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Maxima Corp. struggles to regain the success that made it one of the nation's biggest black-owned firms WHEN A FATHER & SON SPLIT

THE BALTIMORE SUN

It was with both despair and resolve that Joshua I. Smith Sr. summoned his only son and heir apparent to the family business.

"Josh," Mr. Smith said sternly, looking squarely at his namesake across a glass table, "you can't talk your way out of this one."

The private meeting, in a third-floor conference room at the headquarters of Maxima Corp. in Lanham, set the stage for a public tragedy involving Mr. Smith and his son, Joshua I. Smith II, that began to unfold two days later.

Forty-eight hours after their faceoff on that rainy, windy Sunday, Dec. 5, Maxima, one of the nation's biggest black-owned companies, which the elder Mr. Smith heads as chairman, filed a lawsuit accusing the younger Mr. Smith and two others of misappropriating at least $675,000 in corporate funds.

To the son -- known by most as "Josh II" -- the act was one of betrayal. "Why does someone at this stage of his life want to destroy his 28-year-old son? It's like selling your mother," he says.

To the 52-year-old father, it came down to a simple matter of right and wrong: "It's a hard decision, but it's a decision that's right."

At the most basic level, the case turns on Maxima's assertion that the younger Mr. Smith, a division vice president, and two others -- David T. Skidmore, a vice president, and Calvin V. Cothran, an operations director of a division -- created an unauthorized company and diverted to it $675,000 from Maxima accounts. All three have been fired.

The defendants say they have done nothing illegal or improper and, in fact, had acted with the company's OK. They have filed a counter lawsuit, claiming they were wrongfully dismissed and seeking $60 million in damages.

They also assert they are the targets of the company's lawsuit because Maxima is in financial trouble, a charge the elder Mr. Smith dismisses as "just totally not true."

The case, however, is about more than lawsuits and counter claims. It pits a father's devotion against his corporate responsibility; a son's love of father against feeling trapped in his shadow; and a company accustomed to quick growth against today's new reality of cutbacks and shrinking federal contracts.

Maxima Corp. was founded in 1978 by the elder Mr. Smith as a one-man firm in Silver Spring with an initial investment of less than $10,000. As the manager and operator of computer systems for such agencies as the U.S. Postal Service, NASA and the Immigration and Naturalization Service, it has become one of the nation's largest black-owned companies, with 730 employees and sales last year of $45 million.

At the same time, Mr. Smith has emerged as one of the country's most prominent and visible black business operators. Maxima's offices are adorned with scores of plaques and other testimonials to Mr. Smith; he serves on numerous civic and business organizations and is a personal friend of former President George Bush.

Joshua Isaac Smith was born on April 8, 1941, in Garrard County, Kentucky. He was the third youngest of eight children of William and Mamie Smith. His father was a teacher and high school principal in Kentucky, but he later had to find manual work because black people were not paid much in those days.

"He was a principal . . . but in order to send his kids to college he had to work as a laborer -- he couldn't make enough," recalls Joshua Smith. "That's just a terrible tragedy."

The family moved from Kentucky to Loveland, Ohio, just outside Cincinnati, when Joshua was a few years old.

William Smith taught Joshua the importance of education and the gift of speaking. And he and his wife instructed their children about values, especially standing up for themselves and doing what they believed was right, no matter what results may await them.

Today, Joshua Smith says of his father, "I probably emulate him more than anybody else."

There were early signs of that.

"I was quite different from my brothers and sisters," Mr. Smith says. "I, even as a young kid, confronted my mother. If I had something to say, I'd say it."

This penchant for speaking his mind helped him go far, but it also would haunt his relationship with his own son.

When he was 16 years old and working as a dishwasher at Brown's Restaurant, Mr. Smith overheard the owner refer to another worker as a "nigger." Mr. Smith promptly slammed two )) dozen plates to the floor and told the 6-foot-4-inch proprietor, Harry Brown, never to use the word again in his presence.

Mr. Smith expected to be fired on the spot. Instead, he earned the respect of his boss.

"I wasn't trying to be brave," Mr. Smith recalls. "I just felt that I had to stand my ground, because if I let him get by that incident from that point on he would use any language and I would have to bow to it. I just felt it was the right thing. When I think something is right, I don't have a problem with it."

Mr. Smith graduated from Central State University in Wilberforce, Ohio, in 1963, and moved to Washington, D.C., to teach high school biology. He later served as administrator and faculty member at the University of Akron and as executive director for the American Society for Information Science.

It was while he was at the University of Akron and serving as a consultant to businesses in the area that Mr. Smith began thinking about starting his own company.

"I got to know a lot of people in the private sector and realized they were just ordinary people, not necessarily well educated, but they were in business and doing very well in terms of finances," Mr. Smith says. "It dawned on me that that's something I hadn't thought about, and I weighed myself against them.

"Here I am a consultant to them, helping them -- and I am going back to a small salary and the two just didn't mesh . . . and I made the decision before I ended my career I'd start a business."

Mr. Smith spent the next decade plotting his move.

"I'm a planner, a plodder," he says. "I don't take a step without having thought it through the best I can. I like to know where the net is going before I cast it in the water. I like to understand the water and fish and do my homework. What I did was go through the game of being in business."

With the same care, Mr. Smith, worked to build relationships with people who could aid him. He met then-Vice President Bush when a mutual friend introduced the two. What was supposed to be a brief, 15-minute meeting turned into a 90-minute conversation and a friendship that continues today. Mr. Bush appointed Mr. Smith chairman of the U.S. Commission on Minority Business Development, and his second wife, Jacqueline Jones-Smith, chairman of the Consumer Product Safety Commission.

Although Mr. Smith is a Republican, he's worked with Democratic Gov. William Donald Schaefer, serving on the Maryland Stadium Authority. He is chairman of the National Urban Coalition and was the first black person appointed to the board of directors of Caterpillar Inc. and serves as a director of Federal Express Corp. and Inland Steel Industries.

Those relationships and the many speeches Mr. Smith gives every year are not just for ego, he says.

"These activities all have a business strategy behind them," says Mr. Smith. "I don't make speeches to make speeches, I make speeches because . . . it establishes relations with decision makers."

Those relationships have helped Mr. Smith live the life that was denied his father, William Smith. "This is an instance where segregation really took its toll on a person who would have been exceptional," Mr. Smith says. "He was just a brilliant man and a capable person."

It's the kind of life Joshua Smith wanted as well for his son, Josh II.

But if Mr. Smith emulates his father, Joshua I. Smith II is the antithesis of his. Mr. Smith Sr. is a large man with a remarkable resemblance to the actor James Earl Jones --right down to the same graying beard and spectacles, while Josh II is tall and lean. While the elder Mr. Smith is methodical, the son is looking to make his own mark in a hurry. Although Mr. Smith Sr. has a bent toward candor without fear of what others think, the son has always worried about pleasing his father. And while the elder Mr. Smith is hesitant to talk about the family's current torment, Josh II has hired a publicist, hoping to parlay the episode into something more.

The young Mr. Smith grew up in the Washington, D.C., area and lived with his mother after his parents were divorced when he was 10 years old. He went to live with his father in Rockville six years later and began working for Maxima part-time while still in high school.

After high school, Josh II spent a year at the Deerfield Academy, a 197-year-old prep school in Deerfield, Mass., where he was a captain of the track team. He then attended the University of Tennessee, where he graduated with honors with a degree in economics.

Ironically perhaps, Josh II chose the University of Tennessee in part because Maxima had opened an office in Oak Ridge and it allowed him to see his father when the elder Mr. Smith had business there.

Two of the stories the younger Mr. Smith has often told about his days at the University of Tennessee are that he graduated with honors and that while on the freshman track team he once ran the mile in remarkably fast time -- 4:03 -- but decided to quit after one year. "I knew my mind would take me further than my legs. . . . I think I disappointed my father when I stopped running," is how he told the story.

University officials confirm that Josh II graduated with honors, but they could find no record of Josh II clocking the mile at 4:03. In fact, they have no record of him even being on the team.

When asked about that last week, Josh II acknowledged the much-told story of glory days in track is a fabrication. "It's not true," he said. "I am sensitive because I always wanted to do it. There were a lot of expectations and a lot of big hopes. . . . I thought I was going to be a great middle-distance runner."

In one sense, Josh II says, he's glad he was forced to come clean: "I have to get out of my mind all of these ghosts and insecurities."

The lie, of course, is not the biggest. But it illustrates cutting corners, not thinking things through nor doing the right thing -- all of which would be contrary to the elder Mr. Smith's teachings.

Upon graduating from college in June 1988, Josh II was reluctant to work for his father. "I wanted to go out and do my own thing," he recalls.

But his desire to succeed quickly was even more compelling. Thanks to his father's contacts, Josh II was accepted that summer as an intern in the Bush For President campaign.

"It was a once-in-a-lifetime opportunity," the younger Mr. Smith says. "My father knew the president personally. . . . It was an opportunity to meet powerful political people in the Republican Party."

Later that year, Josh II joined his father at Maxima. "I knew if I accepted the job, I'd have to bust my hump 200 percent," he says. "I was an athlete and a good student. I wasn't afraid of it."

Maxima Corp. had been founded by Joshua Smith Sr. in 1978 with an investment of less than $10,000 and a borrowed typewriter. He was the only employee.

Propelled by the Small Business Administration's 8(a) program providing minority-owned companies special access to federal contracts, Maxima began to grow. Five years later, in 1983, it made Black Enterprise magazine's list of the 100 largest black-owned service and industrial companies. In 1986, it was named the magazine's Company of the Year.

By 1987, it had bolted to the nation's ninth-biggest black-owned firm, with sales of $56.1 million.

Things were good for Maxima and Mr. Smith Sr.

Things were too good in fact. In 1986, the SBA ruled that, because of Maxima's size, it no longer qualified for the set-aside program. As a result, Maxima lost $100 million in contracts -- work that would last for the next five years.

The company was facing a crisis. Not only could it not get the set-aside contracts, but it also had to compete on an equal playing field with every other company. It was forced to cut employees almost by half -- from a peak of 1,400 in 1987 to 730 today. Mr. Smith fired seven top executives in 1989. And the company vacated its Rockville headquarters, which took up five full floors, for a smaller, one-floor office in Lanham.

Mr. Smith also embarked on a strategy to keep Maxima -- which has not earned a profit since 1991 -- alive and competitive.

At the heart of the plan is the need to change Maxima's reliance on federal contracts -- which account for 70 percent of its business -- by tapping state and local governments. In December, Maxima was named by the National Association of Counties as one of two preferred providers of information technology (the other is Electronic Data Systems Corp.). Counties spend billions of dollars every year for high-tech services. Maxima's future will be considerably brighter if it can capture a significant piece of that market.

As Maxima scrambled, other trouble was brewing inside the corporate headquarters.

While the younger Mr. Smith was viewed by many as the heir apparent, he perceived that he was losing face -- and stature -- through a series of battles with his father.

One of the chief differences occurred when Josh II sought to go out on his own by acquiring a Maxima unit. And there was growing tension over Josh II's expense accounts, which at one point were averaging $10,000 a month.

Josh II says that his father had agreed in the fall of 1990 to allow him to acquire the Maxima unit, then changed his mind at a meeting with him on Feb. 24, 1991.

"It was my first major disappointment with my father," Josh II says. "I was devastated financially and spiritually to know my father had that capacity in him. Even though I separated the personal from the business, he always brought me up to carry through with your commitments.

"This guy just turned ice cold on me. I thought about leaving Maxima, but I decided to not let this issue come between me and my father."

Another shock came last spring, when Mr. Smith Sr. concluded his vision for Maxima was not enough to get it through the difficult period of restructuring. So he recruited Andrew Bart, the president of Systemhouse Inc., a Canadian information technology company, as Maxima's new president.

Mr. Bart is running the day-to-day operation while Mr. Smith focuses on planning and establishing relations with government officials to bring Maxima new contracts.

The time was right to bring in someone like Mr. Bart, says Levi Lipscomb, acting director of Howard University's Small Business Development Center in Washington. Maxima "had grown considerably through the vision and desires of its founder, Joshua Smith Sr.," he says.

Ultimately, Mr. Lipscomb says, a successful start-up company must be managed -- it can't just run on one person's vision.

For "any well-managed company, particularly one that has the quality of product that Maxima has to offer the world, growth should be controlled," Mr. Lipscomb says. "I think he (Mr. Smith Sr.) did the right thing by pulling in a president who is going to manage the company. I think it's a sound business decision."

That permits the elder Mr. Smith more time on the road selling the company.

"A lot of people now are eyeing the local government market, but I can tell you that eyeing it and getting it are two different things," says the elder Mr. Smith. "You've got to pay your dues. You don't get into these local arenas unless you have relationships."

The hiring of Mr. Bart may have made sound business sense, but it was a bullet in the heart of Josh II.

"I think that Josh Sr. put Andy Bart in between him and me," the younger Mr. Smith says. "I don't understand why. He wanted some distance between him and me."

Josh II says his father would sometimes try to intimidate him by putting down his suggestions at company meetings, or by reminding him who paid the college bills.

"I was always trying to do something he would be proud of," says Josh II. "He definitely was manipulating me through intimidation. I think my father is very competitive as an individual, as are many entrepreneurs. And my being a chip off the old block, he saw me as competing with him."

Joshua Smith Sr. says that his son's mistakes were not knowing his own limitations and not knowing the difference between personal affection and business.

"Quite frankly, we're not talking about two equals here, and I'm saying that from experience, exposure, business acumen and all the other things," Mr. Smith Sr. says. "My intent would never be to embarrass anyone. I would never have a reason to intimidate. But if in fact one felt that way, I didn't know that."

Mr. Smith Sr. acknowledges that he is tough when it comes to Maxima's success.

"Can I be intimidating? Damn right I can," he says with force. "Can I be strong? Damn right I can.

"Business is not a game. Business is very serious. Naivete in business can get you in a lot of difficulty. And I'm pretty straightforward about those kind of things. And it doesn't matter if it was my mother, father, son, daughter, spouse. Business is business, and personal is personal."

For Joshua I. Smith Sr. and Joshua I. Smith II, it came to a head during the 12 o'clock meeting on Dec. 5.

Josh II recalls his father -- whom he still calls "The Chairman" -- handing him a draft of a lawsuit charging him with misappropriating corporate funds. "He said this is a very serious situation for me. He said, 'Josh, you can't talk your way out of this one. This is going to destroy you and there's no way around it.' "

The lawsuit would be filed, Josh II says his father told him, unless he transferred to Maxima all funds in the company Josh II had created, and signed a promissory note for $500,000. He was told to return the next day to discuss the conditions further.

Josh II says he left in a daze. "I was devastated," he says. "I can't even remember driving home. I was thinking to myself, what did I do wrong? I was very loyal to the organization. I don't understand why a father would to this to his son."

Even today, he remembers that session with his father almost as a shootout, calling it the Meeting at High Noon.

He decided not to accept the conditions and hired an attorney.

Joshua Smith Sr. remembers the Sunday meeting as "one of the hardest days I've ever had in my life."

But he had no choice, he insists.

"As chairman and chief executive, there was a clear sense of what I had to do, and I won't back off that," the father says. "You have a responsibility to shareholders, to the employees, your partners and other people with whom you have agreements.

"I had to remove myself as a father. . . . It's still very, very hard. That won't ever go away. This kind of incident tends to tear things -- you hurt something in your body and you may get back to some form, but it never will be the same."

Maxima filed its lawsuit on Tuesday, Dec. 7. Seven weeks later, on Jan. 27, Joshua Smith II and his two co-defendants counter-sued. The lawsuits are pending in Howard County Circuit Court.

Now, Joshua Smith Sr. worries about the future of his company and his future with his son.

He seems more certain about the outcome of the former. "We're at the launching pad," he says of Maxima. "I think in the next five years you're going to see a lot more results from previous efforts."

Of Josh II, he says: "Can I still have a personal relationship with my son? I don't know about that. I hope so, because I love my son. There is no question about that.

"Hopefully, over time I'll understand it and know what the driving forces are, and who knows, one day it might make for a better, stronger relationship."

Josh II cannot see the future any clearer. On one hand, he worries about his reputation. On the other hand, he too wonders about the father-son relationship.

"I can't say what it's going to do," he says. "It's going to change the nature of the relationship. I will no longer be the subservient son I was. . . . There's nothing in his power to change that."

Then Josh II adds, "I still respect him and love him as a father."

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