part 2 of 2

Perhaps because of the company's financial straits, Mack's lavish lifestyle began causing some discomfort in corporate headquarters. Harold Arnold, for instance, who sold Children's Enrichment to CCCNA and who remained on the company's board for a short time, says Mack's style made him uneasy.

"Sometimes you come in with champagne tastes and discover you're running with a beer-and-shot crowd," he says. Mack "just comes from a different school of business than Harold Arnold. It may work in New York, but it won't work in Colorado."

Adds Polevoy: "There were certain individuals, both in and outside the company, who had the opinion that Mr. Mack portrayed a certain image they didn't feel appropriate for someone in the child-care business."

Mack admits that his personal spending habits got him into trouble with his partners. But he brushes off the criticism. "They're self-righteous people," he says. "I have some Armani suits. I wear silk suspenders. I have nice Italian ties and shoes. So what? I've always dressed nicely, since I was sixteen years old. It's this lifestyle problem they have. Maybe because they never had it? I don't know."

Although Mack's business and personal style ruffled a number of investors, Polevoy hardly escaped criticism of his own, and some investors blame the current CEO for the company's disappointing performance. One is Tom Carey, a California money manager who helped raise CCCNA's second cash infusion in 1992.

Now, two years later and with little reason to feel optimistic that their investment will pay off, Carey says, his investors are getting antsy. "People are pissed--I can tell you that right now," he says. "It looks like Mr. Polevoy is going to take the company down the tubes, and all my clients' investments with him."

Yet Polevoy's biggest problems may come from a former employee. Early last year, CCCNA hired a tall, earnest-looking man named Rob Clauson on a short-term contract to develop corporate daycare--supervision for the children of employees of companies and other large organizations. In addition to his experience setting up similar centers, Clauson arrived at CCCNA with another important strength: He had the ear of a potentially big investor.

In July 1993, Clauson says, he pitched a well-known actor--whom he knew from setting up a center in Utah--with the idea of organizing a daycare center in a farm setting for Child Care Centers of North America. Although the two men never settled on anything firm, Clauson recalls that a $500,000 figure was tossed around as a possible investment.

Clauson says the actor seemed interested and asked him for a company financial statement, which Clauson requested from Polevoy and sent to the actor. According to Clauson, although the investor seemed impressed by the company's numbers, he noted the financial statement was not audited.

When Clauson asked Polevoy for an audited statement, however, he says it was markedly different from the one he had first been given. "The first statement showed the company very strong, with a high profit margin," Clauson recalls. "The other, audited one showed that the company was losing money every month. I mean, I was flabbergasted."

The actor backed out of the deal. Clauson called Polevoy: "I said, `Cary, you gave me stuff that doesn't make any sense.'"

Clauson quit the company last October--an action, he says, that made it all the stranger when he discovered his name listed as an executive officer on Child Care Centers of North America's application for a public stock offering with the Securities and Exchange Commission, filed six weeks ago.

"They're using my name to add credibility to the company," Clauson complains. "They're probably going to go belly up, and my name is all over that SEC filing."

Polevoy says the company is financially stable. He adds that he has never misled investors, and he insists that he has produced only one set of financial statements for CCCNA. "If Mr. Clauson says one set differed from another, I don't know what he's talking about," Polevoy says, adding, "If he would like to have his name removed from the SEC registration statement, I have no problem with that."

Nevertheless, this week Clauson filed a lawsuit against Polevoy and CCCNA. It alleges that the company was unjustly enriched by work Clauson did but was not paid for.

Although financial pressures caused some tension among the company's top officers, the partnership of CCCNA's founders didn't begin to disintegrate until the end of 1992. That is when Polevoy charges that an art deal Mack had attempted to cut intruded on the child-care business.

In February 1992, according to documents filed in Denver District Court, Mack agreed to pay $15,000, in three installments, for "540 pieces of art, both framed and unframed" from a local dealer. Unfortunately, his second $5,000 check bounced.

The dealer sued. Mack responded that the bungled deal was the dealer's fault because she had promised him that the art had a retail value of more than $70,000, when it actually was worth less.

In order to close the dealer's lawsuit--and help avoid a costly settlement payment--Mack sold the remainder of the art collection to Child Care Centers. Many of the pieces subsequently were donated to Channel Six Public Broadcasting in exchange for advertising during the station's annual art auction/fundraiser.

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