Biting the Hand

Suing your own company

Richard B. Black, 48, won a place in the Guinness Book of World Records in 1978 for running the fastest continuous vertical, mile, up and down the stairs of Chicago's Lake Point Tower (time: 2 hr. 9 min. 45 sec.). Now Black has achieved a very different kind of notoriety. He is a chief executive officer who is suing the company he worked for. Black has filed a lawsuit that accuses his former employer, AM International, and some of its ex-executives of misrepresenting the firm's financial condition when he was hired a year ago. Black says that in addition to taking over a company near disaster, he has lost most of the $3 million he invested in AM stock eleven months ago.

Better known by its old name of Addressograph Multigraph, AM International has been on the edge of bankruptcy. Even though it canceled ambitious expansion plans and sold off six divisions last year, the company still lost $245 million on sales of only $857 million. In January workers were forced to take a temporary 8% pay cut. AM owes $141 million to a consortium of 21 banks, and has twice violated loan agreements.

AM International is a victim of technological change. The 58-year-old firm was struggling as a manufacturer of old-fashioned duplicating machines in an age of Xerox copiers when Roy Ash, former head of Litton Industries and Budget Director in the Nixon Administration, took over in 1976 as chairman. Ash immediately began buying up companies that manufactured electronic office equipment and moved the company headquarters from Cleveland to Los Angeles. The new products, including word processors, copier devices and credit-card billing systems, soaked up millions of dollars in development costs, and AM International's profits fell sharply. In February 1981 Ash resigned and was replaced by Black.

Black had won a reputation as an efficient executive for his role in turning around Maremont Corp., a manufacturer of auto parts. When he was recruited by AM's board of directors, he took their word that the company was stable and had good growth prospects. Now he says he was the victim of an "industrial Watergate" that covered up sloppy business practices. Replies Ash: "He says I'm responsible for these losses and I'm saying just the contrary."

It was on Black's first day at work that he suddenly discovered the company was ready to announce a big quarterly loss. To slash costs, he moved the firm's headquarters to Chicago to be closer to AM's plants and sold off the high-tech acquisitions. As the company's prospects continued to deteriorate, though, Black decided to sue. Last week AM International announced that he had quit to avoid a conflict between his employment and the lawsuit.

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