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Friday, 20 July 2012 03:43

Class Warfare Gone Wild: Billionaire Fights Millionaires in the Hamptons

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From his early days in the securities industry to his involvement with junk bonds, from serial bankruptcies to multiple violations of environmental standards, from polluting coal mines and steel mills to war profiteering, the Brooklyn, New York-born Ira Leon Rennert has apparently profited from a degenerative ethics disorder.

Now the billionaire whose lead smelters have caused irreparable harm to children; whose use of bankruptcy law evades environmental liabilities, whose RG Steel Sparrows Point mill will likely get away with not having to pay Baltimore the more than $5.4 million it owes the city for water and treated sewage, whose Humvee manufacturing company raked in millions of dollars from the wars in Iraq and Afghanistan, and, whose so-called support for Israel had him help fund restoration of an ancient tunnel system near Jerusalem's Wailing Wall, where the 1996 opening of a long-blocked route set off deadly riots, has incurred the wrath of a gaggle of millionaires in the Hamptons.

Class warfare has taken on a new and unique meaning in the Hamptons. As Mother Jones' Josh Harkinson pointed out in the July/August issue of the magazine, there's a doozy of a battle brewing in Long Island's toney Hamptons between the billionaire industrialist Rennert, 77 - whose net worth was $5.4 billion as of March 2012 according to Forbes magazine -- and a group of millionaire neighbors headed up by Frank Dalene, founder and CEO of a successful luxury homebuilding company.

At odds is Rennert's liberal use of a version of the Sikorsky S-92, "among the world's most powerful civilian helicopters," to transport him back and forth from Manhattan to the Hamptons where he resides in a 63-acre, 110,000-square-foot villa complex. It's those regular helicopter trips that are disturbing the peace of his neighbors, Harkinson reported.

According to Harkinson, "Last year, [Dalene] founded the Quiet Skies Coalition, an anti-helicopter group that has become one of the most potent political forces in the Hamptons. Its wealthy members ... launched what Dalene describes as a ‘knock-down, drag-out battle' against ‘ultra-wealthy' helicopter owners ... accusing them of shattering the island's tranquility, contributing to climate change, and poisoning the air with leaded fuel. ‘I am beginning to think Mr. Rennert is practicing class warfare,' Dalene wrote Rennert's Manhattan secretary in an email that likened the noise assaults to ‘throwing their garbage on the other side of the tracks for us poor folks to live with.'"

Rennert's home - the third-largest private home in the country - was finished in Sagaponack nine years ago. It is a "multibuilding complex [which] has 29 bedrooms, three swimming pools, a 164-seat theater, and a ‘playhouse' containing a basketball court, gym, and two-lane bowling alley." As Harkinson pointed out, while it hasn't lasted as long as the wars in Iraq or Afghanistan, the battle over Rennert's estate has been going on for years, as neighbors tried unsuccessfully to halt its construction.

Harkinson calls the Brooklyn-born Ira Leon Rennert "one of Wall Street's most renowned bad boys": "He was a self-employed stockbroker when the National Association of Securities Dealers yanked his certification in 1964-effectively blackballing him from trading-for repeatedly operating with insufficient capital. Rennert jumped into private equity, issuing millions in junk bonds to finance the purchase of dirty mining and industrial outfits. In 1995 and 1996, his Utah-based Magnesium Corporation was the nation's worst polluter."

According to Harkinson, "Rennert paid himself and his holding company, the Renco Group, hundreds of millions in management fees and dividends. But when commodity prices tanked in the late '90s, his companies began choking on debt. A Kentucky coal mine, an Ohio steel mill, and MagCorp went bust, and bondholders of the latter two sued him for fraud. (The Ohio complaint was withdrawn during bankruptcy proceedings; the MagCorp case is still pending.)

"By the early aughts Rennert had found another winner in AM General, maker of the Humvee. The company has spent more than $3.5 million on defense lobbying and made a killing off the wars in Iraq and Afghanistan. In 2004, after the novelty of the popular Hummer H2 civilian model began to fade, Rennert sold a majority stake to Ronald Perelman, the billionaire owner of Revlon," Harkinson reported.

"[N]othing Rennert has touched is as controversial as his lead smelters, Dickensian monuments to human misery. In 2001, tests revealed that more than half of the children living near the smelter owned by Renco's Doe Run Resources in Herculaneum, Missouri, had enough lead in their blood to cause brain damage. Last year, it finally settled a lawsuit filed on behalf of kids affected by the pollution."

Renco has also come under fire in Peru, "where sulfur dioxide from Doe Run Peru's La Oroya smelter have scalded the surrounding Andean hills," Harkinson reported.

According to Crain'sNewYorkBusiness.com's Aaron Elstein, when Fernando Serrano, a public health expert in Missouri and a professor at Jesuit Institution Saint Louis, University visited La Oroya he "tested" the town's "ground, air and water, and took blood samples from some of its 35,000 residents," and he found that La Oroya "was not only laden with arsenic, antimony and cadmium, but an estimated 97% of the children between ages six and 12 had elevated levels of lead in their blood-levels four times higher than amounts considered dangerous in the U.S."

Mother Jones' Harkinson reported that, "Rather than cleaning up its mess, Renco has spent $305,000 over the past two years lobbying the US government to help convince Peru not to expropriate the plant. Renco is also suing Peru for $800 million, arguing that its demands for a timely cleanup violate the US-Peru free trade agreement."

For many years, Rennert has flown under the radar. Now that his millionaire Hampton neighbors are on his case, lots of other dicey aspects of his career have been opened up for scrutiny. And it's not a pretty picture.