By New Times
By Connor Radnovich
By Robrt L. Pela and Amy Silverman
By Ray Stern
By Keegan Hamilton
By Matthew Hendley
By Monica Alonzo
By Monica Alonzo
Within months, Regency had an amazing new product on the market. It was KI-Spray, a small bottle of potassium iodide that users could spray in their mouths when "a nuclear disaster strikes" to "shield yourself and your family against thyroid-related cancers and other diseases that crippled and killed thousands for years after the Chernobyl nuclear plant disaster."
No joke. Thanks to Deihl, Americans could just spray away those annoying Armageddons.
"No water needed, no pills to swallow, just spray like a breath freshener . . . to protect you and your loved ones," the company said on its Web site, www.vitamist.com.
Also, the product tasted good and was "child friendly."
KI-Spray was arguably the most brilliant invention in the history of American snake-oil medicine.
The U.S. Food and Drug Administration, however, did not appreciate the historic beauty of KI-Spray.
In June of 2003, Alonza Cruse, director of the FDA's Los Angeles district, sent Deihl and his company a letter ordering them to stop selling KI-Spray immediately because the product and the company's claims violated numerous provisions of the federal Food, Drug and Cosmetic Act.
"False promotional statements are being made by you," Cruse wrote, "that are aimed at and accessible to American consumers stating in part: 'Meets all FDA requirements for potassium iodide as a radiation protective, and is labeled and packaged in accordance with U.S. government guidelines. . . . Comes full strength in accordance with FDA demands for complete thyroid blocking . . . manufactured in the United States under strict guidelines, in FDA-approved facilities.'"
Regency stopped making KI-Spray. No harm, no foul, the government responded (and typically responds in such cases).
But Deihl, who did not answer requests to be interviewed for this story, continued to make lots of other stuff under a bunch of different company names.
One of those companies received a cease-and-desist order from the Arizona Attorney General's Office in 2002 for unlawful credit card billing practices.
Two other companies have bad ratings from the Better Business Bureau.
Deihl and his companies, some owned jointly with his wife and sons, have had nearly 70 lawsuits filed against them in state and federal courts. Bills weren't paid. Refunds weren't refunded. Credit cards were charged without authorization. Two of the companies have gone bankrupt.
But in this business, companies and products come and go with the wind.
What remains, and what has been allowed to remain thanks to spineless government oversight, is the slippery rock of genius behind them all.
In this case, the genius is Joe Deihl (yes, "deal"), a multimillionaire known more in the Valley as a Republican party bigwig, respected philanthropist and host to some of the Valley's swankiest parties.
Outside the Valley, Deihl is gaining a reputation of a different sort.
He arguably has become one of the greatest, which also means most notorious, snake-oil salesmen in 21st-century America.
Neighbors remember the family as being a bit odd, but extremely friendly and accommodating. The Deihls threw neighborhood parties.
"I don't remember much about the parties except for seeing a black velvet painting of a clown in the house," says one former neighbor. "But I remember them always being very gracious. They made every effort to be liked."
But the tear gas business remained relatively slow. Not many people seemed interested in assaulting the soft tissues of their fellow man.
Joe Deihl realized, however, that similar propellant technology could be used to create the exact opposite effect. Instead of spraying others with something believed to be harmful, he could help people spray themselves with something believed to be helpful.
In the marketplace of fear, the homeland of snake-oil salesmen, he shifted from offering a weapon against bad guys to offering a weapon against bad germs.
In 1984, Deihl received a patent for "novel vitaminic compositions in the form of an aerosol comprising a suspension of droplets containing at least one vitamin dispersed in a carrier gas."
It was basically a spray breath freshener, like the Binaca Blast, with vitamins added to the spray. People would no longer have to swallow pills, a process Deihl said in his patent application was often accompanied with "gagging or vomiting."
A neat idea, and one that, when sold through a massive multilevel marketing scheme, has made Deihl a rich man.
Along the way, Deihl and his family have created numerous other companies: Mayor Pharmaceuticals, Lifestyle Advantage Ltd., Vitamist Ltd., Regency Medical Research, Karemor International, Pharma Comm Group Ltd., Windy City Properties, Spoiled Brat Ltd., Creative Personnel Resources, to name a few.
All the companies are intertwined. Windy City Properties owns the $6 million office, warehouse and call-center facilities out of which all the companies operate at 2601 and 2606 South 24th Street in Phoenix. In theory, Mayor makes Vitamist products, which are sold by the network marketing company Karemor, which is employed with people from Creative Personnel Resources in a building owned by Windy City Properties.
It's a tangled web, one that has made it nearly impossible for Deihl's numerous creditors to collect on unpaid bills. Along the way, several of Deihl's individual entities have gotten into trouble with either the government or creditors. But those individual companies can fold or go bankrupt without damaging the other entities, even though they're all owned by the same people.
Going after unpaid bills from Joe Deihl means, in legal terms, "piercing the corporate veil," which, in economic terms, means tens or hundreds of thousands of dollars in legal fees. For most creditors, it's not worth the fight.
Indeed, of the lawsuits reviewed by New Times, most were settled out of court with pennies on the dollar going to creditors.
In 2001, Deihl added a high-profile plum to his corporate fruit bowl. That year, he bought the bankrupt company of frenetic former late-night infomercial titan Don Lapre.
By the late 1990s, the Deihls had built themselves into major players in Paradise Valley. Sari Deihl had found her way onto numerous high-profile Valley charity boards. Joe had positioned himself as the guy to see if you were a Republican in need of campaign funds. He hosted fund raisers for Congressman John Shadegg and Maricopa County Sheriff Joe Arpaio and hobnobbed with the likes of Dan Quayle. Leading up to the 2000 campaign, Sari and Joe Deihl were the state's fifth largest individual campaign contributors, donating more than $15,000 to Republican candidates.
The next year, as reported last month in New Times, Deihl wrote a $10,000 check to Joe Arpaio, a check that apparently helped Deihl's son, Joe II, serve time in a small, cushy Mesa jail instead of Tent City for a 1997 solicitation of prostitution conviction.
By 2000, the Deihls had moved up to a $1.5 million house in Paradise Valley. Joe and his wife owned three Mercedes-Benzes, a classic 1950 Jaguar and a 1972 Ferrari 365 GT valued at more than $100,000.
And the parties, increasingly aimed at business associates, political leaders and society bigwigs, became much more memorable.
Here's the problem with Joe Deihl's spray vitamin invention: In the 20 years since he got his patent, there has been no sound scientific evidence that spraying vitamins does anything more than cover the lining of your mouth with vitamins.
"Spray vitamins are the new snake oil," says Timothy Quill, who practices anesthesiology and critical care medicine at the Dartmouth-Hitchcock Medical Center and is a professor of anesthesiology at Dartmouth Medical School. "They're essentially useless."
New Times asked Quill, one of the nation's most respected investigators of alternative medicine scams, to give his opinion about the products and claims made by Deihl's company, Vitamist, which claims 100,000 sales representatives worldwide, regarding the company's spray vitamins. He had nothing good to say.
"The arguments given on the Vitamist Web site for taking these spray products are specious pseudomedical mumbo jumbo," he says. "It's just foolishness. None of it makes any sense when you understand vitamins and the way they're absorbed."
"Preliminary look at Vitamist = bullshit," Quill wrote in an e-mail.
Quill, who occasionally writes for the online consumer watchdog newsletter "Quackwatch," followed with a more extensive opinion on exactly why spray vitamins don't work. Here's a brief summary:
"Water-soluble drugs, such as most vitamins, are hardly absorbed at all via the mucosal route. Since only a microscopic amount is absorbed, the drugs must be very potent, AND they must be largely metabolized by the liver so that the residual product which is swallowed does not result in overdose."
Which is funny, because on the Vitamist Web site, the company says it puts smaller doses of vitamins in its spray "due to the superior absorption rate achieved by our method of delivery. We expect close to 100 percent of this dose to enter the blood stream."
Also, Quill says, "the argument that frequent oral sprays give a more constant level of vitamins is just crazy. There are few or no studies that show that the serum levels are actually more consistent with spray vitamins; each individual vitamin would have a very different absorption profile, and there is no evidence that more constant serum levels of vitamins is helpful in any way, even if you achieved that state."
But Vitamist and similar companies can make all sorts of claims, Quill says, because the products "are sold as nutritional supplements, so they require no research or testing IN ANY WAY for efficacy or safety prior to being marketed since the 1993 Nutritional Supplements Act was passed by Congress."
That law, which vitamin companies spent millions lobbying for, gives companies carte blanche to make claims and sell products as long as the product is not deemed by the FDA to be a drug.
All Vitamist must do is put this declaimer in tiny letters at the bottom of claims made on the company's Web site:
"These statements have not been evaluated by the FDA. This product is not designed to diagnose, treat, cure or prevent any disease."
Here's the trick for dancing around that last sentence, Quill says: "First you list scary diseases like heart disease. Then you say 'heart disease kills people.' Then you say 'we have a special vitamin and that studies show vitamins are helpful and that you need a minimum daily allowance.' You never say your vitamin stops heart disease, you just imply. Then you hope the customer makes the link you aren't supposed to make."
Deihl is a master at this trick. For example, the Vitamist site says:
"Vitamist Colloidal Spray Minerals provides more than 70 minerals in each dose. . . . On a daily basis, our bodies require more than 100 milligrams of major minerals and less than 100 milligrams of minor minerals. Provided in a natural balance to maintain physiological levels, colloidal minerals help prevent deficiency diseases and provide protection against degenerative diseases."
It is implied that spraying these minerals on your tongue will stop degenerative diseases. But that's never stated directly in the claims.
Also offered are Herbal Osteo-CalMag, Vitamist Ex. O, Ginkgo Mist, Grapeseed Mist, Lady Mist, Pre Natal Mist, Kid's Multiple, the Revitalizer, Slender-Mist, Smokeless, and VitaSight, which includes bilberry, which "may offer protection against the development of cataracts."
Or, it may not.
"Mr. Deihl is not an idiot, that's for sure," Quill says. "He's good at what he does."
His only big gaffe, then, was the potassium iodide spray designed to save Americans from nuclear holocaust. Apparently, Deihl was too excited by the business opportunities of September 11 to consider the fallout.
The problem: Deihl's "Ki-Spray," as it was described, fell under the FDA description of a new drug, not a nutritional supplement.
"We are unaware of any evidence that establishes that this drug is generally recognized as safe and effective for the intended use," Cruse wrote Deihl in his four-page order. "The continued distribution of these products without an approved NDA is a prohibited act."
So Deihl just stopped selling the stuff. No big deal.
In the saturated vitamin market, you need more than just a neat spray bottle to get rich.
You need a business plan to get the stuff to customers.
Or, in the case of multilevel/network marketing, all you need to do is get the product sold to newly recruited sales people who believe they can get rich recruiting their own sales staff, from whom they would collect a commission for each product sold.
Joe Deihl described his business plan himself in a deposition he gave in one of the myriad lawsuits against him.
"Would you define 'network marketing' for me?" the attorney asked.
"The ability of one person to seek another and to combine together to make a greater whole," Deihl said.
"So, if one person sells to 10 or 12 others who each sell to 10 or 12 others, would that be an example of network marketing?"
"Create a greater whole, wouldn't it?" Deihl asked rhetorically.
That's how Deihl has built a pyramid of sales people with himself on top. He claimed in that same deposition in 2000 that his company, Karemor, which is charged with selling Vitamist and other products, had 100,000 sales associates.
On Karemor's international Web site, people are recruited to take part in a "Home-Based Opportunity." Beginning "consultants" receive a 5 percent commission from what they sell.
The real money, though, comes by climbing the "stair-step" by recruiting more sales staff beneath you. If you become a "Silver Consultant," you get 5 percent from purchases by the consultants you brought into the company. "Gold Consultants" get 10 percent bonuses on each purchase by lower sales people. "Executive Consultants" get 15 percent.
Beyond executive consultant, you can become an opal executive, then a ruby executive, then sapphire, then emerald, then diamond, at which point you're eligible for something very special called the "Crown Infinity Bonus."
In such operations, it's not about selling a few vitamins to consumers, it's about selling tons of vitamins to "sales consultants" with dreams of receiving "long-term monthly residual income."
Karemor is essentially the Amway of spray vitamins.
This is all legal. And apparently, new suckers are still being born every day.
What is not legal, according to the Arizona Consumer Fraud Act, is how, up until March 2002, Joe Deihl went about getting the money from his "consultants."
In 2000 and 2001, the Arizona Attorney General's Office began receiving complaints from several of Deihl's sales associates.
After a lengthy investigation, Deihl and his company, Karemor, avoided criminal prosecution by agreeing in March of 2002 to an "Assurance of Discontinuance pursuant to the Arizona Consumer Fraud Act."
Deihl's scam was described in the attorney general's order:
"In order to receive the benefits of (Karemor's) commission structure, the Sales Associate was required to enroll in Respondents' AutoShip Plan, which authorized Respondents to ship products to the Sales Associates on a monthly basis and automatically deduct monies from their bank or credit card accounts to pay for the products." Karemor "failed to adequately advise consumers that by enrolling in the AutoShip Plan, they were committing themselves to accept Respondents' products for a minimum of six months and were giving the Respondents the authority to issue an account draft each month to pay for the products."
Karemor "continued the drafts despite being notified by Sales Associates that they did not want the products. Additionally, (Karemor) refused to accept returned products from Sales Associates who were no longer interested in continuing with the AutoShip Program. Respondents' marketing materials contained false promises and misrepresentations, including the omission of material facts, which is a violation of the Arizona Consumer Fraud Act."
According to the Better Business Bureau in Arizona, Deihl was playing similar games with Don Lapre's old company.
For much of the 1990s, Don Lapre had one of the top 10 most broadcast infomercials called Making Money.
Often accompanied by a supermodel, Lapre, with wild arm-flaying exuberance, explained how he ascended from a one-bedroom apartment to making $50,000 a week by placing small classified ads that drew people to 900 phone numbers for his businesses.
Viewers could repeat his success by buying his $40 Making Money kit.
The real money came for Lapre after that first sell. Purchasers were called back with another sales presentation to entice them to buy psychic, sports, chat and date phone lines for a final bill of about $850.
After purchasing Lapre's assets in bankruptcy court, Deihl simply began re-airing Lapre's old infomercials. Deihl utilized the same sales strategy, which, according to numerous customers, entailed a ridiculous litany of misrepresentations, hidden costs, overcharges and unreturned refunds.
In giving Universal Business Strategies an "unsatisfactory" rating, the Better Business Bureau listed these problems reported by customers:
"Though the company offered a 30-day money back guarantee, the Bureau had received complaints alleging delays in both delivery of the product and refunds to those who returned the merchandise."
"Significant additional costs were reportedly not told to prospective customers up front." "Earning turned out to be not as represented." The company has a "pattern of unanswered complaints alleging unauthorized charges to customers' credit cards, some to customers who canceled the program several years ago."
Things got so bad that even Don Lapre, no stranger to allegations of fraud, felt he needed to defend his name. Lapre posted this Internet message to the world in 2002:
"For over two years I have not been operating the company which sells the Making Money Package you see on television today!!" Lapre wrote.
"Today, I am embarrassed and extremely upset over the way customers have been handled since I left back in February of 2000. The company breached my contract which guaranteed customers would be handled correctly!!! This has destroyed my name and likeness in ways I can't imagine would have ever even been allowed by law!!"
"Also, any audio tapes used by this company that have my voice are over three years old and DO NOT represent my opinion regarding any products sold regarding 900 lines!!! I have received many complaints by customers stating they have received charges on their credit cards which they never approved of!!! . . . If this company represents that I am affiliated with its operations in any way, you are being misled."
New Times attempted to reach Lapre, but three phone numbers for him had all been disconnected.
By one estimation, Universal Strategies owed its customers $3 million. Instead of paying debtors, Deihl threw the company into bankruptcy and shut down operations.
At the same time, Karemor, Vitamist and Deihl's other companies rolled along. The Arizona AG's Office considers its investigation of the company closed, although, as an AG spokeswoman told New Times, "if anybody believes the company is violating that specific order, they need to contact us."
An FDA spokeswoman said she could not discuss the potassium iodide-related sanction or follow-up actions by the company or the FDA because "it's still an open case."
It's also a two-year-old case regarding a four-year-old product.
"These guys always get away with nothing more than a slap on the wrist," Dr. Quill says. "That's the nature of our laws and our regulatory system."
The Vitamist Web site contains a peculiar anomaly, a section devoted to the sales of skin-care products, not spray vitamins.
Click into this section, and the skin-care products begin to make sense. This product line isn't about making money, it's about Arizona nouveau riche vanity run amok.
The skin-care products are called "The Sari Collection," as in Sari Deihl, Joe's wife.
Before any mention of the products, though, visitors are greeted with a written introduction titled "The Legacy Begins."
"Sari . . . born to leave her mark on the world!
"Expecting the best in all aspects of life she has committed herself to excellence. As a loving mother, grandmother and ambitious business woman she still makes time to serve on the board of numerous charities. Her deep concern for children has led her to commit not only her time but also her resources. . . . A portion of the proceeds of each Sari product purchased will be directed to the Sari Foundation to help the lives of innocent children."
Sadly for innocent children, the Sari Collection has been a bust.
The glowing bio includes a picture of Sari, hair up, teeth straight and white and skin gauzily wrinkle-free. Her skin glows. She wears a necklace on which the words "Spoiled Brat" are spelled out in diamonds.
The text continues:
"The Legend of this Spoiled Brat signature diamond necklace began when Joseph gave it to Sari to symbolize his eternal love for the woman whose beauty launched The Sari Collection. Alfredo Molina from the House of Molina was commissioned to design this signature diamond necklace as shown on Sari. This exquisite piece was created by four gem setters with over 50 karats of perfect white diamonds."
Paul Dembow, president of Arizona Natural Resources, was on hand when Sari was presented with the necklace at a Karemor/Vitamist lunch convention at Disneyland in 1998. Dembow's north Phoenix skin-care manufacturing company made the Sari line of products for the Deihls.
"It was like some huge piece of bling you'd see on the toughest rapper," Dembow says of the necklace. "It was amazingly over-the-top."
After the presentation, Karemor sales associates were given opportunities to buy costume-jewelry replicas of Sari's new necklace.
About the same time, the Deihls started a company called "Spoiled Brat, Ltd.," which meant the necklace could be written off as part of the new company's advertising budget.
In 1998, Dembow's company made 50,000 units of each product in the Sari line. The total bill to Joe Deihl was $326,250.
It's interesting to Dembow that the products he made are still being sold by the Deihls.
"Those products have been sitting around in a warehouse for six years," he says. "Our guarantee on them is only two years under proper conditions. It's anybody's guess what that product is like now."
The Sari Collection probably isn't dangerous, Dembow says, just very likely useless.
The real legacy of the Sari Collection, Dembow says, is that it exposed how Joe Deihl does business. When Deihl didn't pay the final $106,000 he owed Dembow, Dembow sued. By the time he filed the suit, Dembow knew Deihl had a history of making lawsuits very expensive for his opponents, so expensive that most of his creditors give up and settle cheap. But Dembow refused to let money keep him from taking Deihl to court.
"Somebody had to stand up to this guy," he says. "It pretty quickly wasn't about the money. It was about doing the right thing."
Paul Dembow still curses himself for not checking Joe Deihl's business record before agreeing to do business with him.
If he had, he would have seen an amazing litany of litigation against Deihl, his family and his companies.
The Deihls have been sued at least once a year since 1988. In 1999 alone, they were sued 17 times.
They've been sued by several printing companies, several charter airline companies, several health product companies and several shipping companies, including Federal Express and Airborne Freight Corp.
"I know, I know, I was stupid," Dembow says in the offices of the sprawling Arizona Natural Resources plant in north Phoenix. "But he looks so good in the beginning. He's suckered some of the best with the way he does it."
"He does it" with a ton of cash up front, his creditors say, in lawsuit after lawsuit. Then the last few payments never show up. When you complain, Deihl says something was wrong with the service or the product. The only recourse is civil court, where such non-payment v. faulty-product arguments are always messy and drawn out.
For example, Deihl went to Southwest Jet Aviation in Scottsdale to charter several flights. Deihl promptly paid for the first few flights, says Scott Gibney, the company's chief financial officer.
Then Deihl set up a slew of flights in one month. For one of the flights, Deihl chartered a giant Gulfstream jet for a nine-hour flight around the country.
"He said he needed a bigger cabin," Gibney says. "So we went out and got him Merv Griffin's Gulfstream."
The final bill: $70,000.
Deihl didn't pay. He claimed he was charged for catering he didn't order.
The catering, standard for such flights, was $500, a fraction of the total bill.
Southwest spent $7,000 on legal fees to get Deihl to pay his bill. Since Southwest makes only a 5 percent broker fee on such flights, the company ultimately paid $7,000 to get back $4,000 owed to it.
"His games cost us a month's payroll at the time," Gibney says. "It really hurt us."
Amazingly, Gibney says Joe Deihl recently called him trying to book another charter flight.
"I told him to bring a cashier's check and I'd consider it," Gibney says.
Deihl came to Dembow in much the same fashion. It was early 1998 when Deihl showed up at the offices of Arizona Natural Resources in a fine Italian suit and a flagship Mercedes carrying a $100,000 check, Dembow recalls.
Deihl wanted Dembow to make a collection of skin products named after his wife.
"That kind of money up front gets your attention," Dembow says. "We took the job."
Dembow sent products. Another check came. Dembow sent more products. Another check came.
Then Dembow sent the final shipment, the largest of the bunch. The final $106,000 check never came.
Dembow called. No return call. He called again. No return call.
Finally, he received a letter from Deihl's company saying they believed Dembow had shorted them in the last shipment. Dembow knew that argument was ludicrous. He had numerous employees take accountings of the load. Deihl also claimed Dembow violated an exclusivity clause in a contract that Dembow later proved didn't exist.
But Deihl and Karemor employees stuck by their story. So Dembow sued.
The court records from that 1998 lawsuit, Arizona Natural Resources versus Karemor International, provide a detailed look at Joe Deihl's business and legal strategies.
In initial arguments, Deihl's attorneys promised to provide employees who could confirm that Dembow hadn't sent the promised amount of skin-care products.
So Dembow's attorneys began the lengthy and expensive process of deposing those employees.
Deihl's attorneys said Joe Deihl II, Deihl's son, had the information. They deposed. He said he didn't know anything. Dembow's attorneys asked for Karemor's documentation of the shortage. Deihl's attorneys promised to provide those documents. They never did.
Another executive knew the facts, Deihl's attorneys then said. That person was deposed. She didn't know anything. Bill Deihl, Joe's other son, was deposed. He knew nothing.
Well, actually, it was another employee who knew, Deihl's attorneys then said. That employee was deposed. He knew nothing.
Joe Deihl himself was finally deposed. He said he had heard from somebody at his company that the boxes of skin-care products had been stacked in his warehouse in a way that made a proper count difficult. He basically accused Dembow's shippers of stacking boxes in a way that hid the fact that all the boxes weren't there -- a sort of shipping optical illusion. But he provided no proof. Nobody at the company ever did.
"It was just weird," Dembow says. "They were clearly just stalling and stalling to run up attorney fees on us so we would give up."
In the deposition, Deihl related few details of his past. He said he had "various sales positions" before starting an insurance company in Tampa, Florida, in the 1970s. He said he came to Arizona and started his tear gas company in the early 1980s. He said he had only "a grade school education" and likes to make contracts verbally.
"It has not been a practice [to make written contracts] because of my inability to spell and I have difficulty reading. I am dyslexic so, therefore, it's embarrassing to me to have to sit and read something or it takes me an extended period of time to read something."
In 2000, Joe Deihl asked to meet Dembow at the Ritz-Carlton on Camelback Road to discuss a settlement. Deihl offered pennies on the dollar. Dembow refused.
"Then he says to me, 'You know, Paul, it's just business,'" Dembow says. "That's just burned me. Business? Yeah, it's business when you have no honor."
In late 2000, the litigants received a judgment from Judge Cari Harrison. It was a searing indictment of Deihl's behavior in the case.
Besides paying the $106,000, Deihl also had to pay all of Dembow's attorneys fees because, the judge said, Deihl and his attorney, Robert Hartmann, "defended this lawsuit without substantial justification and for the sole purpose of harassing Arizona Natural Resources and delaying the proceedings."
Judge Harrison lambasted Deihl and his attorney for stonewalling and their "obstreperous refusal" to provide proof of their claims.
"Throughout the course of this litigation," the judge wrote, "defendants repeatedly and recklessly disclosed witnesses without making any effort to ascertain whether a particular individual possessed any relevant knowledge in the area in which he or she was designated to testify."
Harrison railed on for 15 pages in her judgment.
It appeared clear she was sending a message from the judges of the Maricopa County Superior Court. They were sick of Joe Deihl wasting their precious docket time, and taxpayer money, in attempts to avoid paying his bills.
So Dembow got his vindication in court. It would be another four years before he got all of his money. Deihl claimed he didn't have the cash. After more than $100,000 in attorneys fees and other legal fees, Dembow's attorneys and private investigators proved that he did. The case eventually cost Deihl $333,000. Dembow received the final payment from Deihl earlier this year.
For Dembow's private investigator, respected financial investigator Burke Files, the job was a fascinating look into one of the cloudiest corporate structures he's ever seen.
"What guys like Deihl bet on is the dark side of actuarial advantage," says Files, who has written several books on financial fraud. "They create this mess of businesses and get lawyers for shields and then bet that it will cost you more money than it's worth to find the money they owe you. It's just a ruthless way of doing business. And when you get tied up with one of these guys, you're screwed."
As the Deihls continue to be lambasted by customers, creditors and government agencies around the country, they remain darlings of Valley high society.
Sari, by all accounts, has been a dedicated organizer of numerous big-dollar charity fund raisers in the Valley. Among others, she has organized large fund raisers for the March of Dimes, the American Heart Association and the Phoenix Theatre. Last year, she co-chaired an event that raised $500,000 for the Crisis Nursery, which helps children from broken homes.
And then there are the parties at the Deihl house.
"Philanthropists Joe and Sari Deihl are known for throwing posh and creative parties," Scottsdale Republic society columnist Kathy Shayna Shocket wrote early this year about the Deihls' Jams and Jewels party for the Phoenix Theatre.
"They throw amazing parties," confirms Paul Dembow, who attended the Deihls' annual Halloween party in 1998 before their deal went bad. "That was the most extravagant layout I've ever seen at a house."
That year, Joe and Sari greeted guests dressed as a king and queen. Other family members were also dressed as royalty.
High-dollar decorations were strewn across the property. A lavish buffet greeted guests on the tennis court. When guests reached for a slice of watermelon, the watermelon came alive.
"It was actually a guy's head painted up to look like a melon," Dembow says. "The guy was under the table and he'd look at you all of a sudden, and it scared the heck out of you. Very cool."
For the Phoenix Theatre pajama party, plush beds were set up on the tennis court. Guests wore their pajamas as Phoenix Theatre singers performed Broadway hits for $50 donations. Chef Scott Tompkins of Mastro Restaurants catered the event. Joe Deihl, named this year by Trends magazine, the local high society/fashion rag, as one of its "Best Dressed Men," wore a smoking jacket custom-made by designer Michael Casey.
Joe was a year behind Sari, who was named one of Trends' top 10 "Fashionalities" in 2003, earning her the honor of "walking down the runway in designer gowns to the cheering and applause of everyone," as one society magazine writer described it, at the 20th annual Trends Beat the Heat ball.
The women were "honored for their charitable contributions to the community and praised for their individual style," the article continued. "The venue was hot, the auction was hot, the fashion show was hot . . . but most of all, the 10 new Trends Fashionalities were hot in every way."
The accompanying photo of the "Fashionalities" would suggest otherwise, but so be it. The event raised $100,000 for charities such as Widowed With Children.
Because, as her Sari Collection Web site states, Sari has a "deep concern for children." Except when it comes to her own in court.
Currently in the court system is a lawsuit in which Joe and Sari are suing their son William, a longtime employee of their companies, and his former wife, Denyse Pappas Deihl.
According to former Karemor and Mayor employees, Bill and his brother, Joe II, had long been frustrated employees of their father. They apparently wanted out of the company, but they were financially beholden to their father.
"Joe Sr. was constantly screaming at the two of them in board meetings," a former employee says. "They were good guys. But they'd do anything Dad said because they were scared of him."
When the sons were good, Joe Sr. helped them out. Joe Deihl helped Joe II fight his misdemeanor solicitation of prostitution charge for five years, taking procedural issues in the case all the way to the Arizona Supreme Court. Joe Sr. also gave Sheriff Joe Arpaio $10,000 in campaign contributions in 2000. When Joe II finally served his time for the conviction, he served it at a secluded Mesa branch of the county jail system dubbed by detention officers as the "Mesa Hilton," which is usually reserved by Sheriff Arpaio for sports stars or other celebrities.
Instead of saving his butt, Joe Sr. just gave Bill Deihl money for a big house.
Bill could not be reached for comment.
The relationship between father and son apparently soured, so much so that when Bill and his wife sold the house in 2002 as part of their divorce, Joe and Sari sued him to get the money. That case is currently snaking its way through Maricopa County Superior Court.
The senior Deihls produced documents in court showing that the money for the house was a loan.
They even argued that Bill and his wife committed fraud by creating documents to make their mortgage company believe the money came from a company profit-sharing plan.
"In fact," the elder Deihls' attorney wrote in court papers, "neither Mayor Pharmaceutical nor William Deihl had a profit sharing plan. Both he and Ms. Deihl have admitted in their divorce action that the profit-sharing plan was a fiction created to obtain a bank mortgage without disclosing they were borrowing the down payment from plaintiffs."
Interestingly, the elder Deihls are demanding $333,000 from William, the exact amount they ended up having to pay Paul Dembow.
"I guess people like this always end up eating their young," quips Files, the private investigator.
In the meantime, Joe Deihl has come up with a new marketing scheme on his Vitamist Web site. He's now targeting people who have had bariatric or gastric-bypass surgery, the stomach-reduction surgery to combat morbid obesity.
Apparently, spray vitamins are now a critical part of a serious weight-loss program.
"This is a lifelong commitment," the Vitamist Web site says. "By taking vitamin supplements daily, bariatric patients can help avoid health complications due to malnutrition. Vitamist Spray Vitamins makes this commitment easy. One phone call will set up convenient home delivery -- each month, every month."
Which means Joe Deihl would be conveniently billing you for the rest of your life.
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