THE MONEY PIT
part 2 of 2
Caldwell, who even friends say sometimes has his own way with the truth, swears he met William Muchow in the White House during the Kennedy administration. A land developer, Caldwell claims he was there at Kennedy's request coordinating a program aimed at improving relations between the United States and the youth of the world. Caldwell says he witnessed an exchange between Kennedy and Muchow in which Muchow pounded on the President's desk, railing about the stranglehold the government had kept on the mining industry through price controls and other restrictions since the outbreak of the second world war.
Following the chance meeting, says Caldwell, he and Muchow found their companies were headquartered on the same street in Chicago. As they got to know each other better, Muchow often came to him for business advice, says Caldwell. When the older man's health began to decline in the late 1960s, he pressed Caldwell to become trustee of the Chain O' Mines. Caldwell says he resisted because the price of gold was frozen by the government at a level far below what would support a mining operation. Also, the Chain's properties were constantly incurring taxes, while the company had no income. Slowly the old man won him over, Caldwell says. "He used to say, `Who's going to take care of the children if you don't?'" Caldwell recalls, explaining that the paternalistic Muchow viewed the Chain's stockholders and aging employees as his dependents.
Caldwell came to admire Muchow. "Muchow was so muddy big to Harold," says Ron Ramsey, a current business associate of Caldwell's in a venture to extract gold from mill tailings. By the time Muchow died, Caldwell had taken over the company--as a caretaker trustee, Caldwell says. Frank Thoma, a Chicago resident who was a member of Muchow's board of directors, recalls that the board followed Muchow's wishes in appointing Caldwell trustee. "Dr. Muchow was sure he was the only one who could be trusted to take over the mine," says Thoma, noting that he's been with the Chain for more than forty years and trusts Caldwell completely. "He's another man like Dr. Muchow, who devoted his life to the company," Thoma adds.
Betting that price controls on precious metals eventually would be rescinded, Caldwell says he paid the Chain's bills, using profits from development projects he was running on Padre Island off the coast of Texas in the 1960s and '70s. From there Caldwell's account gets hazier. What is clear is that he came to live in Colorado in the 1970s and became more directly active in the mining scene in Central City. The going wasn't easy for the newcomer, says Ron Ramsey. Twice, he says, Caldwell found himself looking down gun barrels held by miners who said the company owed them money.
One time, says Ramsey, retelling a story he heard from Caldwell, a pistol was held to the head of the Chain O' Mines boss as he sat in Muchow's former office at the Glory Hole's mill in Russell Gulch. The phone started ringing, persisting until the gunman told Caldwell's foreman to pick it up. No one was on the line, but the call broke the tension in the room, and Caldwell was able to talk the gunman out of violence. In a similar standoff in the same room a few years later--"probably with some guy who didn't get paid either," says Ramsey--Muchow's favorite chair, sitting empty, began to rock. It distracted the gunman, enabling Caldwell and his foreman to disarm him.
Caldwell credits both escapes to Muchow's ghost, says Ramsey: "Harold believes old Doc Muchow is still watching out for him."
But Muchow's ghost wasn't much help with the mining business. Thanks to inflation and the cost of modern hard-rock mining, gold mining in the 1970s had become a lousy way to make any money. And the Chain O' Mines had no cash, only assets buried hundreds of feet deep. Caldwell tried to use those assets to generate income, but his plans tended to overreach.
In one short-lived enterprise, Caldwell tried to inaugurate a hot-air balloon ride staged on the Glory Hole's tailings pile, which lies a block or so from downtown Central City. Three attempts were made at liftoff, each ending with the balloon being quickly forced down by the winds that routinely rake the hilltops surrounding the town. Caldwell also briefly touted the mine as a sightseeing destination for tourists, a project that apparently chilled after the unlucky picnicker fell down the shaft.
In the late 1960s, the Glory Hole's tailings had been bulldozed into two terraced Central City parking lots set one above the other. It is those tailings that Caldwell claims contain tens of millions of dollars' worth of extractable gold. By the mid-1980s, however, the Environmental Protection Agency was more impressed with the parking lots' heavy metal content and designated the area a Superfund site.
Caldwell's most reliable means of making money in the 1970s and '80s was to lease out Chain O' Mines properties to other parties. It required no capital and let him keep his hand in the game should an old mine suddenly strike it rich. Trouble was, Caldwell didn't appear to care who leased the mines, as long as he got paid. One of his renters was the California con man who used the Glory Hole to set up his bullion scam.
And other would-be mining barons had little problem finding investors to fund dubious get-rich-quick projects. "In this area, you have gold fever, greed and an enormous amount of ignorance," says Ron Ramsey. Geologists hired by Caldwell and other promoters did their part by providing generous estimates of the amount of ore still in the ground--billions of dollars' worth, usually. They left out certain other information, such as the cost of ore extraction given the limits of technology and the expense of complying with environmental regulations. "If there's $5 billion in materials to be mined in the Glory Hole, why is it still there?" asks David Abbott, a regional geologist for the Securities and Exchange Commission in Denver. Many people who were subjects of SEC investigations had leased their mines from Harold Caldwell, says Abbott.
Abbott first came across Caldwell when he was asked to render an opinion about the Glory Hole as part of a bizarre case in Texas. In the late 1980s Caldwell became a member of an "Indian nation" in southern Texas called the Sovereign Cherokee Nation Tejas. He took the name Chief Golden Panther. Investigators for a congressional subcommittee found the Indian nation consisted of a sandbar in the Rio Grande River and a group of white men who'd devised a reinsurance scheme involving bonds backed principally by Caldwell's assertion that mill tailings from the Glory Hole contain $70 million in recoverable gold. Abbott found Caldwell's claims in that case exaggerated to the point of fraud. "The question is what the recovery costs of any gold would be," says Abbott. "As far as there being recoverable gold in those tailings, there's a good reason they're called parking lots."
Van Cullar, the geologist and former county commissioner from Black Hawk, says he resisted taking part in any Glory Hole enterprises during the 1970s and '80s, though he was approached several times and asked to provide estimates of ore reserves. "That mine was involved in so many promotions where people lost money, I didn't want any part of it," he says.
Some locals didn't want any part of Harold Caldwell, either, resenting both the people he leased to and his style as an executive. "He acts like he's king of the mountain, and he'll tell you where to go and how to get there," says one area resident, citing Caldwell's occasional threats to chain off Virginia Canyon Road, a principal artery into Central City from the south.
"Doc Muchow put it in," says an unapologetic Caldwell, "so I guess we do [have the right to barricade it]."
In his worst moments, Caldwell will "brag he is the Chain O' Mines," acknowledges Ramsey. But Caldwell, he adds, does have a good side. Caldwell helped protect Ramsey and his wife from a former business partner who was threatening them, giving them a place to stay that was safe, says Ramsey. He's also given shelter to homeless individuals on more than one occasion, adds Ramsey, who notes, "Harold has a heart of gold, but he can also be a crusty old fart."
Above all, says one former business associate, Caldwell is fixated on not being cheated. "What he agrees to today, he'll change tomorrow," says the ex-partner. "He doesn't want to leave a fraction of a penny on the table."
Ramsey says he saw that particular hangup ruin a deal with a group of Australian investors who wanted a site Caldwell owned in town for a hotel. "There was a check for a million dollars on the table," Ramsey says. "All he had to do was pick it up. But he kept changing the deal and talking about the Tejas Indians. Finally, they got up, took their check and left."
Caldwell's obsession with being cheated failed to keep him from being taken by a slick Texas attorney in 1985. At least that's the view of Gus Pappas, Caldwell's own Texas lawyer.
According to Pappas, Caldwell was a principal in two companies that wanted to develop 1,200 acres of beachfront property opposite South Padre Island, a vacation spot off the Texas coast in the Gulf of Mexico. Pappas says that Robert Barnes, a well-connected attorney who would become a visiting Texas district judge in 1988, got wind of the deal and approached the cash-short Caldwell with a deal: He'd loan him $1.25 million in development funds in return for a stake in the project.
Robert Barnes's attorney in Texas, Tom Matlock, tells it a little differently. He says it was Caldwell who approached Barnes through an intermediary, looking for money to develop the beachfront acreage. Caldwell's agent represented Caldwell to be a man of considerable means, worth at least $320 million.
Caldwell put up title to the beach land as his collateral in the deal, says Matlock. Caldwell also was to make interest payments on the note, as Barnes had borrowed his $1.25 million stake from a mortgage company. Almost a year went by and Caldwell made no payments, Matlock says, so Barnes filed suit and obtained title to the land.
As he struggled to pay off the note, Barnes found a buyer for the land who would have paid him a little over $2 million, says Matlock. But Caldwell and the two companies with which he was involved filed for bankruptcy, with the companies claiming Caldwell had lacked the authority to put up the land as collateral. The move delayed the land purchase, which fell through. A bank that held the note then foreclosed, says Matlock, and Barnes was stuck with the note. He couldn't pay it and had to declare personal bankruptcy. Barnes sued Caldwell for damages in Hidalgo County in 1989.
"What people lose sight of is that Judge Barnes loaned Harold Caldwell over a million bucks and he was never paid any of it back," Matlock says. Barnes, now 74, resolved his bankruptcy but must continue working today because of the financial hole into which Caldwell drove him, says his attorney.
In Pappas's view, however, Barnes has no right to be angry with Caldwell for the collapse of his attempt to sell the property. "The way I feel is, too bad, so sad, you shouldn't have tried to screw Harold to begin with," says the attorney, who claims Barnes entered into the deal just so he could trick Caldwell out of the land.
Barnes won a $15.55 million judgment against Caldwell in Hidalgo County in 1989 with Judge Joe B. Evins presiding. The judgment, which included a whopping $10 million in punitive damages, came in default: Caldwell didn't show up.
Pappas argues that the punitive damages Evins awarded to Barnes were excessive. But Matlock defends the judgment as fair. "I asked for 20 percent of his net worth for what he did to Robert Barnes," says Matlock. "That would have been $100 million, according to information Caldwell himself furnished."
Gus Pappas takes a dim view of the 1989 proceedings, suggesting that Evins may have shown favoritism to Barnes because the men are professional acquaintances. "To me, it just stinks," says Pappas. "The judicial canons are supposed to ensure that the appearance of impropriety doesn't exist. Some canons may have been violated in this case."
Pappas could have raised that issue in motion hearings subsequent to the judgment but never did, Evins observes. If there had been any prejudice on his part, he adds, it more likely would have worked against Barnes, who was represented during the damages portion of the trial by Matlock's co-counsel, a man who had run against Evins in the prior Democratic primary.
Evins refuses to discuss further details of the judgment, because Caldwell has since filed an appeal.
Barnes says nothing unethical transpired between he and Judge Evins. "We knew each other," he says, "and we always acted professionally toward each other. I knew enough to never ask him for favors, and he never asked me for any."
When Caldwell failed to pay any of the damages awarded by Judge Evins, Barnes brought action against him in Colorado in the fall of 1991. By then, interest had swelled the amount of the Texas judgment to $18.5 million. The litigation landed in the courtroom of Judge Kenneth Barnhill.
Through counsel, Caldwell argued that he had no assets with which to satisfy the judgment because he was just the trustee for the Glory Hole properties, not the owner. Barnes's attorney, E. Alan Hampson, went after Caldwell's trusteeship, which he believed to be fraudulent. A specialist in unraveling complex business relationships, Hampson operates out of a modest but roomy Lakewood office. Stacked against the walls are file boxes stuffed with thousands of pages of documents Hampson amassed in reconstructing Caldwell's paper trail. Judge Barnhill was apparently impressed with Hampson's work, ruling in his favor on every major motion the attorney made during two years of litigation.
Hampson convinced the judge there was nothing to back up Caldwell's claim that he was trustee of the Glory Hole and the other Chain O' Mines properties: No tax records, no documents defining the trust or naming its beneficiaries, no correspondence indicating the intent of Muchow or his board of directors to set up a trust. "You can't create a trust just by writing `trustee' after your name," says Hampson.
Caldwell claimed the required records were destroyed when a roof collapsed at a Chain O' Mines building in Central City in 1991. Hampson then secured affidavits from two men hired by Caldwell to work on the building during the time of the supposed cave-in. They testified that the cave-in never happened.
Hampson unearthed other paperwork showing that Caldwell treated Chain O' Mines assets as his own, transferring them when he stood to benefit and personally cashing checks for income earned by parking lots held by Chain O' Mines in and around Central City. Among the more damaging documents to Caldwell's case: a 1985 affidavit signed by Caldwell asserting that he owned all of Dr. Muchow's property as of April 1971; a 1983 letter from his attorney, James Kreutz, to Central City officials saying Caldwell owned 100 percent of the stock in Chain O' Mines; and a 1991 agreement between Caldwell and Central City in which Caldwell stated that he owned the tailings-pile parking lots and agreed to lease them to the town.
"He's a trustee when you try to hold him responsible," Hampson says, "but when there's money to be made, he's the owner."
In a series of orders issued in 1993 and 1994, Judge Barnhill ruled that Caldwell, not the Chain O' Mines, owned the Glory Hole and more than 100 other mines and real estate in the Central City area. Barnhill appointed a receiver to watch over income derived from the parking lots and ordered that other property be auctioned off to satisfy Caldwell's debt to Barnes. That order was stayed by Caldwell's bankruptcy filing last September.
"Any county judge can rule anything he wants," says Caldwell. "I don't own anything." He says he believes Gilpin County and Central City have an interest in seeing the Chain O' Mines lose its property. "The Chain owns a third of Central City," Caldwell claims. "If you put the company out of business, then you have control [of its real estate]."
In appealing the default judgment against him in Texas, Caldwell is claiming that he was never served notice of the suit or the damages award. But Tom Matlock says from the time the Texas judgment was enforced in Colorado in 1991, Caldwell contested it on other issues. "He fought it on the grounds of `that ain't my dog,' that he was just the trustee," Matlock says. "Common sense says when you hear about an $18 million judgment against you, the first thing you say is, `Hey, I was never served.'" Caldwell didn't raise the point until May 1993--a delay that Matlock says undercuts the credibility of the claim.
Judge Barnhill's ruling that Caldwell's debt to Barnes must be paid with assets from the Chain O' Mines leaves Scott Hobbs and other relatives of Chain O' Mines' early shareholders out in the cold. Hobbs is incredulous. He points to two 1969 deeds signed by his great-aunt and other company officers transferring title of the corporate property to "Harold Caldwell, trustee." "Do they really think that my aunt and the people she worked with were so stupid as to have given Mr. Caldwell properties that include the Glory Hole, the mill, the parking lots--properties that contain billions in gold--for ten dollars [the amount specified on the deed]?" he demands.
But that's not the worst of it, according to Hobbs, who spends his days working in the maintenance shop at the Fedco store in Costa Mesa. "What Barnhill is saying is that my aunt and the others--my sweet, lovable, religious aunt from the Old World who lived to 99 and always believed you worked hard and didn't pull the wool over people's eyes--he's saying that my Aunt Nettie was a crook," he says. "That doesn't settle with me. I'm never going to let it rest. I will never stop until justice is done."
Attorney Hampson, however, believes justice has already been done. "Hobbs is the heir of somebody who owned some stock in a company," he says. "But his relative transferred that property to [Caldwell] 25 years ago. They don't own it anymore."
Hobbs finds the notion that his aunt was tricked by Caldwell preposterous. "In truth, he didn't even want to be trustee," he says of Caldwell. "They had to talk him into it. He was picked for a reason. He's a tough old bird, and he's had to fight off people like Barnes over the years--and that takes a very strong-willed individual.
"My aunt and the others were very trusting people, and they trusted him completely," he adds. "She always said that there was a trust for us and Mr. Caldwell was watching over it. She always said he'd take care of us financially."
Judging from Caldwell's Chapter 11 filing, he intends to do just that. In the bankruptcy papers, Caldwell lists Scott Hobbs as his largest creditor, allegedly owed $6 billion as the latest trustee for Chain O' Mines. "If I'm not the trustee," says Caldwell, "then, by God, that property should revert to the people who deeded it to me."
"You can't get any sense out of him," responds Alan Hampson of Caldwell's most recent claim. Each time he examined Caldwell on the stand, Hampson says, he came away thinking Caldwell wanted only to "create as much smoke and confusion as he could." The lawyer sees Caldwell's bankruptcy filing as another such attempt.
Caldwell has appealed Judge Barnhill's rulings against him; the case is now before the Colorado Court of Appeals. Hampson says he's anxious for the appeals court to take up the case. "Let them put on any witness they want," he says of Caldwell and his attorneys. "Let them put on any evidence they want. And let's see what the truth is."
Meanwhile, others continue to look at the Glory Hole and hope. Jeff Schmidt, a Palm Springs resident and former miner at the Glory Hole who now claims the title of president of Chain O' Mines, Inc., says he's waiting for the legal wrangling to be resolved. Then mining at the Glory Hole will resume, he promises. "We've got rich, rich ore," he says.
end of part 2