Untitled Article

"Happy families are all alike; every unhappy family is unhappy in its own way."
--Leo Tolstoy, from Anna Karenina

Last month, 650 of Portland's elite packed the Hilton ballroom for the Association for Portland Progress's Heart of Portland Awards. The audience, which came to honor three men for their contributions to the city, clapped warmly for recipient Pete Mark, who owns much of downtown, and for the late developer Bill Roberts. The loudest applause was saved for the late Bill Naito, whose tireless civic work and irrepressible personality had long made him one of the city's favorite citizens.

As tributes filled the room, however, the Naito family's discomfort was apparent. In the front row of tables, the clan sat divided. Bill's widow, Micki, and their children occupied one table; his brother Sam and his family were at another. After accepting Bill's award, Micki and her children declined to have their picture taken with Sam and his family. At the end of the evening, the two groups moved warily past each other in silence.

For decades, the family held in check undercurrents of jealousy and mistrust, hiding their secrets from a city that regarded them as the classic immigrant success story. But only weeks before the Hilton tribute those long-dormant emotions erupted. Micki and her two older sons filed a lawsuit in Multnomah County Court against Sam, who was not only Bill's brother but his life-long business partner. Accusing him of violating his fiduciary responsibility and mismanagement, they demanded their share of the family's estimated $140 million in assets.Interviews with family members and a review of court documents reveal that not only did Bill Naito's death trigger the lawsuit, but his driving personality may have made the blow-up inevitable. The lawsuit, which seeks the breakup of a 75-year-old business, has implications far beyond settling old scores. The Naitos own numerous properties in Old Town, the least-developed part of the city's center. Until their dispute is resolved, a key piece of Portland's future remains in limbo.

To understand Bill Naito, it's helpful to consider fire hydrants. Most people don't think a lot about them, but to Naito they were a challenge and nuisance. He needed them, of course--his buildings were full of old beams and wooden floors. Yet hydrants stole parking spaces from potential customers. That's why, several years ago, Naito redesigned the fire hydrant, incorporating an L-shaped vertical extension that would allow a car to park in front of it and still provide access to fire trucks. He constantly harangued fire marshals with his plan. Naito never commercialized his design; it was just one of a million ideas he generated. Where others saw problems, he saw opportunities. "He was the most tenacious man I ever met," says his son-in-law Doug Campbell, a former collegiate wrestling champion and Bill's right-hand man for 16 years.

Unlike his father, Hide, and older brother, Sam, who were reserved and modest, Bill was hard-drinking and argumentative. A disheveled Mr. Magoo-like character with the voice of a laryngitic duck, he shambled around in scruffy clothes and beat-up vehicles, disguising a ferocious intellect. "He used his appearance more to his advantage than anyone I've ever seen," Campbell says.

As Naito's real estate investments proved, appearances meant almost nothing. Many developers profit by demolishing and rebuilding; Naito's genius was that he conceived novel uses for existing, often historical, structures. In 1975, he plunged into his first acquisition, the derelict five-story Rhodes department store at Southwest Morrison Street and 10th Avenue. At that time, the only pedestrians in downtown Portland were panhandlers or cops. He renamed the building the Galleria and quickly filled it with tenants. The Galleria thrived, luring shoppers back downtown before Pioneer Place and Nordstrom opened their doors.

In 1979, continuing to bottom-fish for distressed properties, Naito hooked a decaying warehouse complex on the Willamette River and converted it into the apartment complex known as McCormick Pier. At the time, no developer in town would touch real estate in the River District, but the complex's 301 apartments filled rapidly. The project proved that people wanted to live downtown and provided a model for urban redevelopment. "McCormick Pier was way ahead of its time," says Don Palmer of Palmer Groth & Pietka, one of the city's largest real estate appraisers.

In 1985, Naito bet the company, borrowing $25 million--at the time the largest real estate loan in Oregon--to renovate the vacant Montgomery Ward warehouses in Northwest. It was a scary period; soon after the loan was finalized, the savings and loan crisis crippled the nation's financial system. Regulators squeezed banks to write off loans that had even the slightest problems; for many months Bill wrung every penny out of tenants as he struggled to make payments. He was never late. Family members recall the project as the most stressful of Naito's career, but he thrived under pressure. "He liked to live on the edge," says Micki. "He liked to do what other people thought couldn't be done. He liked to park in no-parking zones and run red lights."

Unlike some developers, Naito wasn't just a numbers man. "He would take sandpaper and show janitors how to clean old urinals properly," Campbell says. He squeezed efficiency out of his buildings, from the free advertising gained by painting "Old Town" on the water tower atop the White Stag building to renaming the Montgomery Ward warehouses to Montgomery Park simply by changing the "W" and "D" to "P" and K."

Today, Montgomery Park is a gargantuan success--literally. With 800,000 square feet of sunlit office space, abundant parking and proximity to I-405, the building is a gold mine. Purchased for $6 million and renovated for an additional $25 million, the building is now worth more than $70 million, says one real estate expert.

In July of 1996, less than two months after Bill Naito died of cancer at the age of 70, the City Council changed the name of a big chunk of Front Avenue, Portland's oldest paved street, to Naito Parkway--an unusually rapid recognition. The honor was given less for Naito's real estate skills than for his civic involvement. "Bill was truly an inspiration," said Mayor Vera Katz at the time, "the kind of leader you're lucky to have once in a lifetime."

Naito's most heartfelt project was the riverfront Japanese American Historical Plaza. He conceived the plaza, convinced the city to place it in Tom McCall Waterfront Park, found an architect and helped raise funds to build and maintain it. The series of carved stones profoundly describes the trauma Japanese immigrants suffered during World War II and their subsequent contributions. "It was," says Steve Naito, "my father's proudest accomplishment." Although Bill's parents were Japanese, his leadership of the plaza effort marked a reconciliation with his roots. "He rebelled against his Japanese heritage for years," Micki says. "Only in his last five years did he become interested."

People listened to Bill because he was devoted to the city. Campbell remembers driving him to testify at a City Council meeting when the older man was ill. Before Naito spoke, he raised his pant leg to display a catheter bag strapped to his thigh, reminding those present of his commitment. At the time of his death, he was on the boards of the Portland Chamber of Commerce, Providence Hospital, the Urban Forestry Commission and Reed College and was chairman of the Multnomah County Library Board. He championed the renovation of the central library and City Hall and lobbied for the city's purchase of Union Station. Naito pushed to bring back the vintage trolleys and co-founded Artquake. "He was always getting bright ideas of ways to improve the city," says Paul Bragdon, former president of Reed College, "and pursuing them with amazing persistence."

Real estate genius, first citizen--that's how people saw Naito. But there was another side to this Portland legend. His tireless pursuit of the next deal and his many good works cost others dearly. When Micki Naito says "we were a dysfunctional family," she could easily be talking about the hundreds of people who worked for him over the years, as well as his own flesh and blood.

Hard alongside the Burnside Bridge at 5 NW Front Ave.--make that 5 NW Naito Parkway--squats the headquarters of H. Naito Corporation and Norcrest China. Behind a street-level safety door, a windowless staircase leads to a waiting area furnished with Goodwill castoffs. Once rented by an ad agency that wanted to recreate a 1940s newsroom, the office on the second floor has changed little in decades. Even the magazines are old--in mid-July, a seven-month-old People magazine topped the pile. Ancient windows leak traffic noise, which competes with the sound of money--a mechanical sorter inhales bags of coins from the Naitos' retail stores. A couple of incongruously bright abstract paintings seem lost amid dingy wall paneling and haphazardly patched brown linoleum floor. The peg-board partitions and exposed water pipes framing the room leave the impression that nearly every expense has been spared.

For years, Bill Naito ruled what former employee Kevin Morris calls a "Dickensian operation" from a cluttered desk in the middle of this room. He installed concave mirrors so no office worker evaded his sight. Occasionally known to spy on warehouse employees by riding up the conveyor belt in a ventilated cardboard box, Naito monitored the clock zealously, limiting overtime for the students and senior citizens he preferred to hire. Everyone was entitled to an opinion--as long as it was the same as Naito's. "He was the boss and you didn't forget it," says Dick Lenhart, who spent 38 years with the company. Many employees weren't paid for public holidays, and no one got medical or pension benefits. "People raised their kids in the office," says Heidi Snellman, another former employee. "Nobody was paid well enough to afford day care, so kids were brought to work."

Some of those kids were Bill Naito's. All of them worked in the warehouse and later moved into management. Anne still runs the Galleria, but Kenny and Steve eventually left, many say because of frustration with their father. Son-in-law Campbell resigned shortly before Bill died. Bob worked closely with his father for 15 years. "He did everything himself," Bob recalls. "He was unable to delegate." Others are less diplomatic. "Bill treated Doug like shit," says a former employee, "and he treated Bob with contempt."

As far as Bill's wife, Micki, is concerned, her children would have been better off if none of them had gone to work for their father. "I didn't like the business and didn't want them to get into the business," she says. "The business was my white whale, my rival. It always seemed to be more important to Bill than me or the family."

"He was difficult to be married to and so was I," says Micki, a soft-spoken, fastidious woman. "I was upset with how he worked all the time." They owned a weekend home on the coast, in Salishan, but instead of playing the golf course there, Naito trod barefoot through the adjacent slough, collecting errant balls. On summer weekends, he would sit on the beach with a bag of dimes bent by the company's change-counting machine next to him. With a hammer in hand, the multimillionaire would pound the dimes flat. "Whatever he did," Micki says, "it had to have some utilitarian result."

Naito's relationships with his brothers were no day at the beach, either. Hide Naito originally brought all three of his sons into the business. When they were children, Albert, the youngest, and Bill were close. When they worked together, that changed. In 1959, Albert, considered too impetuous, was tossed out of the business. Bill reportedly never spoke to him again.

Sam got some of the same treatment, but over a longer period. Although Bill and Sam sat within feet of each other for decades, Micki says they rarely talked, preferring to pass each other notes. The brothers socialized only occasionally on holidays and never spoke to each other on the phone while at their homes. "How they were able to work together for 40 years is a mystery," she says. "Two American brothers in the same situation would have split up the company years ago."

The two were as different as water and whiskey: Sam's desk was immaculate; Bill's resembled a landfill. "Sam is definitely a listener," Steve Naito says, "and my father never listened to anyone." They co-existed by concentrating on the parts of the business that fit their personalities--Sam ran the slow, predictable import and retail businesses, while Bill chose the risky world of real estate.

Although he and Sam were nominally equals, it was Bill's name on most of the plaques and awards that filled the office--a sore point, Micki believes. "He [Sam] bears Bill a lot of ill will, and so does his wife," she says. For years, they thought that Bill took too much credit. In Japanese tradition, the oldest son, Sam in this case, should be the most visible. Micki believes her sister-in-law, who she says is "totally immersed in Japanese culture and Japanese ways," was particularly offended. "I think Mary was more upset than Sam about Bill getting the attention," she says. (Neither Sam nor his family would discuss any issues they consider relevant to the lawsuit.)

The rift between the brothers had classic roots. "Bill bore Sam a lot of ill will too," Micki says. "It all started in childhood. Bill always called Sam the 'crown prince.' He [Sam] got all the perks, was favored by their mother. Bill was prone to exaggeration, but he said their mother had wanted a daughter when he was born and dressed him in girls' clothing and made him do girls' work around the house."

When Bill Naito died, there existed a plan--of sorts: He and Sam agreed that whoever survived the other could buy half a percent of the deceased's voting stock. Sam did so and, at the age of 74, was finally in charge. The agreement also stipulated that Bill's survivors could buy back the half a percent when Sam died--meaning the business would revert to an equal partnership between the two families.

Soon after Bill died, relations between the two families worsened. Bob, Bill's oldest son, had rejoined the company shortly before his father's death and was running the real estate and financial operations. Former employees say Bob was not a perfect fit for the job and thought the Harvard and Stanford grad cold, more at home sitting in front of a computer than kibitzing with tenants. Still, he was considered his father's obvious successor--except by Sam. Within months of Bill's death, Bob says his uncle literally stopped talking to him. "It was pretty unpleasant," Bob recalls. He resigned in March of 1997.

His role was filled by Sam's youngest son, Verne--a newcomer to the company who lacked real estate experience. According to Sam, little about the business has changed since Bill's death. "I don't see anything different," he says.

One thing that is different, of course, is the lawsuit. From the moment Naito died, discussions about the company's future deteriorated rapidly. Letters flew back and forth between attorneys representing Sam's and Bill's families. Mediators--ironically including Albert Naito, who never knew Bill's children until after their father died--failed to bring the two sides together. By this May, a lawsuit was the only choice left, according to Steve Naito. "It was absolutely the last resort to have the courts decide this," he says.

A central complaint in the lawsuit is that Sam has altered the agreement that would eventually allow Bill Naito's heirs to buy back the crucial half percent of voting shares. The suit also alleges that after Naito's death Micki and Sam verbally agreed to split the company but that Sam later reneged. The 20-page suit lists many other complaints but can be summarized simply, Micki says: "I just think Sam is treating Bill's family unfairly."

Although the complaint--written by Steve Naito himself--is in standard legalese, blood drips from every paragraph. One of the problems, according to the suit, was that "Mary was afraid that Bob Naito would control and dominate Verne Naito the way Bill Naito controlled and dominated defendant Sam Naito." Micki Naito, who owns 49.5 percent of the company's voting stock, appears to be paying for that domination. "Sam has not asked her or taken her advice on anything," Steve says. "That just wasn't the plan." Nearly a year after Bill died, Sam offered Micki $3,000 a month (later raised to $5,000) "in recognition of Bill's lifelong service to the company." The stipend was revocable at any time. Meanwhile Sam allegedly announced that Mary would receive $7,000 a month for life when he died. The disparity angers Micki. "If $3,000 per month is what they think of Bill's contribution to the company," Micki says, "that's an insult."

In October, the Naito family will meet in court. The prize they'll be fighting over is property--the lawsuit claims that 95 percent of the company's assets is real estate. Developers and city officials will watch the case closely, for Old Town, where most of the Naito properties are located, is the crucial link between downtown and the River District. In addition to the new Port of Portland headquarters, several new housing complexes are already under construction in the area. City planners also expect the Chinese Garden--due for completion in 2000--to attract 100,000 visitors a year to Old Town. As the face of the neighborhood changes, Bill Naito will look more like a visionary than ever.

The battle over the properties he bought promises to be long and expensive, but Naito's other legacy will be even harder to reconcile. Among Naito's children, Anne and Bob don't speak. Steve and Kenny's business partnership dissolved acrimoniously, and Kenny and Anne declined to join their mother and brothers in the lawsuit. Whether the family can ever reunite is an open question; certainly family members speak of Naito with a wistful affection, trying to forgive the flaws that made him a difficult man.

No matter how the lawsuit is decided, there seems little chance of Hide Naito's business surviving into the third generation. "It's clear," Micki says, "that Sam's kids and my kids are never going to be able to work together." The only force powerful enough to keep the company intact is gone.

"My father was like the hub of a wheel," says Steve Naito, "and when the wheel collapses, you get chaos."

BILL NAITO+

MICKI NAITO
A Canadian whom Bill met while studying at the University of Chicago, Micki worked for the company for more than 15 years.

SAM NAITO+

MARY NAITO
Mary has worked for the company for more than
15 years.

BOB NAITO
Bob worked for the company for more than 17 years until his departure in March 1997.

STEVE NAITO
A lawyer in private practice, Steve worked for the company only briefly. Married to County Commissioner Lisa Naito.

ANNE NAITO
Anne has worked for the company for more than 18 years and currently manages the Galleria. Married to Doug Campbell.

KEN NAITO
Ken is the only Naito who has
left Portland. He owns the Original Pancake House in Kirkland, Wash.

LARRY NAITO
Larry has worked for the company for more than 20 years, mostly at Import Plaza.

RON NAITO
Ron is a physician at the Portland Clinic. Alone among the third generation, he has not worked for the company.

VERNE NAITO
Verne joined the company last August and is now reportedly making most day-to-day decisions.

originally published July 29, 1998