Among the improvements Foley has made at Big Mountain include $5.2 million for two new chair lifts. “These are gigantic investments,” says Foley. “We’re not going to get any return on this, other than making this a more attractive place to ski.”
It’s a busy Saturday on Big Mountain. A crowd of people stand at the bottom of Chair 1 having spent the last 10 minutes shuffling through one of four lines taking them to the liftees, employees who check lift tickets with hand-held scanners before funneling the crowd into another line leading to the lift.
As the liftees work to keep things moving, Fred Jones, CEO of Winter Sports Inc. (WSI), which operates the ski resort, ducks under the ropes cordoning off the lift lines, followed by a white-haired man in sunglasses and a blue and orange Big Mountain jacket. The two men approach a 20-something liftee named Sara.
“This is Bill,” says Jones, gesturing to his partner next to him, “and he’s going to be a trainee today.”
Bill isn’t a prospective employee, but nothing else is explained, so Sara hands him her scanner and begins teaching him the basics of the job.
Bill’s full name is William P. Foley II. This year, he became the majority shareholder in WSI, controlling 60 percent of the company’s stock. Foley is also the founder, chairman and CEO of Jacksonville, Fla.-based Fidelity National Financial Inc., a Fortune 500 company encompassing the largest title insurance company in the world, among several other large businesses. Last year, Fidelity earned $12.87 billion in revenue.
Foley’s ownership of WSI is just one of his Montana investments. In 2004, he purchased an 80,000-acre piece of property near Deer Lodge through which runs both Rock Creek and Willow Creek. He says he’ll personally screen applicants for a proposed development on the land known as the Rock Creek Cattle Co. This month he also formed Glacier Restaurant Group LLC, which includes two Whitefish restaurants he already owned—The Craggy Range and The Corner House Grille—as well as popular Whitefish restaurant Mambo Italiano and Montana-based restaurant chain MacKenzie River Pizza Co. Doug McNicoll, owner of Mambo, and Steve Shuel, owner of MacKenzie, will retain minority stakes in the company, but Foley is the majority owner of the new company’s shares. The plan, he says, is to turn these restaurants into chains in middle-tier resort towns, like Bend, Ore., and Coeur d’Alene and Sand Point, Idaho.
But of all Foley’s Montana investments, Big Mountain is probably the most important, especially to residents of Whitefish. For one, it represents an important piece of the valley’s economy. WSI employs 550 workers at peak season (full disclosure: my wife is one of them), and earned approximately $13 million in revenues last year.
It also represents community pride. Whitefish residents got WSI off the ground in 1947 by purchasing shares in the company to keep it afloat. Many of those shares remained in the hands of locals, including the children and grandchildren of the original shareholders, until December 2006, when a reverse stock split forced nearly all of them out and handed control of the company to Foley.
The switch in power has locals openly concerned for Big Mountain’s future. Former shareholders, along with residents who use the mountain, worry Foley intends to turn the resort into another Aspen, Colo.—a world-famous ski town, which has become so popular it’s unintentionally priced out many locals, becoming an example of what many resort towns want to avoid. Others wonder if Foley’s aiming to make Big Mountain another Yellowstone Club, a private membership community near Big Sky with a $250,000 registration fee in addition to a requirement of buying or building a multi-million dollar home in a Club subdivision.
Perhaps the greatest fear, however, is that Foley has gotten into WSI only as a way to sell its valuable land assets.
Foley and his intentions are now the subject of mystery and rumor to residents of Whitefish, partly because of his business reputation and the fact that few know much about him or his vision of the resort’s future. And yet here he is scanning lift tickets on a Saturday morning, at least acting the part as a man of the people.
“I thought it’d be fun,” he says.
Making a mogul
A few days earlier Foley is working from his office just north of downtown Whitefish. It’s an upscale building featuring exposed lumber and rock. Inside, Foley and his employees are dressed casually—Foley eschews corporate dress codes—and everyone refers to the boss as “Bill.”
This particular location—one of three around the country Foley regularly works from—is home to Fidelity National Timber Resources, a subsidiary of Fidelity National Financial Inc. In May 2006, in one of the company’s more prominent and controversial moves, Fidelity purchased 70 percent of Cascade Timberlands LLC, which owns 300,000 acres of timberland in Oregon. Those shares are now in the possession of Fidelity National Timber Resources. What happened with Cascade is illustrative of what some think may happen with Big Mountain.
According to Foley, the massive chunk of Oregon land is in the process of being rezoned as “resort overlay,” which allows for condos and golf courses to replace the former timberlands. He says the Oregon land was undervalued at just $400 per acre.
“I like to find something that’s sort of down and out, where you can see the potential, put a little into it, and turn it around,” Foley says.
This seems to be his talent.
Foley, 67, was born in Austin, Texas, but grew up in Amarillo. He says that from a young age, he was interested in business.
“I was always trying to sell something—comic books, lemonade, newspapers…” he says. “I think it’s a little bit in the genes.”
His mother, he notes, started and sold four businesses in her lifetime. “That was something she gave to me,” he says.
Foley graduated from the United States Military Academy at West Point. It wasn’t his first choice—his father pushed him to apply—and, at the time, he didn’t like the rigor or discipline of the training. But he credits the Academy with shaping who he is today.
“It taught me how to make decisions,” he says, “and not make excuses—to do the job.”
After three years at West Point, Foley went on to receive his MBA from Seattle University in 1970, and in 1974 graduated from the University of Washington School of Law. He went on to help establish a law firm in 1976, where he specialized in real estate law.
In 1984, he spied the opportunity that would make him the mogul he is today: a small, then-Phoenix-based business named Fidelity National Title Insurance Company.
“I could see I had a talent for putting deals together,” he says, and he recognized Fidelity as a better chance to put his business skills to use. Foley organized a buyout of Fidelity and became its CEO in 1984 and immediately began working out some of the kinks in the business. He eliminated upper-management jobs in a company he viewed as “top heavy” and improved the company’s relationship with its customers.
In fact, even today he still likes to do work at the most basic levels, including direct interaction with customers. It’s part of the reason he spent a Saturday scanning lift tickets at Big Mountain and, he says, “the only way to really know what’s going on.”
Under Foley’s leadership, Fidelity also began snapping up small title companies around the country. By 2000, it was the fourth-largest title insurance company in the United States. Later that year Foley engineered the acquisition of Chicago Title, the second-largest title insurance company in the country. Fidelity then became number one.
It was also in 2000 when Foley first heard of Whitefish while on the phone with a business partner, Burt Sugarman.
“I was complaining about Aspen,” Foley says. He’d owned a home in Aspen for a few years, and was vacationing there when he confessed to Sugarman that he didn’t like it anymore. Foley says he’d gotten sick of Aspen’s “glitziness.”
“You need to come to Whitefish,” Sugarman advised him.
Sugarman told him about the local golf courses, the lake and proximity to Glacier National Park. Foley chartered a plane and flew up the next morning.
Upon seeing Whitefish, he took in the sights and remembers thinking, “This is unbelievable. You’ve got a lake, a golf course, a ski resort, it’s low key… You’ve got to be kidding me.”
He and Sugarman went on a tour of lakefront homes for sale and Foley found one he liked, making an offer that day. He owned the house 30 days later. Meanwhile, as the deal for his first Whitefish home was going through, he sold his Aspen property and bought another nine acres at the north end of the Whitefish Lake. A few years later, he also purchased Sugarman’s 130-acre estate, also just north of Whitefish Lake. Sugarman, Foley says, moved to the Yellowstone Club.
Foley now spends part of his year in Whitefish. He works mostly out of Jacksonville, Fla., where Fidelity is based, and also travels to Santa Barbara, Calif., where he owns two wineries.
He calls these three locations his “triangle,” and now that he’s more involved with businesses in Whitefish he plans to alter the balance between its three points so that most of his time is spent in Western Montana.
From ski town to company town
Ed Schenck and George Prentice founded WSI in 1947. Early on, the two men ran out of money trying to start the resort, forcing them to turn to the citizens of Whitefish to help save their dream by investing in WSI stock.
Whitefish responded, purchasing enough stock to get Big Mountain off the ground. A Saturday Evening Post story from 1950 quotes Schenck describing how he and Prentice would respond to people who asked how they managed to start the resort: “‘It’s easy,’ we tell them… ‘All you have to do is find a town like Whitefish.’”
In the 1980s, Budget Finance, a Kalispell company run by Richard A. Dasen, began buying up WSI shares, eventually owning about a quarter of the corporation. But Dasen infamously ran into problems in February 2004, when he was arrested and eventually jailed for prostitution-related crimes.
In November 2004, as legal and financial problems mounted for Dasen, he sold Budget’s shares in WSI to Foley.
Several months before Foley bought Dasen’s shares, WSI had done a 1-150 reverse stock split, meaning a shareholder with 150 shares before the split would have 1 after, a shareholder with 1,500 would have 10, etc. WSI bought out anyone with fewer than 150 shares. This reduced the number of shareholders from 500 to 200, allowing WSI to save money on reporting costs with the Federal Trade Commission.
In May 2005, the company offered $12.5 million in new stock to current shareholders. A few of the most invested shareholders, including Foley, purchased it to help raise money for debt-ridden WSI. With that, Foley raised his stake in the company to 44 percent.
In November 2006, the WSI board, largely controlled by Foley because of his preponderance of shares, approved another reverse split, this time 1-15.
The purpose of this split, Foley says, was to allow WSI to become an “S” corporation, which cannot have more than 100 shareholders. As an S corporation, all profits and losses accrued by WSI are passed on to the shareholders, who are also responsible for the federal taxes that would have gone to the business. Foley says WSI is almost guaranteed to lose money over the next five years, and by creating an S corporation it helps shareholders at least write off the losses on their personal taxes.
The split reduced the number of shareholders to just 37, with Foley owning 60 percent of the company.
A benevolent dictator
Karl Schenck is the son of WSI co-founder Ed Schenck, and owned 14 shares before the most recent stock split—one less than he needed to stay with the company. Being forced out of the company, he says, “Made me mad. I practically grew up [on Big Mountain]. It’s like my brother or something, and it’s like they cut it out of my life.”
The Independent spoke with four former WSI shareholders for this story, but only Ed Schenck agreed to go on the record. The rest asked to speak off the record for fear of compromising their ongoing involvement with Big Mountain in capacities beyond owning stock.
Schenck biggest problem with the WSI board is it did not give notice to shareholders of the most recent split. With some notice, Schenck says, he could have bought one share from his brother or mother and maintained a stake in the company. “They could have given us a chance,” he says.
But WSI CEO Fred Jones says when the 2004 stock split took place, one shareholder used the information to distribute his stock in a way that cost WSI an extra $1 million to buy him out.
Still, Schenck says, “I’m sure there was lots of ways they could have kept us in.”
One way was for WSI to delay filing paperwork for the split at the request of local shareholders who hoped to consolidate their shares under the name of a single business. That move, Schenck says, would still allow WSI to become an S corporation. WSI agreed to the delay.
Schenck and other former shareholders say a consultant helped them find a way to create a single shareholding entity for locals, but according to Jones, the proposal “wasn’t going to work.” On January 5, the WSI board decided to go ahead and file the paperwork.
Ultimately, Schenck says, “I think it was probably a good business decision for the people that own all the stock,” but adds he doesn’t think it was in Whitefish’s best interests.
However Schenck and others feel about Foley’s stock purchase, nearly everyone involved with the resort admits it certainly needed Foley’s infusion of cash.
Jones says before Foley got involved, WSI was heavily in debt, losing money every year and using cash from real estate sales just to stay afloat. As a result, no money was being spent to upgrade the mountain’s infrastructure, making the mountain less attractive to skiers.
“We were losing ground,” Jones says.
Foley says that when he invested in the mountain, “I didn’t really look at the financials.” He then uses the same line from when he was scanning tickets: “I just thought it’d be fun.”
It wasn’t until after Foley bought his shares that he learned of WSI’s problems.
“The infrastructure was falling apart, there was no money to buy new groomers,” he says. “It was completely dysfunctional. Literally, almost every chair lift was falling apart.”
The problem, Foley surmises, is that Big Mountain, “was run by committee,” before he came in.
“Democracy isn’t always the best thing for a corporation,” he says. “Sometimes you’re better off with a benevolent dictator.”
A little cash doesn’t hurt either. Foley, Jones says, made the largest investment in WSI’s private sale of shares in May 2005. And by the end of March, when the final installment from the stock sales is received, about $25 million will have been raised for the mountain.
Some of that money has already gone toward a new day lodge. In the past, services on the mountain such as lift ticket sales, rentals, the ski school and its base area cafeteria were divided between several buildings, all separated by steep roads and ski runs. At a cost of $11.5 million, the new day lodge combines all these services in one 35,000-square-foot building.
The biggest boon to skiers and snowboarders are two new chair lifts to be built this summer at a cost of $5.2 million. The lifts will replace Chair 2, a smaller chair with access to beginner and intermediate terrain, and Chair 1, Big Mountain’s chief lift.
In the coming years, there are also plans to build more lodging.
“It’s going to be terrific. These are gigantic investments,” Foley says. “We’re not going to get any return on this, other than making this a more attractive place to ski. I don’t know if I’ll make any money on the investment. I really doubt it.”
But former shareholders doubt Foley’s “just for fun” refrain, noting the value of 800 undeveloped acres on Big Mountain.
“People like that don’t just invest in things for fun,” one former shareholder says.
“In the long run,” Schenck says, in reference to the undeveloped land, “I think they’re going to sell the property.”
Schenck’s logic is thus: Foley acquires a majority of WSI’s shares, sets up the corporation so that profits accrue directly to the shareholders, and then limits the number of shareholders so there are less people to share the money with when the corporation’s most valuable asset, its land, is sold off.
Foley acknowledges that the 800 acres was part of the reason he saw WSI as a good investment, but denies that he’s planning to plunder the corporation.
“We only had one reason to do the reverse split,” he says, “to reduce the number of shareholders so that we could have a subchapter S corporation.”
Schenck and other former shareholders also say people come to them constantly with fears Big Mountain will be turned into the next Aspen or Yellowstone Club.
One shareholder, who works closely with the local tourism industry, noted a recent National Geographic-sponsored survey stating most U.S. tourists are interested in “geotourism,” which National Geographic defines as, “Tourism that sustains or enhances the geographical character of a place—its environment, heritage, aesthetics, culture, and the well-being of its residents.”
In that shareholder’s estimation, this means, “People are interested in traveling to real places. People don’t want fake. Fake is everywhere; authentic is hard to find.”
Fake, to this shareholder, equals Aspen and the Yellowstone Club; authentic equals Whitefish, with its working class residents and throwback traditions, like the penguins and yetis who populate its annual winter carnival.
“We’re on the cutting edge of what people want now,” the shareholder says. Changing over to a more Aspen-style resort, she believes, would have negative consequences. “That is just repugnant to people here.”
Foley responds to these fears saying: “I left Aspen. I couldn’t stand it. I wouldn’t let it happen here. That mountain is always going to be local and low key.”
And he responds to the idea that he might try to create a private resort like Yellowstone Club with a laugh.
“No chance,” he says. “That is glitzy.”
Ultimately, he says he wants Big Mountain to “try to do the big things well,” and get rid of the small things that people don’t use much. For instance, Foley questions a few aspects of the mountain’s operations, such as night skiing, the superpipe and the Thanksgiving Day opening. He wonders whether enough people really use night skiing to justify it, whether all the time and resources needed to annually build the superpipe (which couldn’t be opened until mid-February this year) are worth it, and whether Thanksgiving Day is too early.
Foley hasn’t made any decisions about these services yet, but he has turned an eye to the mountain’s operations, searching for inefficiencies.
Where the proof is
Foley says he’s here for the long haul. Explaining his attraction to Montana, he says, “People my age remember the way it was in the 1950s. As a kid you could go anywhere you wanted to go. You felt safe, you felt secure; it was a very simple life. Montana differs from nearly every other state because it’s still a simple life here.”
He appears to embrace the simple life while working as a liftee.
Not long after Sara has begun working with her “trainee,” she goes off to find a new battery for their handheld scanner, leaving Foley to manage the line himself.
Foley allows the first group of people to go out of turn, and they cut off another group. He tries to stop the first group and make them come back, but that only causes more confusion. Another liftee finally comes over and straightens the mess out, leaving Foley to only shake his head.
“My first responsibility and I screw it up,” he jokes.
Within a few minutes, he’s got things running more smoothly, chatting with the skiers and snowboarders and joking with the liftees, who have used his extra help as a chance to take breaks.
“Are you guys taking advantage of me?” he asks Sara, laughing.
If Foley is the proverbial wolf in sheep’s clothing, he’s good at faking it. He appears natural during this Saturday morning stunt, comfortable interacting with those who will be most affected by any changes at the resort. In fact, even his biggest critics are optimistic that he’s here to build a better community.
Says Schenck, “I have all the hope in the world that that’s what he wants to do.”