(Source: Jim Doyle and Lisa Brown St. Louis Post-Dispatch) – B. Douglas Morriss, a Clayton-based financier and the scion of one of Ladue’s prominent families, has led a life of privilege. From helicopter rides to Canadian hunting trips and tailored suits, he has a taste for adventure and luxury.
Without a doubt, Morriss knows how to spend money. The only question: Whose money?
In the past several years, Morriss raised tens of millions of dollars in private equity and venture capital funds. He also serves on the boards of a dozen companies, including some of the firms his investment funds have bankrolled.
But last month a group of Texas investors, including polo-playing millionaire John B. Goodman, filed a lawsuit in state circuit court in Clayton accusing Morriss of diverting investor funds for his personal obligations and debts.
Last week, Morriss and three of his companies filed for bankruptcy – listing more than $35 million in debts and at least 40 creditors, including a Swiss investment banker, a leading U.S. bank and some of his employees.
Then on Tuesday, in a civil complaint filed in federal court in St. Louis, the U.S. Securities and Exchange Commission accused Morriss of misleading and defrauding his investors.
Morriss declined to say why his business empire is in jeopardy. During a brief interview Monday at his home in Ladue, he described the bankruptcies of himself and his companies as minor matters of no public concern.
“There are not many people affected by this,” Morriss said. “This is a personal matter. This was a personal loss. … This doesn’t involve investors.”
Morriss filed petitions on Jan. 8 seeking Chapter 11 federal bankruptcy protection for three of his firms: Acartha Group LLC, Acartha Technology Partners L.P., and MIC VII LLC. The three firms have estimated their debts as nearly $10 million, according to petitions filed in Delaware.
In a separate petition filed Jan. 9 in federal bankruptcy court in St. Louis, Morriss reported that his own debts total more than $25 million, including a “personal guaranty” of $14.5 million to Tech Partners LLC of Grand Rapids, Mich., and an $8 million note to Wells Fargo Bank N.A. He estimated his assets at less than $500,000.
Phone calls to Acartha Group’s offices in a 20th-floor suite in New Brunswick, N.J., went unanswered.
The offices of Morriss Holdings Inc., a family-owned holding company, are located on Maryland Avenue in a one-story, octagonal-shaped brick building with two brass lanterns beside the door. Morriss serves as the firm’s chairman and chief executive. No one answered the door at Morriss’ offices Tuesday.
Morriss lives four miles away in a Tudor-style mansion overlooking the golf course of the St. Louis Country Club. The home, appraised at about $4 million, includes a swimming pool and guest house. The home’s listed owner is “the BDM 2000 Irrevocable Trust.” On Jan. 9, the trust paid nearly $50,000 of state and local property taxes on the residence.
Morriss remodeled his home in 2005. Markway Construction Co. in Maplewood, which did some of the work, is listed as a creditor to whom Morriss owes $29,302. Koch Brothers Decorating Inc. in University City is a creditor for $25,256.
Morriss, 49, is the son of Reuben M. Morriss III, a former chairman of Boatmen’s Trust Co. Reuben Morriss, of Ladue, died in 2006. Some who know Douglas Morriss describe him as a likable man with a magnetic personality.
John Wall, an attorney at Greensfelder, Hemker and Gale in St. Louis who partnered with Morriss on a real estate investment in recent years, called Morriss a brilliant businessman whose investment firm suffered in the economic downturn. Wall said the money he invested, while it didn’t get the return he sought, was returned by Morriss when the deal was finalized.
“He’s a very decent guy who treats people well,” Wall said. “I find it hard to believe that there’s been any personal malfeasance.”
Others who know Morriss talk of his extravagant lifestyle. They describe Morriss’ frequent hunting trips to Canada and Scotland and his frequent dinners at St. Louis’ toniest restaurants.
Brian Granger, sales and dockage manager at Walstrom Marine Inc. in Harbor Springs, Mich., recalled selling a 15-foot Chris Craft motorboat to Morriss several years ago. “It was a wooden classic,” Granger said. “He liked it, he bought it.”
But since then, he said, Morriss has failed to pay his winter storage fees on the boat. As a result, the marina – to whom Morriss owes $2,774 – put the boat up for sale last year for $21,000, Granger said.
Granger said Morriss’ parents used to own a cottage in the quaint harbor town. “His family was certainly an old Harbor Springs type of family,” he said. “They’re usually bullet-proof during these times.”
Morriss also has an interest in collecting fine art, and his list of creditors includes a $2,303 debt to the Collectors Fund of Kansas City, which buys modern art and lends pieces to its members.
Morriss graduated from Ladue Horton Watkins High School in 1981, and then graduated from Drake University in Iowa in 1985. According to a Forbes magazine profile of the Morriss family, Burton Douglas Morris worked as a broker at Oppenheimer and Co. He founded a successful company called Kinexus, which sold online wealth management tools and services – at first to individuals, and later to banks.
From 1998 to 2000, Morriss served as the “managing member” of MIC Aircraft LLC, a Chesterfield-based firm. But the aircraft company filed for bankruptcy less than two years after his departure from the firm, according to documents filed with the Securities and Exchange Commission and the federal bankruptcy court in St. Louis.
In 2003, Morriss and partners formed the Acartha Group, which made small investments in startup and growth companies. Morriss also served as a manager of Hela Capital Partners LLC, a leveraged buyout fund that took one company public. And he was a partner in the Gryphon investment funds.
In July 2004, Morriss helped take public a Chicago-based company, Kanbay, a global provider of information technology services with most of its employees working in India. When the company was sold in 2006, Morriss earned about $25 million from selling his shares and those owned by the BDM Irrevocable Trust, according to calculations made from SEC documents.
According to its bankruptcy filing in Delaware, the Acartha Group lists its assets between “$0 and $50,000,” yet owes various debts, including $5.6 million to investment banker Eric Sarasin of Basel, Switzerland; $376,141 to “the Barbara B. Morriss marital trust;” and $43,374 to the Clayton law firm of Armstrong Teasdale.
The Acartha Group’s unsecured creditors also include several of its employees: Morris himself ($1.05 million); his general counsel, New York lawyer Thomas Wynne Morriss Jr. ($441,627); chief technology officer Ameet Patel ($1.1 million); trustee Dixon Brown of New York ($424,857); and Christian Leedy of Wildwood ($61,068).
In a 2005 interview with the St. Louis Business Journal, Morriss said that two of his partners in the Acartha Group included New York financier Nicolas Rohatyn and Bruce Rauner, who operates a Chicago-based private equity firm. They did not return phone calls Tuesday. Morriss served as chairman of the board.
In that interview, Morriss also said that he was on track for raising $1.5 billion in private equity funds by 2006.
On the Acartha Group’s website, Morriss subsequently spoke of raising $350 million for an Acartha Technologies Partners/Gryphon Holdings III LP.
The SEC has different – much smaller – numbers. The agency claims that, from 2003 to 2011, Morriss and his investment funds raised at least $88 million from about 97 investors.
“Morriss lived a lavish lifestyle, living in a multi-million dollar home, driving luxury automobiles, leasing a private airplane and helicopter, and taking expensive vacations,” the SEC complaint states.
According to the SEC, in 2008 Morriss “began experiencing increasingly severe financial difficulties. As a result, he began selling personal assets, including a lodge and hunting property in Canada, and he relinquished his leasing interests in the use of his personal aircraft. He also became delinquent on several million dollars in personal loans. Due to his deteriorating financial condition, Morriss continued to move money from the investment entities to himself and Morriss Holdings.”
By the end of 2009, the SEC alleges, Morriss owed his companies and investment funds about $2 million. At the same time, Acartha Group officers – including the company’s former chief financial officer – voiced concern to Morriss about the extent of his transfers of company funds to himself.
The investor suit speaks of Morriss’ “mounting financial difficulties” and also his “cavalier disregard” for the plaintiff’s investments. In court filings, Morriss has denied any mismanagement or misappropriation of the investors’ funds.
The lawsuit was filed in November by Ron Nixon and Wilmington Trust Co., who are co-trustees of the Bailey Quin Daniel 1991 Trust, JBG Interests LLC, and HEG Interests LLC based in Houston. In 2006, these companies and trusts invested a total of $10.8 million in Morriss’ companies, according to the complaint.
JBG Interests is a company operated by John B. Goodman, founder of the International Polo Club in Wellington, Fla.
The suit accuses the Acartha Group of wiring in 2011 more than $500,000 to Morriss Holdings LLC, which is separately controlled by Morriss. It also accuses Acartha of wiring at least $12,500 to Morriss’ ex-wife, Holly Morriss, in 2011 for alimony obligations.
In court papers, Morriss acknowledged wiring money to both Morriss Holdings and his ex-wife, but denies any impropriety.
The suit accuses Morriss of recruiting new investors to buy an equity share in MIC, thus diluting the plaintiffs’ interests without the unanimous consent of the existing shareholders – a breach of MIC’s operating agreement. Morriss denies that the plaintiff’s investment shares were diluted.
In the past year, Morriss deferred a portion of his salary and the salaries of other Acartha directors and officers. In September, Wells Fargo declared that Morriss was in default on loans the bank had made to him.
“Acartha may not survive without additional investors,” the investors’ suit alleges, “which Morriss has been unsuccessfully seeking for many months.”
©2012 the St. Louis Post-Dispatch
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Source: Jim Doyle and Lisa Brown St. Louis Post-Dispatch