The Connell Company Business Information, Profile, and History
Westfield, New Jersey 07090-1099
History of The Connell Company
Originally and perhaps best known as a major broker of rice, The Connell Company has grown to become one of the largest and most diversified privately held corporations in the United States. Through its several subsidiaries, Connell is involved in exporting rice; exporting food-processing equipment and supplies; importing, brokering, selling, and distributing canned food products; developing office buildings; leasing, distributing, and selling construction equipment; arranging financing of leased equipment and commercial property development; and offering asset management services to the technology sector. With three generations of the Connell family active in the company at the end of the 20th century, the New Jersey-based Connell Company had estimated sales of well over $1 billion in the late 1990s. Grover Connell, the company's president and chief executive officer since 1950 had an estimated net worth of $500 million in 1998.
Origins as a Rice Broker
The Connell Company traces its origins to the 1926 founding of the Connell Rice & Sugar Co. The senior Grover Connell was a native of Texas who moved to New York City, where he established headquarters for his thriving rice distribution and export business. When Connell died in 1950, and was succeeded by a son who bore the same name, company sales had reached $10 million a year. Connell Rice headquarters were moved in 1958 from New York to a modern building in Westfield, New Jersey, near the Connell family residence. From there, the company exported bagged rice via ship to companies around the world. The company's executives had developed their own interests in rice farms by the 1960s.
The primary business of Connell Rice & Sugar was, according to a 1967 Federal Trade Commission (FTC) document, buying and reselling commodities for its own account and acting as a broker for transactions in refined sugar, corn products, and other commodities. In addition, the company was receiving monthly fees for studies of commodity prices and market conditions that it circulated to various industrial organizations.
In 1974, Connell Rice & Sugar, under the leadership of Grover Connell, Jr., became involved in urging Congress to repeal certain legislation, in force since the Great Depression of the 1930s, designed to support rice prices by restricting production in the United States. Discussing the legislation, as well as the nature of the rice business in general, Connell told Elizabeth M. Fowler of the New York Times that year that the United States produced about two percent of the world's rice, yet was the world's largest exporter of the product. Connell attributed this irony to the fact that the world's largest rice-producing nations, such as China, Japan, and India, were also experiencing sharp rises in population and thus needed even more rice to feed themselves. Connell's company was exporting rice to about 100 countries at this time, while also importing some rice and selling it domestically. All told, rice was accounting for about 85 percent of the company's annual sales volume of $350 million, and Connell was reported to be the nation's largest rice exporter.
The Politically Charged 1970s
Grover Connell's ties to two U.S. House of Representatives members became an issue during this time, when reporters revealed that Department of Justice officials were investigating charges that South Koreans were attempting to influence U.S. policies regarding rice and other export programs by bribing congressmen. According to the final report of a House investigation, Representative Otto Passman of Louisiana told a federal investigator that he forced the Koreans to hire a Connell shipping company by threatening to cut off foreign aid otherwise.
Moreover, in 1977 a Department of Agriculture officer recommended suspending Grover Connell from doing business under the department's Food for Peace program, charging that he had concealed ownership of a shipping agency representing foreign governments in the chartering of vessels carrying these food shipments. According to this official, Connell Rice & Sugar shipped 72 percent of all rice moved under the program in 1976.
Finally, Grover Connell was indicted in 1978 on six counts of violating federal law by illegally using a Korean rice dealer with ties to the South Korean government as his agent for sales to the government under the Food for Peace program. He was alleged to have paid the dealer, Tongun Park, $600,000 in commissions and then covered up the payments by sending them to the offshore bank account of a Korean company. The firm itself was reported to have paid Park $8 million in commissions on rice sales to Korea. The charges against Connell were dismissed in 1979 after Park, who was now a prosecution witness, changed his testimony, according to the Department of Justice.
The South Korean government subsequently sought to reduce its dependence on Connell Rice & Sugar for imports of its main food staple. However, according to a Wall Street Journal story in 1983, Grover Connell and his allies in Congress and the U.S. rice trade were making it difficult for South Korea to buy rice from rival exporters. Korean officials attributed their problems to Connell's campaign donations to a number of Democrats in the House of Representatives, many from rice-producing states. In 1982 a State Department official told Congress that Connell had threatened to use his influence to cut off foreign aid to South Korea unless the country bought his rice.
Connell Rice & Sugar's business allies in the United States included two California growers' cooperatives that were handling about 75 percent of the state's rice crop. Virtually all of the export portion of this crop was being brokered by Connell and sent to South Korea. According to a 1984 Forbes story, when the South Korean government ordered a shipment from another company, the cooperatives declined to sell except through Connell, which charged $35 a ton more than the other company's contract price. In 1992 Connell was cleared of allegations that it conspired to monopolize California's rice trade. The jury, however, could not agree on the broader issue of whether the company was guilty of restraint of trade. The U.S. Court of Appeals reinstated, in 1996, this part of the lawsuit by 70 rice growers against Connell.
Extending the Company's Scope in the 1980s
Grover Connell continued to foster ties with members of Congress in the 1980s. In 1989 his company distributed more honoraria, or speaking fees, to members than any other firm: about $100,000 in all. Most of the money was being paid to members of the House and Senate agricultural committees or members from major rice- and sugar-growing states, but congressional staff members also received such payments. According to a 1990 Washington Post story, at least once a week Grover Connell would invite a member of Congress to company headquarters for a report on what the legislative body was doing and then pay a fee of $2,000. Connell said he and his wife were also each making the maximum $25,000 a year in personal political donations to federal campaigns. Some $200,000 in corporate funds were donated to help build a media center for the Democratic Congressional Campaign Committee.
By this time the firm, having extended its scope of operations, had become The Connell Company, a holding company for its diverse activities. A 1988 Forbes story reported that Connell's expansion had begun in 1973 with leasing. In 1987 the company leased $600-million worth of railroad hopper cars, coal barges, shipping containers, aircraft, and office buildings. Connell reduced the risks of such a venture by leasing only to reliable corporate clients, handling goods with no risk of rapid depreciation, and taking payment in the form of an equity interest in the equipment at the end of the lease. Meanwhile, the lessee paid property taxes, maintenance, and insurance but realized its own benefit in the form of lower taxes.
The government of Zaire, long a client for rice shipments from Connell under the Food for Peace program, began leasing equipment for its government-run mining company, Gecamines, in the 1980s. In 1987 Connell became Gecamines' authorized supplier in the United States, with 12 U.S. companies and their subsidiaries required to sell through Connell. Grover Connell defended the country's ruler, Mobutu Sese Seko, against charges of massive human-rights abuses and corruption and, when Mobutu came to the United States during 1988--89, arranged for about 50 members of Congress to attend receptions for the visitor. Some members of Congress also visited Zaire under Connell's auspices. The company lost its contract with Gecamines later in 1990 under pressure from the World Bank, which argued that its fees were excessive. Nevertheless, Connell was said to be grossing more than $15 million a year from its dealings with Mobutu before he was overthrown in 1997.
Connell Realty & Development Co., a subsidiary, erected two office buildings in the 1980s on 107 acres in the township of Berkeley Heights, New Jersey. In 1997 this arm of the operations began construction of another office structure on an adjacent 63-acre parcel of this corporate park, with completion scheduled by the end of 1998. Plans called for more three more buildings at some future date, depending on leasing activity and demand. Connell Realty & Development had estimated operating revenue of $20 million in 1994.
The 1990s and Beyond
Connell Rice & Sugar Co. was exporting domestically grown rice, as well as rice grown in the Far East and other areas, to more than 100 countries in 1999. Within the United States, it was distributing rice to the brewing industry, wholesalers, food processors, and retail chains. It also had long-standing relationships for handling its storage, toll milling, and transportation. Connell Rice & Sugar held an estimated share of more than 20 percent of the sugar and rice export market in 1998.
Subsidiary Connell International Co. was exporting a wide range of equipment and supplies to food-processing businesses in more than 100 countries. It also was serving as exclusive distributor for many of its suppliers and handling additional equipment and supplies on a private-label basis. These activities were being served by offices in Malaysia, Senegal, Taiwan, and Thailand.
The Connell & Co. subsidiary was the largest industrial refined sugar and flour broker in the United States, providing brokerage and sales services to food companies processing and marketing sugar, flour, cocoa and chocolate, vegetable oils, and bakery seeds, and engaged in packaging and bread-bag manufacturing. The sales service was operating out of Westfield; Oak Brook, Illinois; and Omaha, Nebraska. The purchasing service was operating out of Oak Brook.
Connell Foods, Inc. was importing canned food products from more than 50 countries for distribution throughout the United States to supermarkets, cooperatives, wholesale grocers, institutional distributors, food processors, and drug and restaurant chains. It maintained offices in Taiwan and Thailand.
Connell Finance Co., Inc. was active in virtually all aspects of equipment, project, and real-estate financing, with a portfolio of equipment having an original cost of over $800 million. The company had arranged over $10 billion of lease financings.
Connell Equipment Leasing Co., which became a division of Connell Finance in 1997, had been providing single-investor lease financing and equipment advisory services since 1982. It was financing all types of long-lived, durable assets, having completed over $125 million of financing of equipment such as forklift trucks, cranes, tractors, and front-end loaders.
Connell Gatco Co. was working directly with mining, quarrying, and construction companies, supplying them with parts, components, and equipment, such as bearings and loading, hauling, and dumping vehicles. It was also acting as an exclusive distributor for several leading manufacturers and providing marketing, technical, and after-sales support.
Connell Realty & Development Co. was developing corporate headquarters office buildings for both single and multiple tenants, arranging for both construction and permanent financing of these assets through its own funding. It had ownership positions in, or had arranged leasing financing for, more than 9 million square feet of commercial property space.
Connell Technologies Co. was providing equipment, real-estate financing, and asset-management services to the technology sector. It had acted as financial adviser to a large institutional investor for a $43-million lease of semiconductor manufacturing equipment with a major computer-chip manufacturer. Offices were in Westfield and California's Silicon Valley.
As the decade drew to a close, the parent Connell Company was firmly ensconced as the country's largest independent rice and sugar broker, while its heavy equipment leasing business was doing record business as well. Despite some negative press generated by the sometimes controversial political interests and lobbying of CEO Grover Connell, the company seemed assured of maintaining its hold on the markets it served into the next century.
Principal Subsidiaries: Connell Rice & Sugar Co.; Connell & Co.; Connell Foods, Inc.; Connell Finance Company, Inc.; Connell Equipment Leasing Company; Connell Gatco Company; Connell Realty & Development Co.; Connell Technologies Company.
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