClatchy-Tribune Business News. 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