Investors slam Beeline project

Monorail may face rough ride in South Florida courtroom.

Jill Krueger   Staff Writer

ORLANDO -- The biggest barrier between Gene Garfield and his proposed Beeline Monorail may be a Miami court case.

Eighteen investors in the ambitious project are suing Garfield individually, along with two companies he controls, Beeline Monorail System Inc. and Irvington Corp.

At issue is whether Garfield misled investors.

Garfield founded Beeline Monorail to design, build and run a 54-mile monorail system along the Beeline Expressway. The rail system would link Orlando and Port Canaveral. Another Garfield-controlled company, Irvington Corp., holds the development rights to the project.

The project drew fans: Investors from six states who are suing bought stock, providing a $2 million cash infusion.

Now, though, some of those investors contend they were supplied with incomplete and misleading information -- especially Beeline's touted relationships with such name project partners as Transrapid International, Enron Corp. and Lockheed Martin.

According to the suit, a company representative told investors Transrapid agreed to provide a monorail system, Enron concurred to fully finance the Beeline Monorail, and Lockheed Martin Missiles & Fire Control planned to hold an equity stake in the project.

A money misunderstanding

Garfield says, and the companies concur, that they never sought a financing role. Lockheed Martin, for instance, wants to work as a subcontractor to help integrate the electronic operating systems, "should the project get funded," says public affairs manager Nettie Johnson.

And Houston-based Enron Corp. wants to supply energy for the project.

A spokeswoman for Enron makes it very clear, however, that Enron is not a partner. In fact, Enron asked Beeline Monorail to remove its name from the project Web site so as not to cause any confusion regarding its relationship to Beeline Monorail.

Other concerns

There are other concerns. The suit alleges a Beeline Monorail representative told investors the monorail would cost $12.5 million per mile to build, when final costs could exceed $35 million per mile.

When Beeline Rail changed its name to Beeline Monorail and authorized additional stock, two investors claim the move diluted the value of their shares of stock.

The suit also takes issue with how three private placements -- a private sale of company stock -- were handled.

Investors argue some of the financial paperwork in the placements were incomplete. They further allege Garfield and the two companies supplied inaccurate financial information in the three private placement memorandums.

Finally, investors express anger that they weren't made aware of Garfield's involvement in the Florida Fun Train, an ambitious entertainment project which flopped.

Not so fast

In Orlando, Garfield takes sharp issue with criticism of his role in the now-defunct Fun Train.

The businessman acknowledges he did raise money for the train, negotiating and executing contracts with the CSX Corp. and Florida East Coast Railway. But, he says, after securing those two contracts, he left. "I had no involvement in the organization, development or staffing," he says. As for allegations that his involvement caught investors off guard, he adds, "Some were shareholders in Fun Train and they were aware of my involvement."

Then there is the issue of who said what. Allegations in the suit refer repeatedly to statements Fort Lauderdale stockbroker Stephen Scherer allegedly made to investors as a representative of Beeline Monorail.

But Garfield says the broker -- who sold the investments to all 18 of the plaintiffs -- was not authorized to make any statements beyond those given in Beeline's private placement memorandums. And Beeline Monorail no longer does business with Scherer, he says.

"There were other original shareholders who invested who I knew, who were not clients of the broker, who have not joined in the lawsuit and are very happy with the position of the company's development," Garfield adds.

(Scherer, who is not an actual party in the suit, has an unpublished telephone number and could not be reached for comment.)

As to construction costs, Garfield says Beeline Monorail estimated construction costs. Actual costs will vary, depending on the end product.

Summing up, says Garfield, "The allegations are without merit and untrue. We acted properly."

Responds Bruce D. Fischman, the Miami attorney representing the investors, "We stand by the allegations that were filed in the complaint."