CORPORATIONS: Blues for Mr. Charlie

At the peak of his rambunctious form, Chairman Charles Bluhdorn of Gulf & Western Industries, one of the world’s biggest conglomerates (1976 sales: $3.4 billion), is a curiously compulsive monologuist. Whether lolling with a weekend visitor by a sleepy lagoon outside his luxurious beach house, La Favorita, in the Dominican Republic or lecturing to an awed audience in his company’s baronial headquarters suite overlooking Manhattan’s Central Park, Bluhdorn fearlessly offers his forthright and often funny opinions on such disparate topics as acquisition strategy (“I want to buy things no one else wants”), American businessmen (“They have surrounded themselves in a citadel where everyone else was below them”), ideology (“I am a capitalist and I don’t intend to change”), even China (“I think there was maybe something good about Mao when he sent the ministers out to do something in the fields”).

Lately, Bluhdorn has been uncustomarily silent. Three separate investigations are being made into the affairs of Gulf & Western, its subsidiaries and some of its officers and directors. The SEC is looking into, among other things, the adequacy of the company’s public disclosure in connection with transactions of G & W’s securities, the company’s pension funds and its dealings in the shares of an auto-parts subsidiary that had some stock traded on the over-the-counter exchange. Manhattan District Attorney Robert Morgenthau is supervising another probe. Finally, the New York State senate committee on crime and correction is examining the possibility that organized crime may be linked to the operations of Madison Square Garden Corp., another G&W affiliate. Jeremiah B. McKenna, general counsel to the committee, dismisses inquiring reporters with a cryptic comment: “We’re coming at the organized-crime aspect of it from a different angle that I can’t mention to you.”

With his citadel under siege, Bluhdorn is silent as a mime on all these matters, and no other officer will offer as much as a syllable of explanation. One middle-level employee describes the current atmosphere at G & W as “paranoid.” It was rather startling that a routine registration statement filed lately by Associates First Capital Corp., a financial-services subsidiary of G & W, was rejected by the SEC because of incomplete disclosure. Even more anguish has been caused to shareholders by the drop in the company’s stock: it has sagged by more than 20% this year, leaving Bluhdorn’s conglomerate in the humiliating posture of selling for less than $14 a share, or $8 a share below book value.

The catalyst for this calamity is a silver-haired lawyer named Joel Dolkart. He was G & W’s general counsel for al| most 20 years, a bosom pal of Bluhdorn’s -and a partner in the Wall Street cor| porate law firm of Simpson Thacher & Bartlett. Dolkart, a mergers and acquisitions expert with a taste for modern art, was hit with an 89-count indictment in 1974 for stealing $2.5 million through fraudulent checks from law firms representing G&W.* He pleaded guilty to one count of forgery a year ago and was sentenced to a jail term of up to three years. Because he “cooperated” with the SEC and District Attorney Morgenthau, Dolkart has received several stays in the execution of his sentence. But even though he gave the SEC sealed testimony on G&W’s transactions that Stanley Sporkin, the boss of the commission’s division of enforcement, called “reliable and objective,” New York State Supreme Court Justice James Leff ordered that Dolkart begin serving his time this week.

Earnings Heartache. In an angry mood, Judge Leff said, “The real danger is the cynicism that is engendered when, at the level at which this kind of fraud takes place, the general public believes that ultimately there isn’t any effective sanction which will punish or which will be feared by these corporate thieves.” Nonetheless, the appellate court agreed to give Dolkart yet another stay, pending an appeal of his sentence.

As if the legal probes were not giving Bluhdorn enough headaches, G & W, which has several operating companies, ranging from Paramount Pictures in Hollywood to New Jersey Zinc Inc., has a heartache with its earnings. While operating revenues for the first three quarters of fiscal year 1977 are up 7.2%, net income is down 11 % because of depressed prices for sugar and paper, two big G&W divisions. The company’s enormous long-term debt of $1.1 billion must be serviced, at high cost. A sizable investment portfolio that includes stakes in such companies as Simmons (mattresses), Wurlitzer (juke boxes), Amfac (sugar, hotels, processed food), Esquire (magazines) and a Japanese maker of coin-operated machines has added little to G & W’s fortunes.

There was a time not too long ago when Bluhdorn, with his truculent, toothy grin, used to say, “We are not a conventional company, and we are never going to be a conventional company.” Maybe. But that kind of talk is rarely heard now that some threatening storm clouds have begun to gather over Bluhdorn’s outfit.

* Dolkart, knowing that the corporate checks of G&W and its subsidiaries needed two signatures, invented a fictitious character named “Pat Roberts” and drew the checks on the accounts of two obscure subsidiaries.