Eleven years ago, steelworker Brian Zoccole drove along U.S. 62 on the western slope of Pennsylvania. The highway bisected Shenango Valley on a high bridge, revealing the typical town and mill below.
To the north was the town of Sharon, named after the biblical plains of Palestine, and on the south were rows of liver-red sheds. Once home to the nation's finest specialty steel products, the sprawling mill was smokeless and silent. The rust spread out from the mill, past junk-strewn lots to a crisis food center and unemployment office. Zoccole was headed for the unemployment office.
Foreign competition was not the reason Sharon Steel no longer held a future for Zoccole and thousands of other local residents. "We've been held hostage by a guy that lives a thousand miles from here," Zoccole said.
That guy was Victor Posner, the reclusive "dean" of corporate raiders, who died Monday in Miami at age 83. In the 1970s and 1980s, Posner was a legend on Wall Street. He was widely regarded as the prototype for Michael Milken and junk bond finance, which foreshadowed the corporate debt instruments now making headlines and being investigated in Washington.
Posner sure looked good for a while. In 1974, his holding company, NVF, which controlled Sharon, reported a 54 percent return on stockholder equity. At its height in 1985, Posner's empire included stakes in 20 industrial companies that in addition to steel made leisure sportswear, soft drinks, liquefied gas, underground cable conduit, and heavy machinery. Then his house of cards came tumbling down, a reminder that accounting shenanigans and destroyed jobs did not begin with Enron Corp.
Posner started humbly enough. Born in Baltimore's Pimlico neighborhood in 1918, he quit school to work at his father's delicatessen. Before his 20th birthday, he was credited with staging his first hostile buyout - he took over his dad's deli.
He sold the store and began buying and selling rowhouses in the poorest sections of the city. His money-making abilities attracted the attention of Baltimore Federal Savings & Loan.
World War II had recently ended, and Posner saw a future in building homes in Baltimore County. Staked by Baltimore Federal, his companies eventually built 3,000 subdivision houses, mostly around Dundalk and Essex.
He used Maryland's arcane ground-rent laws to sell the houses but keep the land, which allowed him to leverage his holdings and buy more land. His companies still own considerable real estate in Baltimore and Harford counties.
Next he moved to Miami Beach, where he reinvented himself as a high-rolling Wall Street investor, developing the contacts that would enable him to surface in 1969 as the chairman and chief executive officer of the nation's 14th-largest steelmaker.
Under Posner, Sharon became the oddest steel company in America. He shifted its corporate headquarters from the town to a former hotel he owned in Miami Beach.
Soon the landlocked Pennsylvania company was shelling out millions for yachts and speedboats docked at Posner's residence. Its newly acquired corporate jet was used to touch down in Las Vegas and Haiti.
Even under the elastic rules of business expense accounting, Posner had gone too far. A 1977 report by the Securities and Exchange Commission traced how Posner used Sharon and his other companies to pick up nearly $2 million in personal expenses.
Without admitting or denying liability, Posner agreed to reimburse the companies. The wrist slap, however, didn't stop him from speculating on Wall Street or prevent Manufacturers Hanover Trust and Mellon Bank from extending high-interest credit lines secured by Sharon property.
Brian Zoccole and his fellow employees didn't know that Sharon's interest payments had ballooned from $10 million in 1975 to $101 million in 1981. But the electrician did encounter the results of Posner's priorities on a daily basis. He said he wasn't given the tools or the time to fix high-voltage equipment. "It was like a bad joke," he said.
Signs that the company had abandoned its old standards of excellence were apparent. Its stainless steel division was closed and a blast furnace shut down because of deteriorated brick lining. By 1986, Sharon had a $100 million shortfall in its employee pension fund. That same year, five workers died at the Sharon plant. An investigation by federal officials found that faulty equipment and poor safety precautions contributed to four of the five deaths.
Meanwhile, the Environmental Protection Agency filed a lawsuit against the company for willful pollution of the Shenango River. That action resulted in $500,000 in fines.
According to Posner, the company's problems rested squarely on steel imports and excessive wages.
Panicked by Posner's threat of massive layoffs, the local union accepted a $2-an-hour wage reduction in 1986. The wage savings were supposed to be used to repair the blast furnace, but that was not to be. In a move eerily similar to the recent fate of Enron, Posner dumped the company into bankruptcy court after loading it down with about $400 million in debt.
Although the bankruptcy judge stripped Posner of control of the company for gross mismanagement, it was too late. Nearly all the mill equipment had been dismantled, and Sharon Steel was liquidated.
In his next brush with the law, Posner pleaded no contest to tax evasion, but escaped imprisonment by giving $3 million to the homeless in Miami. Next he was accused by the SEC of conspiring with his protege, Michael Milken, to gain control of an electrical company in New York through illegal stock dealings.
Milken went to prison after pleading guilty to felony charges stemming from the transactions, but Posner dodged the same fate. In December 1993, he and his son, Steven, were required to pay $4 million to stockholders and banned from serving as officers of any publicly traded company.
By then, Posner was 75 years old. He had squirreled away about $290 million, according to Forbes magazine, in family-controlled trusts that were beyond the reach of creditors.
Secluded in his Miami Beach bunker, he spent his twilight years protected by bodyguards and reciting his philosophy to underlings. A favorite boast, according to a former insider, was that "small people ... get squashed by people with power and wealth, and I have all the power and wealth in the world."
That was Victor Posner - unrepentant to the end.