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Former Omahan s fortunes sink

As he had nearly 20 times before, Douglas Hiner captained his 53-foot-long sloop - a sailboat known as the Vitamin Sea - through the 6-foot-high waves of the Gulf of Mexico.

Douglas Hiner had big plans for Omaha's Drake Court Apartments back in the 1990s. But renovation of the apartments, near 21st and Leavenworth Streets, never got off the ground when funding could not be secured for the project.It had been a serene, tranquil, 25-hour trek from Cuba. The sun glinted off the sea. Waves sparkled under the stars. A steady east-northeast breeze blew.

Hiner and his two Miami friends dropped a fishing line, drank some beer and took turns on lookout, making sure the boat yielded to bigger vessels.

After dawn the next day, Hiner docked the Vitamin Sea in Fort Myers, Fla., bid adieu to his friends and eventually went to get groceries.

He returned to find 10 Coast Guard and customs agents near his boat.

From their first inquiry - about Cuban cigars and smuggling and the U.S. ban on Cuban goods - Hiner knew.

His ship had sailed. His boat was docked. His voyage was over.

All the nautical metaphors added up to one reality: Hiner was doomed.

"I'm not a good crook," a resigned Hiner said from his Fort Myers apartment recently. "I had too much incriminating evidence on my boat."

From Hiner's boat, authorities seized 361 Cuban cigars and cigarettes. From Hiner's delivery truck a few miles away, customs agents found 27,000 cigars and 42 bottles of rum.

All were from Cuba and, in keeping with the U.S. ban on trade with the island country, all were illegal.

But his resulting indictment - Hiner faces up to 20 years in prison, if convicted - isn't the first time Hiner has found himself at the helm of a sinking ship.

The longtime Omaha property developer who once reported his net worth at $6.5 million filed for bankruptcy in 2005, listing $930 in assets and $28 million in debts.

In his wake, Hiner and his former employee Peter A. Spoto left dozens of investors, lenders and city planners reeling to salvage affordable-housing projects across Nebraska and Kansas.

That collapse, in turn, led the 68-year-old Hiner to what he said is his lowest point: a self-described "old man" now living in isolation.

Indeed, the man who used to dock his boat at Hemingway Marina in Cuba has a tale reminiscent of a Hemingway character, if not Hemingway himself.

Call it the Old Man and the Vitamin Sea. The Old Man and the Bankruptcy. The Old Man and the Spotted Legacy.

Like 'a fictional talking book'

Hiner very much plays the part of the crusty sailor.

In the 1990s, Peter A. Spoto looked for investors for Omaha developer Douglas Hiner's apartment and duplex properties, mostly in Nebraska and Kansas. City and bank leaders eventually discovered that money was being steered from new projects to pay bills on old projects, and the properties were either foreclosed on or taken over. Hiner now is charged with smuggling thousands of cigars from Cuba to Florida. Hiner blames his downfall partly on Spoto, who may have fled the United States.Those who have dealt with him call him crude and outspoken and bombastic - and those people are his friends.

"I like Doug," said Omaha architect Roger duRand, who has known Hiner for at least 30 years. "I think Doug is a good-hearted guy. I've got a basic like and respect for the guy.

"But I also realize Doug always does just what Doug wants to do. He's a big blowhard. He's a very conflicted, rambunctious, brilliant kind of a screw-up."

About eight years ago, Hiner began traveling to Cuba, transporting medical supplies, many of them donated by Omaha hospitals. On his way back, he toted hundreds of cigars - an operation that initially was designed to pay for boat repairs but that eventually became a way to keep his finances afloat.

"My son said I should write a book," he said.

If not a book, Hiner has stories from his travels to Cuba, almost all of them utterly unverifiable:

In one of his hauls, he transported a device used to staple intestines. He now says that device was used to save Fidel Castro's life. How does he know? When Hiner inquired on a subsequent trip, he said, a Cuban doctor "just kind of winked at me."

Maria, a "drop-dead beautiful" 18-year-old Cuban, would have married him if he would have taken her off the island.

His smuggled cigars were smoked by U.S. senators. "(Expletive) hypocrites," he said.

"It's like listening to a fictional talking book," said former Omaha City Planner Bob Peters, who has known Hiner for 20 years. "It was much more enjoyable to view your conversations with Doug and his experiences in that fashion rather than to judge him as to his truthfulness."

Douglas Hiner relaxed at home in 1994. The next year, he listed his net worth as $6.5 million. When he filed for bankruptcy a decade later, he said he had $930 in assets and $28 million in debts.Part of Hiner's story is verifiable. Over the years, he has loaded the Vitamin Sea with anesthesia machines, surgical instruments, wheelchairs and, once, enough equipment to fill an operating room.

Omaha hospitals confirm the donations. Missionaries to Cuba confirm the items reached their destination, and duRand said he witnessed it.

On trips to Florida, duRand said, he saw Hiner set sail for Cuba, his boat strapped down with supplies bound for an AIDS hospital.

"The medical supply thing was legit," duRand said. "Doug enjoyed rounding up whatever he could and making sure it got to the (Cubans) who needed them.

"I can also tell you he thought the embargo on Cuba was ridiculous. So I don't know what part of Doug's mission was humanitarian, what part of it was adventure and what part of it was just contrariness."

From hairdresser to developer

Hiner's path to wealth was unconventional.

Born in South Dakota, Hiner moved with his family to Omaha in 1948 and graduated from Central High School in 1958. After serving in the Army overseas, Hiner returned to Omaha, became a hairdresser and started helping his dad, a dairy inspector, fix up houses and manage apartments.

"He was this colorful, Bohemian character who did exactly what he wanted," Peters said.

Hiner eventually began renovating and renting out historical buildings, such as the Melrose buildings near 33rd and California Streets and the Clarinda near 30th and Farnam Streets.

In time, Hiner accumulated 300 rental units - houses, apartments, duplexes - around town.

And in 1991, he and his soon-to-be ex-wife, Myriel, made the first $1 million residential sale in Omaha, selling their home in Fairacres to a ConAgra executive for $1.1 million.

By 1995, he listed his net worth in Securities and Exchange Commission filings at $6.5 million.

Small cities liked housing concept

About that time, Hiner decided he would semi-retire, buy a boat and set sail six months a year.

The other six months?

Hiner had a real estate venture that he was sure would sweep through Midwestern towns.

He had a hunch that small cities needed apartment complexes. And he had read about how investors could earn tax credits by putting up money for affordable housing.

But there was a problem. Hiner was tired of trying to persuade his friends to invest.

Mindful of his frustration, Hiner's mom fished from the trash a letter from a man selling himself as a tax credit specialist.

His name: Peter A. Spoto.

In his late 20s at the time, Spoto was a fast-talking native of upstate New York - a whiz with financial projections.

Hiner contacted Spoto and Spoto hooked him up with Boston Capital, a company willing to invest $1 million to get tax credits.

Impressed with Spoto's deal-making ability, Hiner formed Retro Development in 1994 and made Spoto his frontman.

Hiner designed duplex and apartment developments ranging in size from eight to 36 units.

Spoto sold the idea to investors.

Cities and towns across Nebraska and Kansas - and a few in Iowa, Oklahoma and Missouri - ate it up.

Gary Person, city manager in Sidney, Neb., said Retro was alone in selling a concept that was overdue in small cities. In the early 1990s, Sidney was starting to grow residentially and commercially - but had no apartment complexes.

The concept was solid, Person said. Retro's Sidney building - a 24-unit complex constructed in 1995 - was something else.

Before long, the high winds of western Nebraska stripped away siding and shingles.

With assurances those problems would be fixed, Sidney approved plans by Retro to build a second, 36-unit complex in 1997. But the project slogged along for four years, with delays in financing and construction.

Similar stories played out in other cities. In Hastings, Retro built nine duplexes, but the management company "didn't keep it up well at all," said Randy Chick, director of the city's redevelopment authority.

City officials said they dealt with Spoto 95 percent of the time.

"The term 'snake-oil salesman' comes to mind," Chick said of Spoto. "He was always trying to squeeze more out of a deal. Just a pretty slick guy."

Spoto: 'We're in trouble'

In early 1999, Hiner said he got off his boat after an extended trip through the Caribbean.

Projects, most of them in Nebraska and Kansas, had ground to a halt. Contractors were walking off the job.

Hiner said he went to Spoto.

"I said, 'Why are these projects stalled?'" Hiner recalled. "He said, 'We're in trouble.'"

It eventually became clear to city and bank leaders that Retro was steering money from new projects to pay bills on the old. A judge's ruling in a lawsuit eventually confirmed that.

Banks, including First National Bank of Omaha, either had to foreclose on or take over properties. In his bankruptcy filing, Hiner listed debts of $3.5 million to First National and $1.5 million to Security First Bank of Sidney.

Neither bank would comment on how much was recovered.

Investors stood to lose the most. In his bankruptcy, Hiner listed losses of $10 million to an Ohio firm and of $5 million to a California firm.

Tim Kenny, director of the Nebraska Investment Finance Authority, which oversees the tax credit program, said he doubts the firms lost that much.

Kenny said the silver lining of Retro's demise was that investors had to take over projects and provide affordable rents before anyone could earn tax credits.

Still, city leaders were left to save face. A decade later, Person said, the Retro fiasco still is invoked by Sidney residents.

A few years after the debacle, a reputable Norfolk contractor proposed affordable housing near Retro's apartments.

Two hundred people packed City Hall to protest. The City Council passed it by a single vote, Person said, and the project since has been a success.

"That meeting was a donnybrook nightmare," Person said. "Any time anyone starts talking affordable housing, we have to overcome (Retro's) project."

Hiner says Spoto fled to Australia

Hiner never overcame his last venture.

After several lawsuits were filed against him, he filed bankruptcy papers in 2005.

He also leveled a series of allegations against Spoto. Hiner said auditors found that Spoto had formed dozens of bank accounts and shuffled money across them. Hiner alleges Spoto made as much as $5 million "disappear."

Spoto could not be reached for comment.

The 46-year-old was indicted in federal court in February 2001 on two counts of bank fraud. He is accused of defrauding Condon National Bank in Coffeyville, Kan., out of $106,000 in funding for a Retro project.

Hiner and others say Spoto fled to Australia. A warrant is out for his arrest.

Michael Kratville, an Omaha attorney who represented Spoto in civil actions after Retro's demise, said he never was certain who was to blame.

"If Peter took that much money, surely there'd be a paper trail," Kratville said. "And certainly Mr. Hiner had a duty to be informed of the company's business."

Hiner acknowledges not fulfilling his oversight duty.

However, he said, he didn't benefit from any of the missing money. As proof, he points to his putrid financial state.

"I thought I had everything covered," he said. "There were checks and balances with the banks and accountants and project engineers.

"Everybody blamed me, I guess, because I was the captain of the ship."

Hiner began living on boat full time

Virtually the only thing Hiner was able to salvage out of his bankruptcy was his boat.

After a court battle and a $60,000 loan payoff, he took up residency on the Vitamin Sea.

Hiner docked it in Fort Myers, near a Coast Guard station, and lived in it year-round.

He also continued his trips to Cuba every few months.

Prosecutors questioned whether the missions to Cuba became more about smuggling cigars than shipping supplies.

Hiner insists the trips to Cuba were aboveboard.

Disconnected from Omaha's medical community, he says he took wheelchairs, crutches and boxes of surgical trays from Florida. He lacks details, saying he had a supplier "named Carl" in Miami and "a guy named George" in Tampa.

Whatever he was carting there, authorities became more concerned with what he was bringing back.

Over time, Hiner accumulated hundreds of boxes of what he says were authentic Cuban cigars, such as Cohibas. By 2007, he was peddling his wares via e-mails like this: "I am finally back from Cuba. I AM BROKE. So let (sic) start out with I AM BROKE SALE. Take 10 percent off."

Members of a cigar smokers' Web site panned Hiner: "Looks like he's selling his fake cigars for a 10 percent discount. What a bargain," one wrote. Another quipped that Hiner restocked his supply of "Fauxhibas."

Hiner said it's possible to buy "fake" Cuban cigars even in Cuba. However, he said, he bought his from a supplier who got them from Havana cigar factory workers.

Hiner said people alleged fraud because he sold his cigars for half of what dealers charged. In countries that trade with Cuba, a box of 25 Cuban cigars can go for more than $500. Hiner said he charged about $250.

Hiner said he has one unfortunate bit of proof of authenticity: His indictment.

"We don't have any reason to believe these were fake," said Doug Molloy, chief assistant U.S. attorney in Fort Myers. "This isn't a guy who managed to bring a couple of Cohibas over. . . . He's one of the more active smugglers we've seen."

There is one bit of irony to his piracy. Hiner said he doesn't care for cigars.

More philosophical than suicidal

These days, Hiner is taking a different sort of inventory.

The man who once lived in Omaha's Regency area now lives in a $500-a-month furnished room with a shared kitchen. He gets $600 in Social Security and $80 in food stamps a month.

Authorities seized his boat - and he fears he won't get it back.

Divorced twice and recently separated from a longtime girlfriend, he rarely talks to his two children. He hasn't seen his four grandchildren in a year or more.

He said he has no plans to return to Omaha.

"I don't know what I'll do," he said. "I'm going to be a convicted felon. I don't have any marketable talents. My life has never been lower."

He then talks of a Hemingway ending to his story.

"I've contemplated suicide," he said. "I just can't figure out a painless way of doing it."

Hiner's friend duRand has heard him say the same.

But duRand said Hiner has become more philosophical than suicidal in recent weeks. Their weekly phone conversations lead duRand to believe that Hiner has another journey in mind.

If Hiner can travel after his case is resolved - a trial is scheduled in September - duRand pictures him on an island. Not Cuba, but somewhere in the Caribbean, where duRand has seen men who have blown marriages and families go to drink and disappear.

There, Hiner could live on the cheap. A businessman without a dime. A landlord without a home. A sailor without a boat.

Sunday, July 20, 2008

Source: Omaha World-Herald

Former Omahan s fortunes sink