Part 5 of 6
Show me the money
Meanwhile, a nightmare awaited the operations crew. They had planned for this first race smartly by renting track equipment and supplies, such as the safety fencing, from vendors responsible for existing CART facilities in Vancouver, Toronto, Long Beach, and elsewhere; these vendors had their own crews with proven experience in doing such work, thus cutting down on the time and expense required in constructing the track. HSP spent $650,000 on repaving the runways and $150,000 on trench work for mechanical, electrical, and communications systems. But the single biggest operational outlay - $2.4 million worth - lay in the grandstands, and that did not follow the above procedure at all.
Due to one of the aforementioned pre-existing conditions Heard and his colleagues could not change, exactly the opposite happened. Typical bleachers consist of turnkey, pre-fabricated seating units or modular pieces with relatively straightforward assembly. But these bleachers were 100% "stick built" - single pieces of channel iron laboriously bolted together with no pre-fabrication. On top of that, HSP had to do all their own construction of what could best be described as Tinker Toy bleachers. The contract also required payment be 100% due before the plants subcontracted to produce the parts would ship, and when HSP began missing progress payments after the investors in St. Louis failed to release the necessary funds on time, penalties began accruing. HSP had accumulated $500,000 in penalties alone before the plants, which insisted on cash and not the performance bond for payment, would ship - hence the delay subsequently exacerbated by the labor dispute.
So why did the funds not materialize? Heard summed up the dilemma upon cancellation and said, "we were basically out of money and didn't get any more money put into it. So I guess you could call it an under-funded business." HSP had already gone through some $10 million in operational and promotional expenses, leaving little or nothing on hand for the huge purse as advertised, CART sanctioning fees, and other outstanding contracts. In the end, not even HSP knew where the money was coming from.
However, in an appearance before the Downtown Honolulu Exchange Club in May, Heard assured the audience, "when somebody says, 'aw, I heard that thing's been cancelled,' you can say, ‘crap! I heard that guy speak, and it's not being cancelled, because they have the money in the bank! And they're not gonna cancel this one and it's gonna happen.'"
Heard added at the time, "we needed some working capital, obviously, and there's a bank in St. Louis that believed in our project and believed in the backers, and I guess the backers had enough money that they'd loan us a bunch of money so we'd have the working capital. And that's why I'm so confident to say that this event is gonna happen. There's no question in my mind whatsoever." But as Heard and others in HSP discovered to their chagrin months later, what appeared in the spring as a guarantee of some kind quickly became a death trap designed, in one insider's words, "to bail out all the other inadequacies."
The intended financial setup also should have still ensured the Super Prix's viability even if its various controversial aspects did not pay off. Heard continued in May, " I can tell you today that if we do not have one person buy(ing) a ticket to sit in the grandstands, if we do not have one sponsor, and if we do not have not one person signing up for Pay-Per-View, everybody involved in the race will get paid. And the reason I can say that is that this event is bonded, and it's a completion bond. It's very prominent in the film industry." Thus, in theory, even with the low ticket sales, no event sponsor, and no PPV, the bond would have guaranteed the race could still take place.
Even in early October, John Hallé, president of New Hampshire-based CNB Capital, assured the Advertiser his investment banking firm would fulfill its contractual obligations and pay off on the $30 million bond (including $5 million guaranteed to CART) in full, given Frontier's insurance policy. But according to those who learned the story first-hand, Heard traveled to Tennesee for a planned in-depth meeting with the Frontier president. This "should have been a rubber stamp from Frontier," but the president "hadn't even been briefed on what was going on. He told his staff ‘give me the bottom line,' glanced at it, and said, ‘you know, it doesn't make any sense.'" Frontier quickly terminated the meeting, and Heard returned to Honolulu the very next day, stunned.
"It just made you wonder what was going on," Koenig recalls. "Phil would say ‘we're close to a title sponsor and a TV deal, and we'll announce it on our website,' but nothing happened. These things would be promised but never materialized."
Subsequently, with money earmarked for future years already being spent, HSP issued what amounted to an emergency prospectus the week of October 4 to possible financial angels, seeking an unexpected $15 million in loans, with a whopping 12% return in interest over three years. Grayson, saddled with the onerous task of coming up with other investors after Rutherford's departure, spent upwards of 18 hours a day on the phone desperately seeking capital.
Multi-millionaire sportscar mogul Don Panoz responded, helping broker the Speedvision deal and agreeing in principle to personally front the missing money and rescue the Super Prix. But Panoz's involvement prematurely leaked out to the media, with the San Diego Union citing the arrangement as fact on October 7. This resulted in Panoz abruptly withdrawing his financial lifeline.
If the Super Prix had not actually been doomed before that, it stood doomed now. Even the return visit the last week of September by Andretti, regarded as Champ Car racing's premier goodwill ambassador, only glossed over the increasingly inevitable.
The financial problems blunted HSP's planned fall promotional deluge, among other opportunities lost. "They had no income to deal with anything other than what the promoter had provided," Sweeney explains. "They didn't give Phil enough to operate on."
Last Sunday's Advertiser's sports pages ran an ad for the Super Prix which amounted to its last gasp, with ticket prices slashed across the board by $10. The ad slogans took on an increasingly ominous and desperate tone: "Time is running out! Get your tickets now! Every split second counts!"
Two days later, time did run out. HSP made a last-ditch effort at saving the race, proposing to CART a reduced overall purse of $8 million and elimination of the four wild card entries, thus reducing the field only to the top 12 in points (at a $4 million savings). A planned second installment of the informercial aired only twice before being yanked, due to these factors being in flux. Craig confirmed from Australia the cutbacks would happen "in an effort to help the promoter," but even this proved too little, too late during final negotiations which collapsed the morning of October 19. CART had been kept fully aware of the dockworkers' situation , which could not possibly have helped matters during these sensitive talks.
One reporter at the final press conference asked Heard if he felt betrayed by the insurance company or others who promised much, delivered little, and left him as a sacrificial lamb. "No...I'm not sure what I feel at this point."
Those behind the scenes locally feel despite their apparent naivete, "Phil did everything humanly possible to save this thing, while David Greyson and Bob Kachler were the ones who really stuck their necks out with their own money." Those in the racing industry also agree Heard, Operations Manager Steve Anderson (among those who called in many personal favors in setting up deals with various vendors and contractors), and their staff do not deserve the brunt of the blame being heaped upon them. "Phil had the wool pulled over his eyes; slowly but surely, his eyes were opened."
"There's no bad opinion of Phil, I don't think," Kirby contends. "That was probably the strongest note of confidence among the teams and the press in the US. That was a small blip of confidence. He is not held culpable in any way, shape, or form - he was the one who had to carry the can to the very end."
"A couple sponsors thought Heard was a pretty solid guy because of his background with the Vancouver race," Koenig says. "I just think Heard was dealt a weak hand, basically, by the time he came aboard." Heard illustrated his work ethic by routinely arriving at the HSP office by 5:30 am and often staying past 9 pm, fighting a losing battle.
Mike Rossell, one of the vendors contracted by HSP, stands firmly behind his client. "I think he's probably one of the best people to come to Hawaii with an event. He's a professional and honest man who did his job with great fairness and candor. He dealt with me in a businesslike fashion that's very appreciated; he's a gentleman and I think very highly of him. If he came back to town the next week with a proposal, I'd be on his doorstep right away...Phil is due a lot of credit for doing his job under very tough circumstances."
