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Feathering your nest: To most, it's just a cliche. To the board of directors of Pinnacle West Capital Corporation, it was an economic strategy. Nothing so illustrates how the "homeboys" did business than how they dished out $50 million in "venture capital"--money loaned for speculative investments.
Beginning some five years ago, shortly after Eller, Keith Turley and other APS honchos decided to take APS profits and diversify, the newly formed holding company sank $2 million into SunVen Limited Partnership I. Young Eller, who has a marketing degree from the University of Arizona, was 28 when he started SunVen I with a partner and $150,000 of their own money. By then, his work experience consisted of three years as a commercial loan officer with First Interstate Bank in Phoenix and two years as a research analyst for a San Francisco investment company.
"I had the backing of my former employer, which gave us credibility, and my father, which also helped us credibility-wise," Eller says. In addition to the PinWest money, another $1.5 million came from the APS employees' retirement plan. Young Eller also got $1 million from his father, Karl, one of the wealthiest men in Arizona. Another $500,000 came from the J.R. Norton Company, whose owner also sits on the PinWest board, and $250,000 from the employee pension plan of the Tanner Co., whose president also sits on the PinWest board.
Eventually $15.1 million was raised and invested in various communications and high-tech companies. Last year, having spent all the SunVen I funds, Scott Eller and his partners started SunVen Partners II.
PinWest, through its subsidiary El Dorado Investment Company, pledged $30 million to the new venture, so far handing over $7 million. In fact, PinWest is contributing most of the $37 million raised for SunVen II.
Commenting on his fund-raising wizardry, the younger Eller says, "Being an Eller helped, no doubt about it, especially when we were just getting started. But attracting investors for the second partnership was mainly based on what we'd accomplished."
"Even though we don't have a track record yet, because we haven't cashed in any of our investments, they can see what we've done as far as investing the SunVen I funds," Eller says earnestly. Eller and Gregory Anderson, general manager of El Dorado, claim the partnerships are ahead of schedule to break even and start making money for their investors. Incoming PinWest CEO Richard Snell says he doesn't find anything disturbing about this picture.
Snell understands how these things work: He inherited a considerable part of his own prominence. Snell grew up in Phoenix and has spent almost all his adult life here as well, the son of Frank Snell, one of the city's earliest and most enduring power brokers. Before taking charge of the Ramada Inns empire in 1981, Snell practiced business law at Snell & Wilmer, founded by-- you guessed it-- daddy.
"It's quite common among corporations to find [board members'] relatives involved in some way," he says. "I'm not aware of any other directors' relatives on the PinWest subsidiaries' payrolls, although I think Keith [Turley's] daughter is an engineer out at Palo Verde, but it sure wouldn't surprise me if there were."
As far as Snell is concerned, it's business as usual at PinWest.
"Being an Eller helped, no doubt about it, especially when we were just getting started."