"In retrospect," he wrote, "it appears that the events created by Cary Polevoy, Chris Bogard-Reynolds and Harvey Cohen are reminiscent of what occurred in their past association with Blinder Robinson, where they were all in senior management positions."
(Blinder Robinson declared bankruptcy in 1990 after an SEC lawsuit and several shareholder judgments against the company. Two years later, its founder, Meyer Blinder, was convicted of racketeering and securities fraud. All three CCCNA directors did work for the firm; however, only Cohen has been disciplined by the National Association of Securities Dealers. In 1991 the State of Delaware fined him $9,000 and revoked his securities registration for "dishonest and unethical practices.")
Mack summarized his letter to investors (a letter that Polevoy characterizes as "libelous from line one to the last line"): "It is indeed unfortunate that your investment has been jeopardized by numerous errors, omissions and falsehoods."
Today Mack insists he has given up any thought of leading a takeover of Child Care Centers of North America. "I went through a lot of headache in November and December, thinking, `Now I've got to start from scratch.' But that's behind me. I'm onto something much bigger, worth $150 million in assets." Although he won't get specific, he says the new venture involves real estate in Las Vegas, and that he soon expects to raise $750,000 to finance the project.
For his part, Polevoy insists that he never envisioned himself as the top dog of CCCNA. "It was never my intention to be CEO of this company," he declares. "I never wanted to run it. I just came in to help and got deeper and deeper." Now that he's there, though, Polevoy says he is committed to the business.
What's the future of Child Care Centers of North America? Polevoy says he is confident of success. The company seeks outside experts to help it regain its financial balance, and Polevoy says he is pursuing mergers or acquistions with nine companies, including several video-production firms and the check-cashing chain.
But when contacted, several of the targets say they are nowhere near signing an agreement. And the one big company that CCCNA did merge with recently, Branson Entertainment, is an uncertain commodity. The corporation apparently has an option to purchase or lease a theater in Branson, Missouri, where it intends to put on Forever Plaid. In exchange for part of the potential revenue from the production, CCCNA handed over millions of shares of its stock, plus some cash it hopes to raise from the second public offering.
"We can't really figure out what [Branson] has, except some company name and some options," says Steve Ketcham, a Littleton real estate broker who sold Child Care Centers a four-acre site in Jefferson County in exchange for shares of the anticipated public offering. "Anybody can do that."
CCCNA's real estate holdings are not looking especially solid, either. Ketcham says he is on the verge of repossessing the Jefferson County site. The remainder was never very desirable, according to Miles Wynn, who says CCCNA hired him to acquire more land (and who is suing for back wages). "They didn't have anything that was prime, or even close to it," he says. "They didn't seem to understand real estate, or care, or something."
Finally, while Polevoy insists that Child Care Centers' underwriter for the public stock offering, VTR Capital Inc., is solid, some cracks in their relationship have appeared. In a February 10 letter, VTR pointed out that CCCNA's filing with the Securities and Exchange Commission did not meet its requirements, and instructed Polevoy not to use VTR's name until all the conditions were met. Even Polevoy concedes that if the public offering doesn't go through, CCCNA will spend some time in bankruptcy court.
The uncertainty has led Ketcham, for one, to draw some lessons from Child Care Centers of North America. For the moment, he says, "It doesn't appear as though deal-making and child care are very compatible."
end of part 2
