Feel a Whole Lot Debtor

Both Arthur Teele, Jr., and Hans Peter Kugler say they don't remember much about the exact moment they met on a 1985 Concorde flight from Paris to New York. But the chance encounter turned out to be fateful for the Dade County Commission chairman and the German tycoon. Kugler has had several years to contemplate the hole in his wallet left by a subsequent $380,000 loan to Teele that hasn't been repaid. And for the remainder of Teele's four-year term, Dade's citizens can ponder the fact that the commissioner charged with overseeing the county's three-billion-dollar annual budget is well acquainted with matters of high finance.

Especially deficits.
It isn't hard to imagine how the conversation between Teele and Kugler unfolded against the background swoosh of supersonic air travel. Each man's credentials were bound to impress the other. Teele, who had not yet embarked on his local political career, was a successful attorney and president of the National Business League, an association promoting black entrepreneurship. Until 1983 he had served as head of the Urban Mass Transportation Administration under Ronald Reagan. After leaving that post, he began shuttling between jobs at two law firms, one in Miami, the other in Washington, D.C. The Concorde was a return flight to the U.S. from a European business trip. Kugler was a well-known German businessman with investments that spanned the globe (including a home and office in the Bahamas) and a solid reputation as a philanthropist.

What almost certainly struck Teele and Kugler about each other was the fact that both were involved in the rail transportation industry. Only months before meeting Kugler, Teele and several other investors had purchased Applied Electrical Technologies Corporation (AETC), a Brooklyn, New York, company that rebuilt subway motors. The price was $1.4 million, Teele the majority owner. According to Teele, the company at that time was growing steadily, employing about 60 workers and generating annual sales of more than ten million dollars. Kugler's Swiss company, Hardomid, was seeking to introduce to the U.S. a new rail technology it had developed. High above the Atlantic, the two men saw the possibility of working together.

The following year, Teele says, Kugler lent AETC the $380,000. As a condition of the loan, Kugler required Teele's signature as a "co-signer," thus making him personally responsible for paying back the money.

AETC's fortunes declined sharply after the infusion of Kugler's money. Teele admits that Japanese and U.S. competitors had shaken the company's once secure position in the market and forced him to assume day-to-day operations. In 1988 Teele had to lay off fifteen workers; in addition, he says, Kugler never secured from U.S. authorities the licensing necessary to introduce his new technology, high-tech plastic railway joints. The next year he visited Kugler at his home on Paradise Island in the Bahamas to negotiate repayment of the increasingly burdensome loan. Teele says a number of options were discussed, including the possible sale or forfeiture of some of his personal property. (Kugler's wife Erica, a banker who assists in managing her husband's finances, recalls with disdain Teele's offer of property. "We don't need properties!" she snaps. "We have enough properties already. Why is it that Americans must always sell things before they pay back money? This is an American sickness.") Some time after the meeting, Kugler and Teele agreed on a restructured payment schedule.

Repaying Kugler wasn't Teele's only worry. Laboring under debts of more than two million dollars, AETC filed for bankruptcy in November 1989 and eventually won court approval of a reorganization plan to pay back more than 100 creditors, some of them in full, some only a fraction of what they were owed.

The business relationship between Kugler and Teele took another dive when Teele's second check under the revised repayment schedule proved worthless. Kugler claims the check bounced. Teele says he stopped payment on it because Kugler had failed to send him written acknowledgment of the new agreement. Kugler says he was furious, but was still willing to settle the debt with his business associate. At least until recently. "Teele has been saying he's going to find a solution to this problem," Kugler grumbles, "but he has kept putting it off and putting it off so that now I am tired of it."

His anger over the debt threatened to embarrass Teele, who by then was facing re-election to a newly expanded county commission. With a sense of timing worthy of the most savvy politician, Kugler made his move. On March 15, just one day before the crucial Metro election, he petitioned the U.S. Bankruptcy Court in Miami and demanded that Teele immediately repay the loan, which had grown to nearly $413,000 with interest. But Kugler's court action did not receive publicity until days later, and Teele coasted to election victory on March 16.

A week later the Miami Herald did publish a story about the dispute in which Teele claimed he was unaware of Kugler's repayment demand because he hadn't been notified. But in the next four weeks, Teele would miss two deadlines for response ordered by Judge A. Jay Cristol. Finally, on Monday, April 26, Teele's attorney filed with the court documents arguing that he shouldn't have to comply with Cristol's order because he'd never received proper notice of Kugler's original demand. (Apparently the documents had been sent to a building without the proper suite number, according to one attorney involved in the case.)

The timing of that defense also bore political significance. The very next day, April 27, the newly elected thirteen-member county commission would be sworn in and would undertake its first official action: the election of a chairman. Teele had been working hard behind the scenes to line up the votes he needed for that position, which carried with it the power to appoint other commissioners to committee chairmanships. Teele already knew what he wanted for himself A chairmanship of the powerful finance committee, which oversees Dade County's budget, including all major capital projects and bond measures.

Kugler's publicized demand for immediate repayment raised the obvious question about Teele: If he can't manage his personal finances, why should anyone trust him with billions of dollars from county taxpayers? "In Germany you would go straight to jail for something like this," Kugler says scornfully. "Here the law is different, so that's why I give this matter to the attorneys."

Those attorneys and their actions may not have had any effect on Teele's local political career A he was voted commission chairman and appointed himself to head the finance committee A but they did prompt the commissioner to action. "Mr. Kugler is a very intelligent man," says Teele. "The simple fact of the matter is that he has been saying certain things and filing things in court to get me to pay more personal attention to this matter. He has succeeded."

Two weeks ago Judge Cristol ruled that Kugler's original petition had not been properly delivered to Teele. But before the process could begin anew, the two sides reached a settlement. Teele says Kugler consented to reduce the amount owed to about $250,000. In return Teele has agreed to sell a home he owns in Tallahassee to begin repaying the money. (Kugler's Miami attorneys would only confirm that a "general understanding" has been reached. Kugler himself was unavailable for comment this past week.)

Teele is downplaying the conflict and emphasizes its amicable resolution. "I still consider Mr. Kugler a friend," he says. "He has always been a gentleman with me, as I have with him." The commissioner, however, is less generous with those who would make an issue of his personal financial affairs. He complains that he, like every other black man in the United States, must put his "butt on the line" by accepting personal responsibility for business loans. And he chides the press for failing to note that he and his companies have successfully paid back nearly $20 million in loans over the past ten years. Both his and AETC's finances, he says, are now in good shape. "I've taken risks and will continue to take risks," he adds. "This story is only three-quarters of the way through. The question is: Does it end happily