St. Marys Loses Its Mill

  



Companies, People, Ideas
The Fall of The House of Gilman
Robert Lenzner Tomas Kellner, 08.11.03

 How family feuds, business neglect and extravagant spending destroyed a billion-dollar fortune

Howard Gilman led a double life. He ran a group of companies that churned out the most mundane products you could imagine: paper bags, bleached cardboard and two-by-fours. Yet he could be found hosting glitzy functions where he would sip champagne with the likes of actress Isabella Rossellini, or entertaining dancer Mikhail Baryshnikov at his elegant plantation near Jacksonville, Fla., which Gilman transformed into a dance center and wildlife preserve.

It was at the 7,500-acre White Oak Plantation that Gilman was felled by a heart attack at age 73, in January 1998. By this time the Gilman family fortune, with $1.1 billion in assets, carried $550 million in debt. Now, just over five years later, much of the remaining money is gone. Gilman, who was childless, bequeathed the vast majority of his assets to the Howard Gilman Foundation. Yet at the close of 2001 the fair market value of the charity's assets was only $227 million. The foundation's 2002 IRS filing won't be available until this fall. But the circumstantial evidence is that it is in a downward spiral. One of the assets it held was a $47 million IOU from the parent of the buyer of the Gilman paper mill. With the buyer in bankruptcy--and the parent suing the Gilman estate for fraud--that asset may be worth nothing. The foundation, which typically gave to arts groups, is so broke that it stopped handing out new grants in 2003. (It is honoring existing grants.)

Shirtsleeves to shirtsleeves in three generations, says the adage about family fortunes. The rise and fall of the Gilmans fits that pattern. Like many American success stories, this one begins on Manhattan's Lower East Side, the first stop for Jews fleeing eastern Europe. Isaac Gilman arrived in the 1880s and peddled trinkets on the crowded streets. By 1907 he had enough money to take over a distressed New England paper company in the village of Fitzdale, Vt., making newsprint and wrapping paper. The locals were so grateful they changed Fitzdale's name to Gilman in 1921.

Isaac passed the business to his son Charles, who in 1939 moved the business south to the Georgia-Florida border, not far from Jacksonville. There he built a large mill with three paper machines. He added a short-line railroad to haul trees, pulp and paper. The Gilman Paper Co. prospered and grew into the largest privately held paper company in the U.S.

When Charles died in 1967 the problems for the third generation of Gilmans began. Charles Jr., known as Chris, was president; Howard, the older brother, was a senior officer. Their relationship became strained, riven by jealousy and bitterness over control of the company, according to friends and family. In 1979 their mother, Sylvia, sided with Chris, disinheriting Howard and leaving Chris with control of the business.

Enter Bernard D. Bergreen, a New York City attorney who says he met Howard at a New York party in 1979 and became his personal counsel and, later, financial adviser and general counsel to the business. "Howard's financial future in 1979 was clouded at best," says Bergreen, 80. He also states Gilman had no equity in the company and limited business or investing experience.

Bergreen spoke only briefly with FORBES. His account, which largely blames Howard and Chris for the demise of the fortune--and of course can't be disputed since the two men are now dead--is contained in an 81-page petition filed with the Surrogate's Court in Manhattan. Bergreen says he managed to reinstate Howard's stake in the paper company by arranging for the two brothers to each obtain 50% of Gilman basically for free from the trust that controlled their father's estate.

In the middle of this turmoil Chris died from a heart attack in 1982, at 51. A new round of litigation ensued between Chris' widow, Sondra, and Howard over whether she was required to sell her share of the company to Howard. Sondra told FORBES she decided finally to sell her shares to Howard because, she says, she didn't want to leave her future "in irresponsible hands." That left Howard as the sole owner of the Gilman empire.

But after two decades of legal wars, the business was ailing and, as Bergreen tells it, Gilman wasn't the right person to turn it around. He says he could not convince Gilman to invest the capital necessary to keep the paper business competitive. A papermaking machine today costs $100 million or more; Bergreen claims Gilman had other uses for the money. Between 1988 and 1997 he lavished $300 million on his philanthropy and what Bergreen calls "pet projects." Back at the mill, a big source of this largesse, the business faltered and profits turned into losses--$55 million over the last two years of Howard's life.

The biggest pet project: $154 million spent transforming the White Oak Plantation in Yulee, Fla., which was acquired by the Gilman family in 1938, into a dance center for Baryshnikov and other noted artists, a conference center and a home for 60 species of endangered and threatened animals, including reticulated giraffes, okapis, black and white rhinoceros, and cheetahs. Howard played host at White Oak to U.S. presidents and celebrities and their families, often using the company's plane to ferry them to White Oak. The guests were fed meals prepared by top-notch chefs. Bill Clinton played golf on Gilman's private nine-hole course.

The Gilman fortune also was devastated by huge losses in the bond market during the years 1992-94 and by a bad investment in the entertainment business, $63 million spent on a forgettable television series called Space Precinct.

But Howard Gilman never neglected his philanthropy, making big gifts to the Howard Gilman Gallery at the Metropolitan Museum of Art and the Howard Gilman Opera House at the Brooklyn Academy of Music. Gilman also backed many dance and theater companies and was Baryshnikov's patron from the moment the Russian dancer landed in the U.S.

Bergreen, coexecutor of Gilman's will, sold off some assets, including timber holdings and the plane. A division that sold lumber declined in value from $230 million after Gilman's death to around $67 million today, according to Dun & Bradstreet. Bergreen blames a glut of Canadian lumber. Other foundation assets at year-end 2001: $38 million in securities (not counting the dubious loan on the mill), White Oak and a highly regarded collection of photos.

If the Gilman Foundation is ailing, Bergreen is not. Between 1985 and 1997 he earned $40 million from Gilman, according to a court filing, and in 2001 Bergreen wanted another $40.5 million for services from 1998 to 2000. The foundation's board sliced that to $17 million, and the New York attorney general's office is trying to force a further reduction.

Why didn't Gilman sell the holdings if, as suggested, he had little interest in running the business? The former corporate controller of Gilman Paper, Michael Pallen, offers this: "He felt tremendous loyalty to his family and employees." Sentiment, in this case, seems highly overrated.

Desert Storm in St. Marys

I am in my own Desert Storm here.  The mighty air hose nozzle screams and roars as it shoots those glass particles against the hull.  Inside it sounds as if a brigade of middle eastern terrorists is mounting an assault and will break through walls any minute.

Until two days ago, Craig and Harold were attacking  below the waterline but now they are up to the engine room and living quarters level so it's getting nasty.  The "sand" is coming through the portlites.  These apertures are recessed ten inches inside the hull so Craig, the "gunner", has to direct the jet stream at sharp angles of contact to blast off the old paint.  He must direct stream around the windows with great care to avoid breaking the glass.  With one hand he places a rubber shield in front to the glass to try to protect it.  Initially, Harold, inside, opened the portlites to swing the glass window up and away from danger.  He covered the opening with plastic and cardboard but the powerful jet spewed granules inside.  I was absent when they first attacked through a portlite, but I was here today and helped Harold defend the castle.  We learned as we went, and by the time Craig got to the third portlite, we had almost completely turned back the enemy. 
I spent an hour yesterday sweeping and vacuuming in the engine room and today more of that there and then into my stateroom.  Yikes!   And even after vacuuming in those areas, I am losing the battle in other rooms. The granules get tracked around and there is serious "dust" everywhere.  Were I anything close to a fastidious housekeeper I would be insane.  (My sister Carol would be the first to laugh were the words "housekeeping" and "Lynn" used in the same sentence.)
The siege will become more intense when the men start blasting  up on the next level near the doors, two of which are sliders so don't seal tightly.  But Desert Storm did end finally, so there's hope for me.

A Christmas Present for Simba Dec. 26,2010

I have been here in the St. Marys boatyard for six weeks or more and have relied on library books and an occasional DVD for entertainment.  I have had no TV as there is no cable here, and have been too busy to miss it.  However, work has slowed during the holiday season and a few days ago I realized I would not be able to see any college bowl games on New Years Day.  Bummer!

Almost no one used TV antennas in Brunswick.  The nearest stations were located far away in Jacksonville and Savannah.  But it occurred to me that here in St. Marys, some thirty miles closer, one might be able to pick up the Jacksonville stations.  With the idea percolating in my mind, I had Xmas eve dinner on friends' boat here and they had a TV. Hey, look at that! The TV was several years old, and the picture a bit grainy, but it served to prove to me that I should get a marine antenna like theirs and test it on Simba.

Christmas day I itched to get shopping, but obviously couldn't but planned out where I would locate the antenna and got West Marine's number to call the next day, which I did.  It was Sunday but they were open.  The West Marine store I called didn't have what I needed, but another store in the city did.  I drove down and bought it, woofing down a hot dog, soda and sundae at the nearby Costco to make this a truly worthwhile trip, and returned to the boat.

Although the wind was up and so cold I had to wear gloves, I climbed up on top of the aluminum bimini with a drill tools and installed the antenna base on the radar arch, some 40-50 feet off the ground.  Thirty feet of wire came with the antenna but it was four feet short of reaching the TV in my saloon, so I drove eight miles to Lowes to get more.  It's a good thing I did, because Lowe's no longer carries the R59 wire as it has been found inferior for digital TV.  (About a year ago the FCC suspended analog broadcasting so it's now all digital.)  I bought plenty of approved R6 wire and returned.   I installed connectors on the wire ends.

It was now dark out, and the wind even higher, but of course I had to test out the antenna and see if I had any kind of picture on my glorious wide panel TV.  With a small LED flashlight I climbed up on the bimini again and attached the new wire to the antenna disk.  Warning myself not to fall at this point, so close to a possibly successful conclusion, I carefully climbed down to the "promenade deck". 

Inside I hooked the antenna wire up to a pre amp and turned on the TV.  I went through the steps required to change the TV input from cable to antenna.  I used the clicker to move up the channels.  From 2 to 6 I got nothing but grainy grey. But at 7 the screen came alive with color.  I had TV!  More than that, I had a magnificent picture.  I was astonished.  The picture was better than the cable in Brunswick.  It was as good, perhaps somehow even better, than the cable HDTV at my sons.  Wow!

MERRY CHRISTMAS, SIMBA!

Simba All Wrapped Up for Xmas (Contracted Work Begins) DEC 5, 2010 ST. MARYS

Once the Travel Lift had carried Simba to a parking space in a row of yachts and large blocks were placed beneath her keel and jack stands located under her hull to keep her upright, the lift's four belts were removed from her girth and the ungainly beast retreated to its birth at the boat haulout pad.

The next day Southern Equipment and Services' foreman Jim Coombs arrived with Craig and Harold to unload stacks of steel scaffolding.  Over the next three days the scaffolding was erected 20 feet high to completely surround Simba.  Then the entire structure was wrapped  with a blue plastic tarp to contain the paint chips and rust scale produced by sand blasting.  For health reasons, the "sand" is now particles of recycled glass.

Thursday and Friday Craig and Harold finally turned their attention to the boat.   First they blasted in the mornings.  Inside the enclosure Craig directed the nozzle of the high pressure hose while outside, Harold fed the bagged ground glass into a hopper.  Where blasted, the steel turned powdery, crystalline, white.  After one half of one side of the hull was blasted, a three gallon batch of epoxy paint was mixed and sprayed onto the hull.

Working On Simba Nov. 26, 2010 St. Marys,GA

Sandblasting of Simba is imminent, once two neighboring boats are moved by the travel lift out of possible harms way (the threat is the sandblasting).  It will be ugly for a few days as I understand that sand will very likely work its way through aperatures and make things quite gritty.  However, the boat is already pretty darn dirty and, as I type, I see my fingernails and hands are dirty despite several washings today.  My day began at 7AM when I watched my wonderful new lithsome LED worklight spring free of its magnetic attachment to the steel  engine room wall and dive ever so gracefully into the oily black bilge.  I rescued the light as soon as I could, thrusting my right arm into the black pool, but I think the light is doomed and my hand and arm will henceforth label me multi­-racial (not a bad thing anyway).  Speaking of that, I stood behind a multi-racial couple in Wal-Mart today. Neither of the parents were particularly appealing, but their three year old daughter was a hoot, standing inside the cart, unloading the purchases, even climbing onto the conveyor belt to rearrange the items.:-)

The reason I was working in the bilge is I am trying to pump it dry so I can clean  and paint it and have my welder cut a foot square hole in the bottom of it, which is the bottom of the boat  of course, and weld a two inch deep basin or sump in place there.  I shall relocate the bilge pump there.  A bilge pump can never remove all liquid but this will reduce the amount remaining to ounces instead of gallons.

I have removed all hardware from the deck bulwarks so the sandblasting and painting will be as thorough as possible.  Sandblasting removes all paint and rust down to bare, raw metal.  A prime coat of paint is applied almost immediately to prevent contamination (rusting) of the raw steel.

Umbilical cords keep Simba alive.

SIMBA LOG  DEC. 15, 2010  ST. MARYS,GA

I woke up to the sound of the small space heater bravely huffin' and puffin' away in the stateroom, trying to keep the space above freezing.  Although the portlights had been covered with cardboard and duck tape by glassblaster/painter Craig, I could still see a faint glimmer of daylight and guessed it had to be time to rise and ...shiver.  I rose, tugged on my Port Huron, Michigan slippers, (purchased on another cold winter day almost exactly seven years before, as Simba waited for a least unfavorable weather window at this small town at the foot of Lake Huron, before running a day and a half up to the top of the lake in hopes there would be some place there to tuck in for shelter.)  I opened the engine room fire door to unplug the heater from an extension cord.  I then plugged in another cord that ran up to the saloon and carried the heater up there where I plugged it in to this extension of the extension cord so it could join the second heater I had left up there running through the night.   It was 41 degrees in the saloon and 24 outside.  The night before I had burned a faux log in the brass and tile fireplace to make the room warm and cheery, but the second heater would suffice during the day.

Extension cords are truly umbilical here at St. Marys Boat Services as every boat that has owners living aboard or working on it must rely on the 15 amperes of power the cords carry to power tools and space heaters.  Down and just abaft of Simba's stern there are four electrical outlet boxes and a breaker panel.  Each box has four outlets so a maximum of four cords can be plugged in.  Six cords run to other boats.  I use three cords to power the boat.   It has been a bit of a challenge to find a way to bring them into the boat.  To reduce the amount of ground glass, dirt, and paint chips entering the boat, all windows and doors must be kept tightly closed.  So how else to get them in?  Well, I snaked the engine room cord through the ventilation scoop way up on the promenade deck and down the air shaft to that space.  I tore a hole in the plastic screen I had over the galley stove blower vent and ran two cords through it.  One of those cords powers the saloon heater and the other, through two plug-in strips, runs the fridge, microwave, tv¸computer, etc.  A fourth cord runs into the lazarette workroom to power the needle gun's air compressor, the grinding wheel arbor, vacuum, etc.  This cord is easily removed.  It drops through the lazarette overhead deck hatch which I only open if they are not glass-blasting and if the wind is down and can't blow nasty stuff off the deck down into my workroom.

Yep, those cords are truly umbilical as I couldn't live and work here without them.

Hull Repairs on Simba Dec. 12, 2010 St. Marys Boat Services

Shake, rattle and roll.  That's what Simba is doing.  The wind is very strong today as a cold front preceeded by a NW wind arriving in St. Marys.  Simba normally is a power boat, but sitting out here in the boatyard on "the Hard", she is wrapped within a blue plastic "sail" 30 feet high and 60 feet long supported by the painters' scaffolding.  My flat screen TV, extended a couple of feet from the saloon wall on its adjustable scissor mount, at times moves in sync with the rest of the boat as the blasts hit our sail, literally rocking the boat.  The scaffolding knocks against the hull, plastic pops and wops, and rope ties slap.  It is fortunate I am alone on the boat for when it occasionally shakes, the thought immediately pops up "could we blow over?".  Each time I picture the pairs of three-legged adjustable supports (jack stands) that keep the boat upright.  They are steel and are connected with taught chains that pass under the keel.   They are only made of 1 ½ inch or so pipe, but with their three feet spread wide and welded together in a triangle, are a vast improvement over the wooden posts they used to keep Simba I upright at the marina in Spain.

I finished filling pits in the hull and rudders today with the thick epoxy paste.  I was forced to stop a couple of times when the wind blew glass-blasted glass and paint chips off the scaffolding platforms onto my work.  There is no hiding the fact that Simba had a bad case of acne as I am not about to spread the goop over the entire hull, but by having a welder plug any holes with steel and filling the deeper craters with the very strong epoxy , she should not spring any more leaks.

Post script Dec. 28.  For over thirty years water dripped from the rudder shafts inside the engine room, a common occurrence as water lubricates the bearing there.  On most boats this water runs forward into the bilge.  But because a frame member had to be removed to accommodate each shaft, Simba's builder added an additional brace which blocked the flow of water.  I sometimes sponged up the small amounts of water, but over the years, and shielded from observation by rust scale, corrosion ate away at the steel to the point where the sand blaster punched several small holes.  Welder Jimmie placed new steel plates on the outside of the hull covering several square feet around the shaft ports.  In addition, I will shortly pour paint down between the new plates and the old to prevent any further deterioration of the old steel.