Onto another plane
Onto another plane
As his black Chrysler rolls out of Little Washington across the bridge over the Pamlico River, Reggie Fountain chatters like a jackhammer into his cellphone. “Yeah, yeah. Not a problem. I’ll bring you $500 so you can have a little something to work with.” Steering with his forearm as he scrolls up another number, the sleeve of his “RMF”-monogrammed white shirt rides up, flashing a diamond-studded Rolex.
“Used to have secretaries,” he tells his passenger. “A chief financial officer. Had 450 people working for me. Did almost $80 million in sales in 2006.” He’s still talking and juggling the phone as he wheels into a two-bay boat shop in Chocowinity, a tiny town of 800 where boats are as common as cars. “Kenny!” he greets a man with a white goatee and an English accent. “First things first.” Pulling out his wallet, he peels off bills — “one hundred, two hundred …” Kenny Adams, 77, shows him the modifications he’s making to a dagger-shaped speedboat. “We built this one in ’99,” Fountain says. “One like it would be $600,000 now.” A customer is paying $50,000 for upgrades, including faster engines and a new interior.
Back in his car, Fountain takes a call from his office manager in Greenville, 25 miles inland, where he owns a shopping center and 315 apartment units. “Take the credit card and go to Lowe’s and get what you need.” Another caller reports his truck has broken down, and Fountain scolds him for missing an appointment. “I don’t want to have to be keeping up with little deals like that.” He hangs up, muttering.
Once, secretaries took care of Fountain’s little deals, while CFOs handled his big ones. Over the course of 30 years, he ran a business that, by his estimate, built 10,000 speedboats that were sold for more than $1 billion. His customers were playboys and sheiks, the rich and famous. George H.W. Bush bought four; Fountain still wears cuff links bearing the presidential shield Bush gave him. Before building boats, he raced them at speeds that turned water hard as concrete. After one accident, “I woke up in the hospital, peeing blood for two weeks. Tore my kidneys all to pieces.” He won seven national and three world championships in unlimited-horsepower classes. He never gave up racing entirely. On the broad Pamlico in 2004, he hit a record 177 mph in a 42-foot, 3,000-horsepower offshore racer he designed. “Reggie was known on a world scale for his prowess on the racecourse,” says William Sisson, editor in chief of Soundings Trade Only, an authoritative Essex, Conn.-based magazine for the boating industry. “He was always a hard-charger, very aggressive.”
“I was always at the top of the food chain,” Fountain says. The Richard Petty of speedboat racing, he’s 71, wears pinstriped, three-piece suits some days, racing jumpsuits on others and, every day, his signature gold necklace. “Lightning bolts in a circle.” Once, it was his corporate logo. “Wear it all the time.” Elbows on the steering wheel, he pushes aside his tie to unbutton his shirt.
Once, he was at the top. But on Aug. 24, 2009, Fountain Powerboat Industries Inc. and its subsidiaries, Fountain Powerboats, Baja by Fountain and Fountain Factory Superstore, filed bankruptcy. Not him personally. As president and CEO of the publicly traded company, he was legally an employee, though he owned 51% of the stock, he says. “I was the biggest owner and the biggest loser.” On the surface, the rotten economy, fractured high finance and a bank on the brink were to blame. But part of the problem, he admits, was a larger-than-life character, weaned on success, who couldn’t back away from the trough. “Pigs get fat,” he says with a shrug, “hogs get slaughtered.”
On the outskirts of Washington, he bumps the big sedan across a field and parks several hundred yards from the 66 acres surrounding Fountain Powerboat Industries’ 237,000- square-foot complex. “Grass needs mowing,” he says. After the bankruptcy, he went on the new owners’ payroll in his old job at $5,000 a week. But the arrangement quickly ran aground, leaving in its wake recriminations and bitterness. Did Boca Raton, Fla.-based Liberty Associates LC scoop up the company for a song, then renege on promises to pump money into rebuilding it? That’s what he says. Did he, as the new owners suggest, foment unrest in the ranks while plundering design secrets and plotting to start anew on his own? What nobody can dispute is that on the afternoon of Friday, Dec. 10 of last year, he went home for the day. When he came back Saturday morning, as was his routine, guards blocked his way. “They locked me out. They kept my pictures, trophies and all that.”
Once, he couldn’t imagine the kind of scrambling he’s doing now, darting from shop to shop, slapping backs, chatting up former employees, engine builders, riggers and craftsmen like Kenny Adams. He’s having to court investors, dowsing for dollars. Three or 4 million should suffice, he says, to craft a new business servicing the boats he built before the collapse. He’ll build new ones, too, not by the score but with a network of subcontractors and only with orders in hand. “No overhead, no inventory,” he says.
Once, for Reggie Fountain, was not enough. The Chrysler’s air conditioner breathes softly. Through a fringe of tall trees that were no higher than his head when he planted them, he stares vacantly at the plant. This is as close as he is allowed. “I ain’t done yet,” he says. “I ain’t done till they bury me.”
It came down to this. Late in the summer of 2009, Randy Doub, chief judge of the U.S. Bankruptcy Court for the Eastern District of North Carolina, pored over papers as attorneys for Fountain Powerboat Industries and its creditors filed into the courtroom in Wilson. He thumbed to the bottom line: Fountain Powerboat Industries and its subsidiaries, worth $25 million, had $79 million of liabilities. The American Stock Exchange had delisted the company when its stock, which had traded as high as $8.62 in early 2006, plunged to 33 cents a share in 2008. After that, it had languished on the Pink Sheets, the trading graveyard of terminal companies, going for a nickel a share the day the company filed bankruptcy. But it was the principals, not the particulars, that made the case spectacular.
Reginald Morton Fountain Jr. grew up in Tarboro, son of an insurance salesman and small-time real-estate dealer who had been mayor and an Edgecombe County commissioner. An uncle who lived across the street was L.H. Fountain, congressman for 30 years and a Tar Heel political icon. By the time Reggie was 14, he was waterskiing barefoot — “good training in hydrodynamics.” His parents sent him to a private boys school in Asheville. After the second year, he begged to come home, but something a coach had said stuck with him: “To the victor go the spoils, the rewards, the glory — and all the girls.” Particularly the girls, he remembers, four marriages later.
Fountain started racing small hydroplanes in 1954 and continued through college at Chapel Hill, where he earned a bachelor’s in business in 1962 and a law degree in 1965. He sold insurance for Northwestern Mutual, racing on weekends. Investing in real estate to stake his boats and expenses, he turned pro in 1970. Racing for Mercury Marine, now part of Lake Forest, Ill.-based Brunswick Corp., he had won 20 of his 31 races by 1973. “I never thought about getting hurt or killed. Hell, over the years, 29 people were killed in races that I was participating in.”
In 1979, working out of a former used-car dealership in Washington, he began building boats, incorporating lessons from his racing experience. He designed ferociously powered “cigarette” boats, usually 35 to 48 feet long with a distinctive hawksbill profile. He took the company public in 1987 and modified his designs to expand into the express cruiser and sportfisher markets. With about 60 dealers worldwide, his blazingly fast craft attracted high-profile customers. King Hussein of Jordan bought one. A New York distributor spent three years in federal prison for exporting seven at a cost of $1.7 million to North Korea for use as military patrol boats. Some made their way into the hands of drug runners. He calculates the average wholesale price of the craft he sold at about $240,000.
Fountain ran with the jet set, racing his boats around the globe and becoming a fixture at boating events, capitalizing on both performance and persona. “My customers like Rolexes with diamonds, so I play that role for them. If I get a chance to come back in my next life, I want to be Elvis Presley. You never saw him when he didn’t look good, his hair fixed, his clothes perfect. People come to boat shows to see somebody special.” As somebody special, he was a magnet for bronze-tanned beauties. In 1994, when he was 54, he wed the 24-year-old daughter of a business acquaintance. That and his other three marriages were fun, he says, while they lasted. “I’m still friends with all of them.”
He ran his company as lavishly as he lived his life. At its peak in 2006, it had 450 people on its payroll, Beaufort County’s largest private employer, and logged $79 million in sales. From his helicopter and Cessna Citation I jet, he watched his offshore boats slam through waves, sometimes far enough ahead to loop back, mocking competitors. Money rolled in and right back out. “My mother used to say, ‘Son, while you’re making all this money, flying back and forth to my house to pick me up in your jet helicopter, you should be saving some.’ I didn’t listen. Over the course of 30 years, I spent probably $150 million on plant, technology, equipment, marketing and sales.”
In the early 2000s, Fountain Powerboats had begun expanding sales by financing “floor plan,” building boats, hustling them off to dealerships and guaranteeing their inventories. Also common in the automobile industry, the tactic lets dealers dazzle customers with products ready for quick sales. But Fountain was laying a trap for himself. Fountain Powerboats was, in effect, co-signing the loans with which dealers bought its boats. He shrugs. “Pigs get fat …” By late 2008, as the recession deepened, dealers refused to take more boats. “It was like a switch cut off.” Six months, he figured, and the economy would bounce back. “We just kept stacking them in the field.” Then dealerships began failing. “Finance companies for the dealers started calling. ‘We need you to take back your boats.’” By mid-2009, Fountain had 275 extant, valued at $62 million, a year’s inventory pipeline even in good times.
The storm that would founder his business was gathering in Birmingham, Ala., where regulators were breathing down the collar of Regions Bank and its holding company, Regions Financial Corp. Its stock was tanking, customers were yanking deposits, and nonperforming assets had more than doubled in a year to almost 1.7% of loans. One of these was the secured $19.6 million Fountain Powerboats owed, its biggest obligation. “They said, ‘We’ve got the government after us. We’ve got to get rid of this thing. We’ll let you get an investment banker, shop it and get the best you can.’” Fountain hired Chapel Hill-based Jacobs Capital LLC, which persuaded La Jolla, Calif.-based Oxford Investment Group Inc. to take the discounted loan for $6.5 million, about 33 cents on the dollar. Fountain Powerboats was on the hook for the rest.
Lenders who had advanced dealers money to buy floor plan began stampeding. Creditors included Hoffman Estates, Ill.-based GE Commercial Distribution Finance Corp., Providence, R.I.-based Textron Financial Corp. and Charlotte-based Bank of America Corp. Bankruptcy filings show they held notes for $30 million to $40 million in unsold boats. “Instead of saying, ‘Reggie, take these boats back, refinance them and we’ll ride with you on the interest,’ they said, ‘If you can’t buy them back right now, we’re going to sell them to somebody else.’ They began selling them for 50 cents on the dollar.” Potential buyers could wait out dealers to get fire-sale prices. “A boat that would sell for $500,000 — and the dealer had paid $400,000 for — they were selling for $200,000. Hell, my material costs were $200,000.”
In September 2009, Judge Doub weighed arguments. Fountain Powerboat’s liquidation auction had been set for October. Oxford Investment held the big note, nearly $20 million, but just before Doub was to rule, another player surfaced. Family-owned Liberty Associates specializes in what patriarch Bill Gates calls undervalued companies. It already owned two in North Carolina, CompuChem Labs and WearCheck USA, Cary laboratories that test fuel and lubricants. “One of our strategies is to acquire the debt,” Gates says. “Oxford owned it, and they were moving to liquidate the company. We offered to buy it and also to fund the unsecured creditors a million dollars, where in liquidation they wouldn’t have gotten anything.”
Liberty was not being charitable. “We offered Oxford somewhat above what they paid for the loan but, obviously, significantly below the face value.” Oxford had paid $6.5 million for the loan, worth almost $20 million. Liberty would buy it for $6.9 million, allowing Oxford to walk away with a $400,000 profit without lifting a finger. For slightly less than $8 million, including the $1 million budgeted for unsecured creditors, Liberty Associates would own a company once capitalized at $150 million. It had other points in its favor. It was majority shareholder of two other boat builders, Donzi Marine and Pro-Line Boats, and told Doub it intended to refloat rather than liquidate Fountain Powerboats, potentially saving hundreds of jobs. The clincher, though, was the man Liberty chose to run the company.
As the aroma of oregano and garlic drifted from the kitchen, the two men eyed each other across the front corner booth at Marabella Pizza & Grill, Fountain’s favorite Italian restaurant in Little Washington. Fountain liked the soft-spoken Floridian. Charming guy, he thought. Gates liked Fountain, who reminded him of his father. So, when Liberty Associates became the new owner of Fountain Powerboats, with Gates chairman and Fountain CEO and president, Fountain suggested they focus on service, taking advantage of the manufacturing lull to retool for new models. Gates seemed to agree. Visiting the plant, he had seen the toll recession and bankruptcy had taken. “When I first walked into Fountain Powerboats in September of 2009, they had 15 employees. It was shut down, idle. It was not an operating entity.”
The warmth of the initial meeting soon cooled. Fountain says Liberty refused to fund research and development of new models. “They started bringing boats up here from Florida instead.” Ten months after the meeting, Liberty moved Donzi Marine and Pro-Line, two of Fountain’s old rivals, from Florida to Washington to cut costs. Gates says Fountain seemed oblivious to economic reality. “You just couldn’t keep spending like there was no economic downturn.” Through the thin walls of his office, Fountain overheard conversations that he says left him suspicious of Liberty’s financial dealings. “Liberty had told the bankruptcy court all these lies and then came in and started ripping off the company. They weren’t giving me any money to improve our lines, and they were firing all my best people, my key people.” Gates and Liberty executives barred Fountain from the production floor. “They said, ‘We don’t want you going out into the plant any more — you’re causing problems checking on the way we’re doing things.’” They accused him of recruiting workers for a new venture. Liberty demanded an agreement not to compete if he left. Fountain refused to sign the noncompete and another pledging not to disclose internal workings of the company. The chill deepened in the front offices of the otherwise windowless plant. Then the sparring turned sinister.
Someone, Gates says, hacked into company computers. “I can tell you there is an investigation going on.” The State Bureau of Investigation says it knows nothing about one, though other agencies might be involved. “There are allegations that there was a theft of intellectual property,” Gates adds. “All the company’s computers were backed up, and a number of boat patterns and designs were missing from the plant. Mr. Fountain was not truthful with the board. He was pursuing other investments while being paid as president and CEO of Fountain Powerboats. He had a fiduciary responsibility as a senior officer of the company.”
Nonsense, Fountain says — he had no reason to steal designs. “I was the guy who engineered all those boats. I was effectively the head engineer.” He has named his new company Real Fast Powerboats LLC, which he expects most to translate as Reggie Fountain Powerboats, perilously close to the trademarked name of the original company. As for designs: “I can’t use exactly what they’re using, but none of the technology is patentable. If it doesn’t fit in the same mold, there’s no action they can take.”
For his part, Gates says he would welcome Fountain back — but only on his terms. “He likes pretty girls. We even told him that if he wanted to step back a notch and have a little more time for his social life, we could accommodate where he wanted to go. Unfortunately, that was not where he wanted to go.” John Walker, who succeeded Fountain as president and CEO within hours after he resigned, says the plant now employs 164 and has a backlog. But the forces that brought down Reggie Fountain still stalk the business. Interest in offshore racing is waning, banks are tight-fisted in financing high-dollar boats, there’s talk in Congress about increasing taxes on them, and high gasoline prices dampen sales. “We’re in some shark-infested waters,” Walker admits.
The Pamlico River shimmers below the $4.2 million mansion Reggie Fountain built on Chocowinity Bay, beige brick with six massive white columns at the top of graceful steps flanked by a brace of life-size bronze lions. He leans over an ironwork balcony accented by inset circles of gold-colored lightning bolts that match his necklace. “Right out there. That’s where I set the world record — 177 mph. I was hauling ass.” Once, this was Reggie Fountain’s monument to the good times. Now even the lightning bolts are symbols of how thoroughly wrong things can go when a man loses the business he built. Liberty Associates is threatening to sue him if he doesn’t remove them, contending that they are the trademark of Fountain Powerboats and that Fountain is portraying the 11,000-square-foot, five-bedroom house as his new headquarters.
Piled in a heap in the basement and scattered throughout the house are decades of trophies and mementoes. In a faded photo, George H. W. Bush stands shoulder-to-shoulder with him beneath the inscription: “Reggie, you ‘da man!” In a garage bay sits the 1992 Cadillac he gave his mother. “I’ll keep it forever,” he says. She died several years ago at 94 — “maybe that means I’ll live a long time” — before mastering the suite he set aside for her, with its heated floors and gold-plated fixtures. A life-size statue of Elvis greets visitors in the foyer. Elegant cherry woodwork and floors are throughout the house, a bargain he says at $450,000 because idled craftsmen from Fountain Powerboats did the work. Decorator-furnished guest rooms are made up. Closets are the size of bedrooms “for your girlfriends or wife — whichever. I guess wives are about out for me now.” Bathrooms are lined with mirrors. A Jacuzzi has 165 nozzles. “You could get in here with all the girls you want and have a great time. So many girls, so little time.”
The formal dining room is quiet and dim, the massive table with its 14 chairs empty. Once, when times were good, this was where he expected to entertain customers who would buy his half-million-dollar boats. Pictures of his grandchildren sit on occasional tables. He has two sons and a daughter. He’s coming back, he says, starting over for them. And to show the boating world he can. In the theater on the top floor, with its black leather seats, he dims the lights and frets with the controls. “Watch this!” he says, excitement in his voice. “When I come back again, this is what I want to be.” The screen brightens.
Elvis grasps a microphone. “While I can dream,” the King sings, from the finale of the 1968 TV special that resurrected his career, “please let my dream come true … right now.”