Businessman leaves trail of ruin

Robert Swain lives in luxury and skips past angry investors and bankruptcies as he continually lines up new deals.

By ADAM C. SMITH

© St. Petersburg Times,
published October 7, 2001

The mood was joyous back in March 1999, as Clearwater Beach businessman Robert Swain sealed the deal to buy the venerable New England restaurant chain Newport Creamery. He and longtime restaurant owner Peter Rector toasted the sale with the restaurant's trademark Awful Awful milkshakes.

Rector was confident the chain his family had run for three generations was in good hands. After all, Swain's resume portrayed him as a shrewd, multimillionaire businessman with a long and diverse history of financial success.

It turns out Rector, like a string of banks, investors and consumers before him, didn't do his homework before doing business with Swain.

For two decades, the 56-year-old Swain has run his far-flung business ventures -- oil, real estate, bath supplies, clothing, crafts and more -- from the Tampa Bay area. And for two decades, he has repeatedly left financial chaos in his wake while continuing to line up backing for his next business deal.

Newport Creamery, a Rhode Island institution, is now bankrupt and on the verge of shutting down altogether. Swain has been booted from the management, and a court-appointed trustee is suing Swain and his wife for $9-million, accusing them of looting the company.

Swain calls these allegations "ridiculous." He has faced similar claims on prior business deals.

Had Newport Creamery officials done background checks, or talked to people who have done business with Swain from Pinellas County to the Caribbean, they would have heard plenty of warnings.

"The man has hurt so many people," said Liz Wallace, a real estate agent who says she lost at least $200,000 selling homes for Swain's high-profile St. Petersburg development, Rutland Estates.

Dozens of eager buyers lost thousands of dollars each in down payments for homes in three Swain developments in Tarpon Springs and St. Petersburg that fizzled and wound up in bankruptcy court. Those developments swallowed up hundreds of thousands of dollars from investors and subcontractors.

These days, Swain is the focus of a criminal investigation by the Pinellas-Pasco State Attorney's Office, which is looking into his Pinellas business dealings.

The Swains sold their 5,500-square-foot Clearwater Beach home for $1.7-million in May, and now rent a waterfront condo in Belleair. They divide their time between Pinellas and New England.

In a telephone interview from Massachusetts, Robert Swain stressed that his recent business troubles need to be put in the context of a 30-year career.

"I don't think there's anybody who's been in the investment business for as long as I have and never had any problems," he said. "Every deal doesn't work."

In Rhode Island recently, the Providence Journal quoted Swain telling a bankruptcy judge, "Candidly, I'm not that familiar with the (bankruptcy) process."

He should be.

A St. Petersburg Times examination of Swain found that at least seven companies that Swain ran or was closely associated with filed for bankruptcy protection or liquidation since the mid 1980s. Two others went bankrupt after Swain cashed out, and still others fizzled out of existence or morphed into entirely new ventures.

"Teflon is a good word for Bob Swain," marveled Ed deVeer, a businessman in Aruba who took over a bankrupt time share development Swain spearheaded in the early 1990s. "The same story keeps repeating itself with him."

The resume Swain provides to prospective investors certainly sounds impressive: an experienced real estate developer, including a $40-million time share resort and casino in Aruba; CEO of an oil company, Energy Exchange, that he took public on the New York Stock Exchange; founder of a clothing company that more than quadrupled his initial investment; and more.

Indeed, he has successes under his belt.

Until a few years ago, he headed Tampa-based American Landmark Homes, a company whose projects included the booming Sable Ridge development in central Pasco County. In the 1980s, he sold a craft supplies company he headed, Craft World International, to a Texas investment group in a deal he said netted millions. The company later went bankrupt.

While Swain appears to have made plenty of money at his myriad ventures, his financial backers have repeatedly suffered.

A closer look at the glowing bios Swain distributed to various investors shows there are plenty of highlights that he neglected to mention.

In the early 1980s, Swain had an active leadership role at Oklahoma-based Energy Exchange. In 1982, the Massachusetts secretary of state's office issued a cease and desist order against Swain and Energy Exchange. The state ordered them to stop selling tax shelters described by Massachusetts officials as "a device to scheme or defraud investors."

"That's what they alleged," said Swain, dismissing the charges as bogus.

Swain touted his leadership in taking the company public in 1982, but Securities and Exchange Commission filings show the company had to spend millions settling lawsuits over the offering. SEC records also say Energy Exchange was in dire financial straits when Swain ran the company, which went bankrupt after he left.

Swain's bio boasts at length about his role developing a premier resort and casino in Aruba, Harbourtown Resorts. Under his management, the development went bankrupt in 1993. According to a court-appointed trustee, Antilles lawyer Rob Blaauw, bondholders lost $5-million, another investment firm lost $4.5-million, and Aruba Bank lost $2.2-million.

But most troubling to Blaauw was the more than $300,000 lost by time share investors. Blaauw said that while bankruptcy proceedings were in motion in Aruba, Swain persuaded time share investors to send tens of thousands of dollars of additional money directly to one of his companies, rather than send it to court-approved managers of the development.

"He just took their money and went away with it. It was pure fraud," Blaauw said.

Swain recalled a dispute over whether time share buyers were entitled to that money but could not recall the outcome. Records show Blaauw tried to persuade Florida's attorney general to prosecute Swain in 1994 and followed up in 1998. Nothing came of it. Similar consumer complaints against Swain filed with attorneys general in Oklahoma and Illinois also went nowhere.

Anthony Sterling, a doctor in Orlando who invested in the Aruba development, recalled court proceedings in Aruba attended by dozens of anguished American senior citizens. "A lot of people were there crying, desperate to find somebody to help them in Aruba. Nobody could," Sterling said. "That shyster stole from me and so many people older than I am who had invested their Social Security and retirement money."

Sterling said he lost more than $100,000 on Harbourtown, but Swain convinced him he would make it back and then some if he invested in another Swain company. He lost nearly $100,000 more.

"I know I was a jerk, but when you meet him, he comes across as a corporate genius," Sterling said. "He's a scorpion who can talk the tan off of anybody."

As the Aruba bankruptcy progressed into 1994, Swain bought a bath products company, Jean Sorelle Corp., and announced that he was moving it from Illinois to Clearwater.

The company went bankrupt in less than a year, and investors sued Swain, accusing him of fraudulently misrepresenting the financial condition of the company and improperly transferring assets to another Swain-controlled company.

Swain's marketing materials note how he founded and ran a resort clothing company called Caribbean Outfitters in 1990. Millions of dollars in debt, it shut its doors in 1995 and went bankrupt in Aruba. Swain said he didn't realize that had happened because in 1993 he had sold the company to Coachman Inc.

But Swain was president of Coachman Inc. in 1993, SEC filings show, and remained on its board of directors for most of the 1990s as Caribbean Outfitters collapsed and Coachman steadily lost money.

As recently as last year, an investor complained to the Florida Attorney General's Office that Swain and Coachman had taken $86,000 from him, and then stopped all contact with him.

None of these blemishes slowed Swain's ability to line up new business deals. Despite his track record, he continued finding financial backers who apparently did little background checking.

"I don't recall any red flags about him," said AmSouth Bank senior vice president Jerry Pate, who handled more than $2-million in bank loans for two of Swain's Pinellas developments that fizzled and had to be foreclosed on. "I do know AmSouth is prudent in their credit investigations."

At the time AmSouth was considering that loan, just a quick check of local court records would have revealed allegations of fraud against Swain by investors in his Jean Sorelle bath products company.

Likewise, Republic Bank also went for Swain's pitch. It lent more than $1.4-million toward Swain's Tarpon Highlands townhome development in Tarpon Springs. Langfred White, a lawyer who represented Republic Bank, said he didn't recall Swain having had black marks on his track record.

Digging up the truth about Swain's career is not easy, said David Boggs, a Tampa attorney with three clients who invested $500,000 in Swain's Pinellas developments.

"He represents himself as a highly successful businessman, and it's not exactly who he is. He moves from town to town and venture to venture, and nobody really knows his background," Boggs said, noting that his clients relied on Swain to disclose everything relevant about himself and the deal, as required under securities law.

As Swain's Pinellas developments floundered, he was busy putting together the deal to buy Newport Creamery in Rhode Island. Peter Rector, the chain's owner, received a call from a Swain business associate, Benedetto Cerilli, inquiring about a purchase.

Cerilli worked with Swain at American Landmark Homes in Tampa, as well as on a Checkers Drive-In franchise in Puerto Rico. (Checkers has sued Swain for defaulting on the contract.)

Cerilli has had his own problems, having run a savings and loan that collapsed and helped trigger a banking crisis in Rhode Island in the early 1990s. He was indicted in 1994 on charges of running the bank as a "criminal enterprise" and diverting bank funds for his own use. The state dropped most of the charges in 1999, and he pleaded guilty to a misdemeanor.

At the time of that plea deal, Cerilli was helping Swain buy Newport Creamery. Rector said he and an investment company conducted a background check on Swain and everything looked fine.

Rector and his investment company had little to lose anyway, because Swain bought the chain for $7.6-million cash. Hundreds of Newport Creamery's employees, though, had plenty at stake. For much of the summer, creamery staffers, including some needing cancer and dialysis treatment, went without health insurance. Hundreds have lost their jobs or are on the verge of losing them.

Swain blames the restaurant's woes on an inadequate management team that couldn't handle his aggressive expansion of the chain. The trustee now trying to salvage the company says the problems went much deeper than that, though Swain contends he's ignorant about basic business practices. Swain's purchase of Newport Creamery was so leveraged, court papers assert, that the restaurant was insolvent as soon as Swain finished the deal. Swain transferred most company assets to other Swain-controlled companies, and steadily dipped into Newport Creamery money to fund his family's lavish lifestyle and various other speculative business deals, trustee Andrew Richardson contends.

Among other things, the cash-strapped restaurant paid college tuition for Swain's kids; rental of a grand Newport home; $9,000 monthly mortgage payments on their Clearwater Beach home next to the Carlouel Yacht Club; $1,000 a week for Swain's wife, Linda, to consult on decorating plans for the Rhode Island restaurants; boats, Land Rovers and a BMW; no-interest loans to friends of Swain; and money to keep afloat his only Pinellas development that avoided foreclosure, court records show.

Tarpon Highlands, with dozens of weedy, undeveloped lots and a sales office framed by a dilapidated white fence and muddy parking lot, is today Newport Creamery's primary asset.

In Rhode Island, the woes of Newport Creamery are generating a steady diet of newspaper headlines. Nearly three-quarters of the stores have closed since Swain expanded it to 43 locations, and the trustee is searching for a buyer to avoid liquidating the 73-year-old chain altogether.

Swain, as usual, is moving on. These days he is focused on convenience stores. Shortly before Newport Creamery filed for bankruptcy protection this summer, Swain bought 55 White Hen Pantry stores in Massachusetts and New Hampshire.

He said he has big hopes for his newest venture.

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