At 29, Anthony Hodel was makin' cream: the sprawling $775,000 home in Brecksville, a pen of exotic cars, à la Cribs, and a beautiful wife and daughter. The former car salesman was sitting atop the throne of one of Cleveland's fastest-growing companies, Platinum Warranty Corporation, which sold car warranties that kick in after the factory warranty runs out.
At a time when most Cleveland businesses were drowning in red ink, Hodel was flying high above the water. He was audacious and cocky, but so good, it didn't matter. In addition to selling through dealers, he opened shop on the web, selling warranties for $1,000 a pop to anyone with a car and a mouse. Sales exploded. In 2003, Hodel told Crain's Cleveland Business that his company was pulling in $27 million, almost one million for every candle on his birthday cake.
It seemed as if Hodel could do no wrong. When he told Inside Business that mistakes are an important part of learning, he was extolled by the Cleveland magazine as a fresh thinker. The photograph showed a nattily attired Hodel lounging behind his desk, a fat stogie sizzling between his fingers, a gold chain dangling from his wrist, his brown hair gelled into crisp waves.
Like the precious metal in his company's name, he was better than gold, untarnishable. Too bad his warranties weren't worth the paper they were printed on.
Kevin Wiley of Perrysburg purchased a Platinum warranty online to cover his Infiniti Q45. Last August, the car died in Wiley's driveway. He had it towed to a shop, where a broken mass air-flow sensor was discovered. Platinum approved $258.75 of the repair cost, but Wiley hasn't seen a dime of his reimbursement.
He called customer service. "I said, Do you have a manager I can talk to?' They would say, I am the manager' -- straight out of a movie."
Wiley called back a dozen times over the next three months, but each time he was fed the same line: The company's accounting department was backed up. He asked when it would be caught up. They didn't know.
"I finally said, forget it, I'm done," says Wiley. "I would accept nothing less from them than a full refund of the policy, because it's pointless."
At age 17, Hodel was built like a car.
The short, thickset jock played football at Brunswick High. He was tough, on and off the field. In 1993, he was convicted for assaulting his ex-girlfriend, Julie Tyndall. During an argument, Hodel pushed her to the ground and slapped her in the face, according to a Tallmadge police report.
Later that night, he arrived at Tyndall's mother's house and demanded to see Julie. When her mother refused, Hodel pounded so hard on the door that the molding came loose.
He was sentenced to community service. But his obsession with Tyndall continued. According to another police report, he came looking for her at Tallmadge High and had to be escorted off the property. Hodel, then a student at Baldwin-Wallace, was charged with menacing by stalking, but was found not guilty at trial. (Tyndall refused to comment for this story, saying that she's still scared of her high school boyfriend.)
Hodel left college after only a year. He told Scene that he went to play football for the University of Nebraska, but the school has no record of his ever attending. Then, he claims, he dropped out to play pro ball in Finland, but instead of glory, he got a reality check. "I got a baptism that the guys are too big, too fast," says Hodel. The American Football Association of Finland also has no record of him ever playing.
So he came home to do what he did best: sell. He sold cars at Ganley Pontiac Superstore and then at LCA Auto, a buy-here/pay-here on the East Side. The 22-year-old was good, full of energy and pizzazz, says LCA owner Randy Cohen. But Hodel apparently couldn't resist easy money. Cohen says he caught him stealing $800 from the secretary's drawer while she was away at lunch. Rather than call the police, Cohen let him walk out with the $800; he owed him more than that in commissions anyway.
"I said, 'You're fired . . . Get outta here,'" recounts Cohen.
In 1998, Hodel walked into Transportation Alley, a small dealership in Collinwood, and asked for a job. Owner John Spofford made him the finance manager.
He was amazed by the 24-year-old. "Sharpest fucking kid I ever met in my life," Spofford says. "Anthony Hodel was the best of the best. He could close anybody. He had no fear . . . And he made us big money."
Hodel made big money for himself too. Spofford says Hodel was raking in $10,000 a month in commissions.
But running a shop in a tough neighborhood brought new pressures. Hodel says that Spofford kept guns around his office and often refused to pay him. According to court documents, Spofford operated on both sides of the law.
In 1993, he was charged with odometer tampering, but the case was dismissed. Four years later, Spofford skated on felonious assault. In 2001, he pleaded guilty to attempted tampering with records, escaping more serious charges of grand theft and receiving stolen property.
"That's all bullshit. Shit, I should have been up on murder charges for half them assholes down there," he says of his customers. "When you're doin' business down there, you're doin' hardcore business, man, and you got one of two choices: You either straighten somebody out, or fists are gonna fly, bullets are gonna fly, somethin's gonna happen."
It seems that Hodel too was playing by the rules of the jungle. Spofford says he caught Hodel stealing two checks -- a total of almost $13,000 -- from finance companies, as well as pocketing almost $8,000 from the sale of a used BMW on consignment from another dealer, then writing a bad check to cover the cost. Hodel was charged with passing bad checks, theft, and forgery, according to court records. But Spofford agreed to drop the charges if Hodel paid back the money, which he did, says Spofford.
Still, Hodel denies the charges and blames his ex-boss for "muddying" his record.
Spofford speaks of Hodel as if he were Obi-Wan, lamenting Anakin's turn to the dark side. "Without a doubt, the dude is, by far, one of the finest scammers on the planet. There's no doubt about it," he says. "If he's a straight guy in your business, you got gold. But if he's not straight, you got the biggest poison on the planet."
Even after being swindled, Spofford didn't want to let Hodel go. But Hodel saw bigger dollar signs on the horizon -- in the extended-warranty business. In 1998, he started Platinum Warranty Corporation.
Hodel struggled at first. His company consisted of nothing more than a computer in the apartment he shared with his now-estranged wife, Kimberly, claims friend Rich Alexis. But that was about to change. When the money started rolling in, Hodel leased an office in Middleburg Heights, filling it with salesmen and claims handlers.
By 2002, Platinum was pulling in $14.4 million in sales, Hodel told Crain's. A year later: $27 million. It also doubled in size, from 17 employees in 2002 to 37 in 2003. That year it topped the Weatherhead 100, Case Western Reserve's list of the fastest-growing companies in Northeast Ohio. The accounting firm Ernst & Young named Hodel a finalist for its Entrepreneur of the Year award.
But it just wasn't Hodel's style to let all that money gather dust. He decided to give Platinum a face-lift. The company's offices at Interstate Plaza fit neither its growing staff nor its president's sizable self-image.
For Hodel, there was only one place to go: up, literally -- to the 29th floor of the BP Tower. The skyscraper presented a better image for the company, he told Crain's.
And like any self-respecting chief executive, Hodel needed a company car -- or four of them: an H2 and a Mercedes for himself, and a Corvette and an Escalade for his wife, all leased by Platinum.
Inside Business gave him a full-page spread, in which the boss attempted to share his wisdom.
"We want mistakes," he said. "Mistakes means you're trying new ideas . . . If you listen too often to everyone else's input, you won't take the risks and the steps that will set your firm apart from the competition."
Hodel relished the spotlight. On the company's website, he bragged about attending a fund-raising dinner with President Bush in Washington in 2002. "That night I met a man who looks at life through our eyes," he wrote. "It was nice to hear our president speak from the heart and not a script."
Meanwhile, Hodel was also getting noticed by less fawning organizations -- namely the Better Business Bureau. The agency was being flooded with angry complaints from Platinum's customers.
Many said the company had failed to reimburse them for repair claims that Platinum approved, says the bureau's Sandy Prebil. And Platinum's website allowed customers to view their contract only after buying the warranty. If they decided to cancel after reading it, Platinum charged them $50.
In almost every complaint, Platinum refused to settle with the customers, forcing the BBB to arbitrate, Prebil says. The company's favorite defense was that the warranty holder had caused the damage by modifying or not properly maintaining the car. But when the company started losing its cases, Hodel yanked his membership.
"He wanted to be a member of the bureau because he wanted our credibility, but then once we started to get complaints and we started to hold him accountable, then he wasn't too happy," says Prebil. "We weren't asking him to do anything but be fair to his customers."
Prebil says it was the last time she heard from Hodel, but the complaints kept pouring in -- hundreds of them. The bureau stopped counting at 423 last year, and started forwarding complaints to Attorney General Jim Petro, who had just filed a $750,000 deceptive-practices action against the company.
To quell the rising tide, Platinum sent a letter to each claimant in September 2004, announcing that it was restructuring its operations and that everyone owed money would eventually be paid -- the question was when. It carried the suspiciously vague tone of a guy who's chronically late on his rent, though couched in business verse. "We will notice you at an appropriate time to advise you as to when you may expect payment," it read.
Jerome Howard thought he had it sweet when the salesman at National Car Mart in Brook Park pitched him on a Platinum warranty. For $1,099, he could cover his 1994 Sedan Deville for three years or 36,000 miles, bumper to bumper. "It covered everything," says Howard. "It was too good to be true."
At first, says Howard, Platinum seemed legit. When he needed a brake line and wheel bearing replaced, Platinum paid, no problem. But when he needed new brake lines again a year later, the company's responsiveness had vanished.
Tom Tabernik, manager of Speedy Auto Service in South Euclid, says that instead of paying by credit card the same day -- standard procedure -- Platinum insisted on sending his shop a check to cover the repair. "It was very odd," he says.
Still, Tabernik did the repair, then waited . . . and waited . . . for his check.
When he called Platinum, a customer-service manager told Howard they wouldn't pay the claim, because Tabernik had overcharged them -- an odd assertion, since Platinum had approved the work.
Platinum advised Howard to take his car to a dealership from then on to avoid any further problems. So when the water pump broke last October, Howard went to DeLorean Cadillac in Lakewood.
DeLorean, tired of hassling with warranty companies, made Howard pay up front and get reimbursed by Platinum. A customer-service representative at Platinum assured him the check would arrive within 20 to 30 working days.
A month later, and still no check, Howard's starter broke. He went back to DeLorean to get it replaced. Again, Platinum promised to send a check.
By late December, Howard was becoming impatient. Platinum was now telling him his money would arrive in January. When that didn't happen, he demanded to speak to somebody face-to-face.
"They said, 'No, and if you come down here, the building is a secure building, and we will not let you in,'" says Howard. "I knew they had hosed me."
The onetime shooting star was starting to fizzle out. But Hodel wasn't acting that way. Platinum kept selling warranties as usual, and buyers were none the wiser.
Last November, the company was showcased in a five-minute segment of an MSNBC infomercial called "The Winner's Circle," hosted by former football great Terry Bradshaw.
"The reason Platinum Warranty Corporation is so successful is that we walk in our customer's shoes," a smiling, confident Hodel told the camera.
"At Platinum Warranty, everyone wins," parroted Bradshaw. "A high value at a low cost, a Platinum Warranty product provides a Platinum solution."
But Bradshaw's glowing endorsement couldn't help the faltering company. Last May, with the trial for the attorney general's suit only a week away, Platinum filed for Chapter 11 bankruptcy protection. The number of customer complaints has since risen to more than 825.
It's an all-too-familiar story to David Stivers, an auto-industry consultant and warranty expert. He says that he's seen many extended-warranty companies suddenly pack up and shut down, leaving customers holding the bag.
Many start as one- or two-man operations run from P.O. boxes. Once the premiums start coming in, cash stacks up like drug money.
"They're seeing money roll in at levels they never thought they'd achieve," says Stivers.
Auto dealers love the warranties because, unlike manufacturers' contracts, theirs carry no suggested retail price, so dealers can hike the price as they please. A $1,000 policy is typically marked up between 40 and 70 percent.
Even better, the companies are about as tightly regulated as the kid mowing your lawn. They operate much like insurance companies, but with no rules. In many states, including Ohio, warranty companies don't even need to be bonded or carry contract insurance. The only recourse for consumers is to sue. But the amounts in dispute are often so small, they'd be consumed by lawyer bills. And even when customers do win, collecting is nearly impossible.
"You wanna become a warranty company? No problem," says Dayton consumer lawyer Ron Burdge. "Hang up a sign and start sellin' 'em."
But it's usually a temporary gig, says Stivers. Sooner or later, the claims start mounting, and the gold rush of premiums levels off. Like wine, the company reaches a peak of profitability, then turns to vinegar. If the owners are smart, they'll finish it up while it's in its prime.
"The decision to collapse a warranty company is often not just because the claims overwhelm them. It's because the cash reserves are optimum that they're holding," says Stivers. "And by collapsing at that point, they'll end up with much more money than they would if they continued to work the business for a few years."
"This is one of the last few great scams going, in terms of ripping off consumers in a way that is pretty much foolproof and pretty much protected," says Burdge.
Lessie Smallwood sits on a quilted daybed in her cramped, hot apartment in downtown Lorain. She sifts through a mound of papers -- receipts, bills, letters -- she's collected since she sent a claim to Platinum two years ago for a broken air-conditioner compressor on her '96 GMC Jimmy. While her warranty contract specifically covers the part, Platinum hasn't paid a dime.
Smallwood paid $1,000 for the two-year, 24,000-mile warranty. Steve Cseke of Auto Depot in Elyria sold her on it, but says he's long since stopped selling Platinum because of the company's bad reputation. Asked what he thinks of Platinum, he responds, "The junkiest warranty out there?"
Two years ago, when her air conditioner broke, Smallwood took it to three different shops to get it fixed, but none would honor Platinum's promises. "They wouldn't do it, 'cause they knew it was Platinum," she says.
She finally took it to a Procare shop in Toledo, which Platinum recommended. While a mechanic worked on her car, Procare faxed the $841.54 invoice to Platinum, asking for payment by credit card. When the company didn't respond, the shop called, but got stuck on hold. Procare asked Smallwood to call, but she couldn't get through either.
"I got so frustrated down there, I called to speak to the manager," says Smallwood. "They said I couldn't."
As the shop was getting ready to close, Procare offered to cut her a deal. She paid $347.99 out of pocket; Procare ate the rest.
Smallwood says she called the company several times to ask where her money was, but got nowhere. A customer-service manager was no help, she says. "She was playin' me. 'Oh, I can't tell you right now. I gotta talk to such-and-such a person.' They kept giving me more excuses every time I called."
As Platinum wades through the drawn-out reorganization process, sharks circle the wounded company. Standing in the bread line with the attorney general are more than a dozen plaintiffs who've won judgments against Platinum around the country, including Cristy Williams, to whom a judge in Georgia awarded $126,000 in a breach-of-contract and deceptive-practices suit. She bought a Platinum warranty from RoadLoans, a Ford-owned, web-based lender, and was never paid for a claim. Platinum wasn't even authorized to do business in Georgia.
At the bottom of the ladder are hundreds of little guys -- mostly Platinum's customers -- waiting for $1,000 here, $100 there. According to the bankruptcy filing, Platinum is on the hook for more than $4 million.
Suddenly, Hodel isn't so boastful about revenues. It appears that he was rounding up when he told Crain's his company made $27 million in 2003. In the bankruptcy filing, he claims it was more like $3.8 million.
It's unclear how much money the company has. One balance sheet lists assets of less than $1 million -- another says almost $2 million. Even Hodel doesn't appear to know how much his company is worth. He has asked for more time to reorganize, claiming that former employees deleted critical financial records from company computers. Monthly operating reports have all come in late and incomplete. The latest one, due September 20, hasn't even been filed yet. And bank records subpoenaed by the court have yet to come in.
But mysterious expenses remain. For at least a year, Platinum paid $4,615 a week for "management" services to NSIC Holdings, LLC, in which Hodel was a 50 percent partner, according to bankruptcy documents. Just before declaring Chapter 11, he transferred his shares to his girlfriend, Tawny Barber. To make things even murkier, Platinum and NSIC shared the same office in the BP Tower. And NSIC owns the house in Stow that Hodel and his girlfriend share.
There's a suspicion that NSIC may have been used to bleed cash from the dying warranty business. Just a month before filing for bankruptcy, Hodel started a used-car dealership in Cuyahoga Falls, Riverfront Automotive, a trade name of NSIC Holdings.
Tax returns show that Hodel borrowed $600,000 from Platinum over the life of the company, none of which he has paid back.
Additional money seems to have just disappeared. Hodel says he cut a $196,000 check to Claymore Asset Management Group, Ltd., based in the West Indies, to create a reinsurance fund for Platinum called NSIC Insurance Company. Instead, Hodel claims in an affidavit, the company ignored the agreement and stole the money.
John Phillips, one of Claymore's directors, admits that he met with Hodel several years ago to talk about starting the company, but says he never even finished the application process. "I never heard anything about it until I got a call from the attorney general's office," says Phillips.
Hodel should have known better than to mess with the feds. The U.S. trustee who oversees the proceedings has filed a motion to either oust Hodel and appoint a trustee to run the company, or to liquidate Platinum, hoping to give what little is left to creditors. Apparently, Hodel liked the idea. On September 30, he packed up the office and left, without bothering to inform the court.
It's approaching dusk at a Tremont park as the North Coast Outlaws, Cleveland's minor-league football team, get ready for practice. Standing in a circle of giants is Hodel, tiny by comparison, but commanding the conversation. These are his former teammates; he's taking the year off to focus on the business. And he's clearly not here to toss the ball around for old times' sake. A reporter has been snooping around, knocking on doors and making calls. At first, it's not clear who's found whom.
Hodel is dressed casually, but to the nines, in a blue, pink, and white button-down with his initials sewn in the cuff. A beard, short and neat, makes him look years older than the kid who sat holding the cigar, but no less self-assured.
When the reporter introduces himself, Hodel immediately stonewalls, referring questions to his lawyer. Then he uncrosses his arms and relaxes his shoulders. A guy's-guy smirk replaces his poker face, as if he's laying a royal flush on the table.
"I know you got a job to do," he says, stepping closer, exuding fumes of fine cologne. He agrees to talk, but only about the business -- nothing personal.
He takes the reporter aside, and the interview begins. His piercing baby blues never wander, and soon it becomes clear who's pulling the strings. Hodel has apparently done a background check on the reporter. "So, you went to O.U.," he says. "I've read some of your stories . . ."
He says these things not to make chitchat, but to show that he's in control.
He answers questions with the confidence of a salesman, the cunning of a lawyer, and the cool of the guy pumping the keg at a frat party. "Now, that's gross," he chuckles, pointing to a player urinating behind a car. "Hey, let me see that," he says to a teammate holding a football. "I wanna see if I can still catch."
Former coach Paul Offil says that Hodel, a fullback, played hard and could clear a hole "like a can opener." But he's shrunk quite a bit since last season, probably because he's no longer on the juice. Last April, Hodel pleaded guilty to possession of trenbolone, a potent anabolic steroid. "I'm no help to these guys anymore," he says, grinning.
Hodel won't talk specifics, but says that Platinum was behind the industry in technology. As a result, the company paid a lot of claims it shouldn't have -- double the industry average, according to his lawyer. But the problems have been remedied, says Hodel, and customers will be paid.
"I can't blame people for being upset. Personally, I would be upset also," he says. "When this is over, we'll be able to look back and say it all worked out."
Hodel sits on the witness stand in courtroom 1A. The central issue of this hearing: whether a trustee could still make something of Platinum, or whether it's time to hit the final nail in the coffin. Hodel and his lawyer, Joan Kodish, are seeking the latter.
Kodish has just dropped a bomb on the court: Platinum has no assets, no reserves, nothing, she says, stuttering and shaking her head. "This corporation is out of money."
Hodel's bulky frame and thick neck fill up his satin-smooth black suit. He answers questions with the calm and confidence of a pro athlete after a win.
But there are more bombshells to come.
Under cross-examination, Hodel tells Jim Ehrman, a lawyer for unsecured creditors, that after he fired his bookkeeper earlier this year, he found a folder filled with checks totaling $295,000; they were cut to pay claims but never mailed out.
It's a common way to cook the books -- pay down the company's liabilities on paper, without ever having the checks cashed. Hodel, of course, has no idea how it happened.
"I may be a bad businessman . . . but I'm not a crook," he tells a visibly outraged Ehrman, staring him down as if Ehrman is the one being interrogated. "I've made some bad decisions, like you have, I'm sure, in your past . . . If you wanna challenge me and my integrity, you'll see I made decisions to the best of my ability."
Then he lays down a challenge. "You're welcome to look for it," Hodel says of his corporation's money. "I have nothing, Mr. Ehrman, nothing but debt."
During a recess, the two sides agree to liquidate the company. "We're going into Chapter 7?" Hodel asks the lawyers brightly.
Then he turns to a fuming Ehrman. "You and I just won't be going to dinner anytime after this," he smirks.
"No we won't," Ehrman replies, his eyes grimly fixed on the floor.
As Hodel descends the front steps of the courthouse, a reporter attempts to take a picture. Hodel snatches the camera bag from his hands and walks away. "You want it?" he says. "Fuckin' sue me for it."