It was going to be a boxing training camp more progressive than any the sport had seen before.
Headquartered on a Virginia estate, Champion Sports Management Inc. would provide aspiring young fighters with pension and profit-sharing plans, life and health insurance and frequent medical checkups to guard against possible neurological injuries of the sort that three-time heavyweight boxing champion Muhammad Ali may have suffered in the ring.
Ali himself would be chairman of the board of the Virginia Beach company that would run the camp. Its chief executive officer would be Jabir Herbert Muhammad, Ali's longtime manager and son of Elijah Muhammad, founder of the Black Muslim church. Richard M. Hirschfeld, Ali's attorney in Virginia Beach, would be president.
The goal of Champion Sports Management was to work "with young, upcoming professional boxers and try to develop more Alis," Ali told a packed New York courtroom in August. "We are trying to help boxers and better the sport and knock out much of the criminal action. Take boys off the street and help people, not defraud them and rob them."
But a federal district judge in New York ruled earlier this month that Champion Sports and Hirschfeld violated securities laws by misrepresenting the company's financial position, assets and ownership in a stock prospectus.
U.S. District Judge Robert J. Ward permanently prohibited Hirschfeld from continuing with a public stock sale begun in July that was supposed to raise at least $1.85 million for the sports camp. The judge issued a bench ruling on Oct. 15 and is expected to issue a final order in the case in a few days.
It was the third time Hirschfeld has been cited in Securities and Exchange Commission charges. The SEC alleged that in the Champion Sports stock offering, Hirschfeld had committed securities fraud by concealing the loss of a $600,000 note listed as the company's principal asset and by failing to disclose the extent of his personal interests in the company. Ward ruled that Ali and Herbert Muhammad were innocent of wrongdoing; the SEC had said the former champ "was victimized by Hirschfeld as much as were potential investors."
Hirschfeld and his attorneys denied the fraud charges, saying some of the information was available to the SEC in letters and amendments to the prospectus and registration statement, while the rest was immaterial. They also argued that the injunction was unnecessary because they voluntarily returned investors' money in August.
The case has returned Hirschfeld, 37, the wealthy son of a prominent Tidewater family, to the public spotlight for almost the first time since he left the state after an unsuccessful effort to start a bank got him in trouble with the SEC in 1974.
Hirschfeld's more recent business dealings include a Virginia company formed to market a West German herpes vaccine in the United States and an $800 million oil refinery deal in Sudan. The SEC alleged that both those ventures are closely linked with the finances of Champion Sports Management, and that Hirschfeld used the herpes firm, Hirsch-Chemie Ltd., to disguise the identity of Champion Sport's major backers, including himself.
According to its most recent stock offering prospectus, dated July 10, 1984, Champion Sports Management was formed in Virginia in July 1983 to manage and train professional fighters at a new training camp in Virginia Beach and an existing camp Ali owned in Deer Lake, Pa.
The company was the brainchild of Herbert Muhammad and Ali, who had been Hirschfeld's legal client since the two met in London in 1980. The three men had been partners in several ventures, including a $22.5 million luxury hotel overlooking Virginia Beach, and a Tidewater photo processing firm called Fotek Inc. Ali told Judge Ward in New York that he trusted Hirschfeld "completely." Ali and Hirschfeld had become such good friends that Ali had attended Hirschfeld's eldest son's bar mitzvah.
According to the SEC, the financing to start the boxing camp was arranged by a multimillionaire financier from Lichtenstein named Wilhelm Wolfinger, a longtime Hirschfeld business associate. Hirschfeld testified in the SEC case that Wolfinger's help with the boxing camp was a quid pro quo for Ali's aid in arranging an $800 million oil refinery deal in Sudan financed by Wolfinger.
Hirschfeld said he introduced Wolfinger to Ali in an attempt to have the prominent Muslim fighter help smooth the way for the refinery with Sudan's Islamic leaders and to lay the groundwork for another refinery in Dubai.
Herbert Muhammad testified that he and Ali had made the necessary introductions in Sudan. Since then, Hirschfeld told Judge Ward, Ali had received a $20,000-a-month retainer fee from Wolfinger "because of his Muslim recognition over there."
According to Hirschfeld's testimony, "Wolfinger said he would get involved in Champion because he thought it would be therapeutic for Ali" -- whose slow movements and slurred speech of recent years have been diagnosed as a treatable, boxing-related form of Parkinson's disease. Furthermore, Hirschfeld conceded, Ali's "Muslim recognition" was needed more than ever in the Sudan project.
While Ali and Herbert Muhammad were the company's titular heads, in charge of recruiting promising athletes, Hirschfeld oversaw Champion's day-to-day business and financial activities. Ali never even read the prospectus. "I only read the Holy Koran or maybe parts of the Bible or the sports pages," he told Ward.
With a star-studded list of business contacts, Hirschfeld had had no trouble enlisting prominent sports figures for the company. The list of directors read like a Who's Who of boxing. Henry C. Grooms, one-time manager of Leon Spinks; David Jacobs, who trained Sugar Ray Leonard, and Earnie Shavers, a former top heavyweight fighter -- all signed on as vice presidents.
And on the company's first prospectus in October 1983, a photo of heavyweight champion Larry Holmes graced the back cover; he had agreed to serve as co-chairman with Ali in return for an annual salary plus expenses of $110,000. He also had signed a contract for $50,000 giving Hirschfeld the right of first refusal to promote a bout with heavyweight rival Gerrie Coetzee.
But there were a few potential pitfalls in the venture, as the July prospectus noted in a five-page section titled "Risk Factors." First of all, though Champion's success depended on the names and drawing power of its directors, whom the company was paying a total of at least $280,000 a year plus stock for their participation, "none of the foregoing persons have entered into employment contracts with the company," the prospectus said.
No feasibility studies of the market had been performed, and there were a number of conflicts of interest among board members because of their involvements with other training and boxing businesses. Former boxing champion Alexis Arguello left his position as a vice president of the company after less than a month. Elsehwere, the prospectus noted only two boxers had been signed to the camp so far, and one -- lightweight Eddie Mustafa Muhammed -- had been barred from fighting for a year in most states for allegedly tampering with official scales before a weigh-in for a bout against Michael Spinks.
The company's working capital so far had come entirely from loans, and they had been used to purchase, among other things, an 11-seat Sabreliner Model 60 jet from Lockheed for $733,125, a $65,000 1983 Stutz Bearcat company car, and the down payment on a $1.7 million, 88-acre estate in Virginia Beach.
Holmes' picture was gone when a revised prospectus was issued in July, and he was suing Hirschfeld in an unsuccessful attempt to nullify the Coetzee contract. Holmes' advisers, after analyzing the prospectus last November, had suggested he get out.
"It just struck me that the thing Champion Sports was a real sham," said Charles Spaziani, Holmes' mentor and attorney in Easton, Pa. As for the Coetzee contract, Spaziani said, "Hirschfeld took advantage of Holmes' lack of education. Larry can't read that contract, and everybody knows it. . . . This contract was the primary thing Hirschfeld wanted. The rest was just window-dressing."
Hirschfeld had help in preparing the Champion prospectus from Annamerle Z. Bellah, an associate in his law firm's Virginia Beach office who had also notarized the Holmes-Coetzee contract. In July, Hirschfeld testified, he fired Bellah, whom he accused of stealing airplane tickets from the firm. Soon afterwards, SEC officials said, Bellah contacted them with information about Hirschfeld's complicated financial dealings, which revolved around Champion Sports Management. The SEC's case against Hirschfeld is based largely on Bellah's information, agency attorneys said.
The SEC's complaint centers on the tangled transactions involving Champion Sports, Hirschfeld, the 88-acre estate that was supposed to become the boxing camp, a $600,000 unsecured note , and several Virginia companies in which Hirschfeld is involved.
One of those companies is Hirsch-Chemie Ltd., a publicly held firm that was incorporated under the name Taj Americorp-East Ltd. in 1981. The company had the exclusive American rights to sell the West German drug Lupidone, which Hirschfeld claims is the only vaccine treatment for herpes simplex. The drug has not been approved by the FDA, and Hirschfeld said it was recently taken off the market in Germany and Austria.
According to reports to the SEC, Hirschfeld owns 26.5 percent of Hirsch-Chemie's 25.1 million shares. Another major shareholder is Tajir Institute Establissement, a Swiss company in which Wolfinger is a principal. Until this March, when it sold the stock, Tajir was listed as Champion Sports Management's major shareholder, with 6.5 million shares (43.13 percent).
Hirsch-Chemie has several subsidiaries. Hirsch-Scionics Corp. and Hirsch Cinemedics Corp. had contracts to do cancer research for Johns Hopkins Hospital in Baltimore. The company's financial arm, Hirsch Capital Corp., owns 9.5 percent of Champion Sports.
Champion's prospectus listed Hirsch Capital as a major shareholder and principal creditor of Champion, but made no reference to Hirschfeld's involvement in Hirsch Capital. The SEC said the prospectus failed to disclose that Hirschfeld was a principal shareholder and major creditor of Champion and that Champion had signed an agreement with Hirsch Capital to guarantee repayment of a $1.475 million loan. If Champion failed to pay off the loan and Hirsch Capital did so, Hirsch Capital would receive a controlling interest (51 percent) in Champion.
According to the SEC, Champion defaulted on the loan last February when the Bank of Virginia Beach demanded payment of the $1.475 million. (The note was called, the bank's president said in a deposition in the New York case, because he was "extremely uncomfortable with the manner in which Hirschfeld and his various companies conducted their corporate affairs.") The money to pay off the loan came from a Hirsch Capital account controlled by Hirschfeld, giving his companies a majority interest in Champion -- a fact not disclosed to potential shareholders, the SEC said.
The SEC said the prospectus further misleads investors about the $1.475 million note paid from the Hirsch Capital account. The prospectus said the note was made over to "an unaffiliated third party." But that "unaffiliated" company was controlled by business associates of Hirschfeld and raised funds from a Hirschfeld-affiliated company through a stock sale deal that the SEC said was "a sham designed to hide the fact that Hirschfeld was using Hirsch-Chemie's funds to pay the bank."
The note, the SEC said, wound up with an Italian firm controlled by Wolfinger's former brother-in-law. The Italian firm also provided the down payment on the Virginia Beach estate. For a time, Hirschfeld, his wife and five sons lived at the estate, which has a 12,000-square-foot house, three apartments, tennis courts and a 10-horse stable. In all, the company paid $600,000 toward the property before deciding to sell it and consolidate operations at Ali's Deer Lake camp.
The prospectus says that in January, Champion transferred the $600,000 note receivable for the estate, one of the company's principal assets, to an "unaffiliated third party" called CSM Properties Inc. But according to the SEC, CSM was in fact "a shell company" formed by Hirschfeld and a Nevada company called First Leisure Inc. whose principal, Ronald Smith, was at the time serving a 1- to 15-year sentence in Utah state prison for theft by deception and writing bad checks.
The agency said Hirschfeld never made sure First Leisure could make good on the deal. By May, CSM defaulted on payments for the property, which was reclaimed by its owner, Virginia Beach developer Edward Garcia. The SEC charged that the July prospectus made no mention of the default or that the $600,000 note had become virtually worthless.
In addition to denying the fraud charges, Hirschfeld argued that the information Bellah provided the SEC violated the attorney-client privilege. In a telephone interview, Hirschfeld said he intended to sue her "for a very large amount of money."
In the interview, Hirschfeld said Champion Sports might continue operating as a private firm despite the SEC action. But U.S. District Judge Ward said he expected Champion to go out of business by Dec. 31. He told SEC attorneys that if it didn't, the agency could seek an injunction against it.
The adverse publicity has affected Ali and Herbert Muhammad, they testified. "It hurt me tremendously," Herbert Muhammad told Ward. But, he added, "I believe the man Hirschfeld is honest. I will go and get in business with him tomorrow."