Jim Heeter, a lawyer and former city councilman, will bring an interesting perspective to his new position as the Greater Kansas City Chamber of Commerce's chief executive. He was on the board of a company that, for a time, suffered under exceptionally shitty management.
Heeter is a member of the board of directors at American Italian Pasta. He and the company's founder, Richard Thompson, go way back. Heeter was Thompson's lawyer when, in 1991, the U.S. Justice Department nixed a sale of the company, which Thompson started from nothing, to Hershey Foods out of fear the pasta market would become too concentrated.
A short time later, Thompson turned over the company to professional managers. Those men are now in federal prison.
American Italian Pasta's top executives used accounting tricks to make the company seem more profitable. The Enron-style bookkeeping came to light in 2005. The company announced that its financial reports could not be trusted and that the SEC was investigating.
Heeter says the company's board, which he joined in 2000 or 2001 (he's not sure), deserves the credit for the misdeeds coming to light. "We rooted out the fraud," he says. "We found it ourselves." A newspaper report from 2005 suggests that officials at stock exchanges in New York and Philadelphia sounded early alarms, after noticing curiously timed trades.
In any event, Heeter and the pastamaker's other directors got things under control. They brought in forensic accountants and turnaround experts. Misbehaving executives were shown the door and, later, prosecuted by the U.S. attorney. (Timothy Webster, the former CEO, and Warren Schmidgall, the ex-chief financial officer, pleaded guilty to wire fraud and received prison sentences of 18 and 13 months, respectively.) American Italian Pasta paid a $7.5 million penalty to the SEC and settled lawsuits brought by shareholders.
Heeter is proud of the steps, such as the hiring of current chief executive Jack Kelly, the board took to set things right. Heeter notes that the company's stock is selling for nearly $40 a share. He calls American Italian Pasta "a remarkable turnaround story."
Heeter will expand on the story at a risk-management seminar in Overland Park on April 21, the same week he takes charge at the chamber.
