Fortune squandered? When Taco Cabana founder Felix Stehling died in 2012, his wealth was valued at about $20 million. Fast-forward several years and those assets are now “worthless,” according to a lawsuit filed by his stepson.

Fortune squandered? When Taco Cabana founder Felix Stehling died in 2012, his wealth was valued at about $20 million. Fast-forward several years and those assets are now “worthless,” according to a lawsuit filed by his stepson.

Taco Cabana founder Felix Stehling’s success in the restaurant business made him, as he once put it, a “rich son of a bitch.”

A recent court document says Stehling pocketed roughly $28 million when the then-San Antonio-based Tex-Mex chain, which he took public in 1992, was sold for about $154 million in 2000.

When Stehling died Dec. 10, 2012, at age 85, his assets were valued at about $20 million.

Fast-forward about six years and those assets are “worthless,” according to a lawsuit filed by Stehling’s stepson Lynn Moody last month in Bexar County district court. The assets include a San Antonio building and Colorado land.

Moody, a 67-year-old heir, accuses Stehling's longtime San Antonio investment adviser, James C. Worth, of squandering the assets by over-leveraging them to generate cash for himself and others. Worth serves as general partner of STW Interests, which has held Stehling's investments, and as trustee of various trusts of which Moody is the beneficiary.

LISTEN: Business reporter Patrick Danner details the a lawsuit that alleges fraud and self-dealing by the long-time investment adviser to Felix Stehling, co-founder of Taco Cabana. EN Depth.

The lawsuit alleges Worth, 66, engaged in fraud, self-dealing in violation of his fiduciary duties and negligence. The complaint seeks unspecified financial damages.

Barry Snell, Worth’s lawyer, called Moody’s allegations “absolutely false.”

“This is all about Moody trying to get money for himself,” Snell said.

Worth has blamed some of the troubles on plunging real estate prices brought on by the 2008 financial crisis, living expenses for Stehling and his wife in their final years, and some poor investment decisions.

“There were a lot of losers,” Worth said in court last month.One of the disappointing ventures Worth cited was Stehling’s late-in-life move to run three San Antonio barbecue joints in 2002.

“Tom’s Ribs alone probably lost $3 (million) or $4 million,” Worth testified. “I helped him the best I could to minimize that. But he was a swashbuckler. And I think as Lynn would acknowledge, (Stehling) never met a deal he didn’t like.”

Stehling had to sell his small ownership interest in the San Antonio Spurs to then-team Chairman and CEO Peter Holt after real estate values collapsed in 2008, Worth said.

“If it hadn’t been for the crash of ’08, we would never have wanted to sell the interest,” Worth said on the witness stand. “His Spurs interest turned out to be very valuable, but a lot of others lost a lot of money.”

Snell argued before Judge Michael Mery that the dispute with Moody should be settled by binding arbitration, as spelled out in an agreement Worth and Stehling signed in the 1990s. Moody’s lawyers countered that he’s not bound by the arbitration clause because he’s not a party to it.

Mery told the parties earlier this month he will rule that the dispute should be arbitrated.

Budding entrepreneur

Felix Stehling at his usual spot, manning the cash register at one of his bars. When business was busy, Stehling - who used to be a heavy smoker, freed up his hands and sported his trademark: a lighted cigarette tucked behind his ear.(Undated file photo)

Born in 1927, Felix Stehling was the second oldest of 11 children. His parents immigrated to the Texas Hill Country from Germany in the 1860s. His father ran a clothing store in Fredericksburg, where all of the children were expected to work.

Felix liked the business, but he hated small-town Fredericksburg, the San Antonio Express-News reported in a 2006 profile.

“All I wanted was to move to a big town and get to the big time,” he said.

After serving in the U.S. Army Air Corps in the 1940s, Stehling enrolled at St. Mary's University, where he graduated with a business degree in 1949. He worked for an insurance company for two years but found working for someone else wasn't for him.

“I knew that, if I wanted to be someone, I'd have to go out and earn it myself,” he said.

In 1952, Stehling leased an Austin Highway shack, rechristened it Triple S and went into the hamburger business. In that tiny building, Stehling introduced the Alamo City to the bean burger, a now-famous concoction of refried beans, diced onions, Fritos and Cheese Whiz.

Stehling also met his future wife, Billie Jo Moody, at the Triple S. She was divorced with two young sons — Lynn and Thomas Moody Jr.

Stehling invested his earnings from the Triple S in Crosswinds, a bar near San Antonio International Airport. It was the first in a string of restaurants and nightspots he operated. Others included the Bombay Bicycle Club, the Poco Loco Club and the Crystal Pistol.

The latter indirectly boosted the Stehling’s family fortunes permanently.

The Crystal Pistol was so popular that after a Dairy Queen across the street closed in 1978, Stehling leased the property at Hildebrand and San Pedro for the bar’s overflow parking.

He wasn’t about to let the shuttered Dairy Queen sit unused. Stehling, his wife and his brother Mike decided to open another restaurant in the building.

They considered selling hamburgers, then switched to barbecue — even spending $5,000 on a pit — before deciding on tacos.

Taco Cabana was born.

The restaurant was a hit from the start, making $700 on the day it opened. It stayed open 24 hours a day because Stehling didn’t want to spend an hour locking up the patio furniture each night.

Several of Stehling’s brothers and sisters worked at the restaurant, as did his stepsons.

Taco Cabana opened a second store in 1983. It had nine locations three years later.

Stehling wanted to sell franchises and then take Taco Cabana public. Some relatives, however, preferred stability, slower growth and control.

So Stehling assumed sole ownership of five locations and retained the Taco Cabana name in 1987, while brother Mike got the other four locations.

Taco Cabana founders Felix and Billie Jo Stehling in one of their restaurants. Taco Cabana founders Felix and Billie Jo Stehling in one of their restaurants. Photo: Taco Cabana Photo: Taco Cabana Image 1 of / 7 Caption Close 'There were a lot of losers': An heir’s Taco Cabana fortune allegedly squandered 1 / 7 Back to Gallery

Going public

Five years later, Stehling jumped on a strong market for restaurant issues and sold 30 percent of Taco Cabana to the public for $35 million. About $20 million of that went to the company and the rest to insiders, Forbes reported in 1993.

Stehling still held about 6 percent of Taco Cabana, worth about $18 million, according to the article.

Problems emerged after a second stock offering in 1993. Taco Cabana ran out of experienced managers as it expanded to more than 100 restaurants, and a Colorado expansion flopped.

Stehling was eased out as chairman in late 1994 in a dispute with Taco Cabana’s CEO.

Taco Cabana and its 126 restaurants — primarily in Texas, Oklahoma and Arizona — were sold to Syracuse, N.Y.-based Carrols Restaurant Group in 2000. That $154 million deal enriched Stehling by $28 million, according to his stepson’s lawsuit.

STW Interests

In 1994, around the time Stehling left Taco Cabana, he met with Worth, the San Antonio financial adviser. The pair had known each other for about four years.

“He already had problem investments that he wanted help with,” Worth said on the witness stand March 19. “I did that kind of thing, so I agreed to help him out.

About this story To understand the legal battle over the estate of Taco Cabana founder Felix Stehling, business reporter Patrick Danner reviewed numerous court filings in Bexar County district court and records in Stehling's probate case. He also conducted interviews and covered a March court hearing.

“He also wanted to invest in other businesses, operating businesses,” Worth added. “He was an entrepreneur. He didn’t really care about stocks and bonds. The agreement was that I would help him with the problems he had and then we would go (look) for new opportunities.”

Stehling and Worth memorialized their arrangement in an agreement that included a clause to arbitrate any disputes. The first page of the agreement is dated Jan. 1, 1996, but the second page is dated Jan. 2, 1999.

Moody’s lawyers argue the document has not been authenticated and may have been “cobbled together” in hopes of convincing a court to order arbitration.

Stehling operated a dozen limited partnerships, Worth said, so the pair put them into a holding company called STW Interests in 2007. STW is an amalgamation of their names. Overseeing the various investments became Worth’s “only gig,” according to Snell, his lawyer. Worth owns a 10 percent interest in STW.

Worth testified that some of the trusts set up for Moody in 2007 acquired a portion of Stehling’s interest in STW.

STW’s holdings included a Seguin metal stamping and fabrication company, and a machining manufacturer and a machine components company, both in Fredericksburg. Worth, who had interests in the three companies, over time exercised options to buy STW’s stake in the companies.

STW’s real estate holdings include a building at 225 E. Cevallos occupied by Supreme Meat Purveyors, a distributor operated by Moody. The property is assessed at $550,000 by the Bexar Appraisal District. Worth alleges Supreme Meat has not been paying rent to STW, contributing to STW’s cash-flow problems.

Moody, as Stehling’s majority heir, would regularly ask for money, Worth testified, adding, “I tried to help him out.”

Attorney Francisco “Frank” Guerra IV, who represents Moody, didn’t respond to requests for comment. Guerra said after the March 19 court hearing that his client declined to comment.

STW also purchased some undeveloped high-end residential lots in Telluride and Castle Pines, Colo., just outside Denver.

As for whether land was an appropriate investment for Stehling, given he was in his 70s and real estate can’t easily be converted to cash, Snell said Stehling wanted to do the deals.

“You can criticize that if you want, but Felix was very astute and very active and very much a guy that like to do deals,” Snell said.

Felix Stehling's wife Billie Jo is credited with the decor of the Taco Cabana restaurant chain.

“This is not some doting old man, at least not until the very end, 2010 and after, when he was really stricken,” Snell said, adding Stehling had a minor stroke in 2008. In the last few years of his life, Stehling suffered from dementia.

A document filed in 2009 in Bexar County records shows Stehling gave power of attorney over all of his business affairs — including real estate, financial and estate transactions — to Worth in March 2007.

In December 2007, both Stehling and his wife executed their last wills, spelling out what should happen with their possessions.

Stehling died in 2012. Worth is the executor of the estate.

Port Aransas beach house

Moody alleges in court filings that after Stehling’s death, Worth “manipulated” the estate assets “through a labyrinthine maze of entities and transactions.”

Moody questioned a deal where Worth acquired the Port Aransas beach house that Stehling and his wife had owned but deeded to STW in 2008.

Worth, as general partner of STW, listed the beach house for sale at $779,000 in 2010. A month later, he took out a $520,000 loan on the house, which had been debt-free. Moody says in his lawsuit he was never told where the proceeds went, though Snell said STW needed the money for its debt obligations.

In 2012, according to the suit, Worth informed Moody that STW was selling Worth half of its ownership in the beach house. Worth added he would personally guarantee the loan.

Instead of paying cash, though, Moody’s suit says, Worth simply took over half of the $5,600 monthly payment obligations on the loan. Worth was supposed to make a $50,000 down payment, but the suit alleges there is no evidence he did. Worth made the payment, Snell said.

Worth also indicated he was granted a 10-year option to purchase the other half of the property from STW, the suit says. He offered to write a check for $210,000 to acquire the interest, but Moody says neither he nor the trusts ever received any distributions from the sale.

The latter sale was “mainly done to provide cash for STW and for it to reduce its expenses,” Snell said. The purchase price was “spot on” the appraisal from Worth’s lender, Snell added.

Colorado land

Moody also alleges transactions involving the Telluride lots “greatly enriched” Worth and his longtime friend and partner, Colorado developer Jack Vickers III, “while depleting virtually the entirety of Felix’s estate.” Trusts naming Moody as a beneficiary, Moody claimed, have been “looted” by Worth and Vickers, who also is a defendant in the lawsuit.

“That diminution of the assets has occurred principally through real estate transactions that Worth and Vickers have undertaken; the obligations imposed by loans exceed the value of the properties they secure,” Moody adds in a court filing.

In essence, the suit alleges loans were taken out on the property while management fees the pair collected ate up the equity.

Snell countered that the Colorado real estate has paid off handsomely.

“I don’t want to put direct numbers out there in the newspaper, but it was a very successful investment overall, and Felix Stehling has made millions of dollars from it,” Snell said.

Elliott Cappuccio, Vickers’ San Antonio lawyer, is seeking to have the claims against his client thrown out on the grounds that Vickers is not a Texas resident and hasn’t done business here.

“On the subject matter (of the suit), I can say that all of my client’s dealings between him and Mr. Worth have always been arm’s length,” Cappuccio said. “Any dealings we had with Mr. Worth were in his capacity, in what was represented to us, as the authorized representative of the various entities.”

According to Moody’s court filings, in a typical deal Vickers would create a company, assign land and take a note on the property. STW Interests or Worth would then be offered ownership on the condition they provide additional cash to fund the loan.

“Vickers and Worth thereafter obtained additional notes on the property, ostensibly to further development, but in reality, that development either never occurred or occurred in ways that are not commensurate with the amount of the loan,” a filing says.

Vickers also charged “exorbitant management fees that removed all available cash flow that could have been used to service the debt on the properties,” the filing adds.

The property would then be divided, with Vickers receiving “a preferred property” and Worth and his entities receiving “the least-desirable part.”

Guerra, one of Moody’s lawyers, said during the March 19 court hearing that his firm hired a “financial expert” to analyze the transactions.

Wendy Kowalik, president of San Antonio financial-planning and consulting firm Predico Partners, said in a March 13 affidavit she spent at least 120 hours reviewing financial documents provided by Worth.

It “is clear to me that the transactions involving Jack Vickers and his entities resulted in financial losses and inequitable distributions favoring Jack Vickers and … James Worth, to the detriment of the Moody Plaintiffs’ rights, finances, and entities, all of which were being directed and controlled by … Worth,” Kowalik concluded.

Kowalik, in an interview, said Moody came to her to review his finances. When she discovered alleged improprieties, Moody retained the Watts Guerra law firm to represent him in the lawsuit. The firm then hired Kowalik — who detected the fraud committed by the ex-financial adviser for retired Spurs star Tim Duncan — to review Worth’s documents, she said.

Cappuccio said he may challenge Kowalik’s credibility if the claims against Vickers proceed, given the work she did for Moody before Watts Guerra hired her.

The three, 35-acre Telluride lots STW owns are listed for $5.6 million and carry $2.5 million in debt, Snell said. STW owns $2 million in Colorado water rights, he added.

STW also owns 63 percent of the remaining 25 lots in Castle Pines. Those lots have an asking price of more than $13 million and have about $2.7 million in debt on them, Snell said. The Supreme Meat building is valued at $1 million, he added.

“You just don’t know when those things sell, especially the Telluride stuff, which is real, real high-end property that is unpredictable,” Snell said. “The market comes and goes for it. It’s located near where Tom Cruise and people like that have bought property.” So it has the potential to bring millions, Snell added.

‘Out of cash’

Right now, though, STW is “cash poor but real estate rich,” Snell said

Snell painted a dire picture in a February letter to Moody’s lawyers.

An exchange of letters in February revealed the bitterness between Lynn Moody, Taco Cabana co-founder Felix Stehling’s stepson, and James Worth, the financial adviser who oversaw Stehling’s assets.

“STW is effectively out of cash, and cannot meet the upcoming note payments on either the Telluride or the Castle Pine lots,” Snell wrote. Worth had a deal to sell some lots to Vickers on the condition that Vickers be dropped from the lawsuit, Snell added. Moody hasn’t agreed to drop the claims.

The litigation likely will upend efforts to achieve “considerable equity” through the sale of the properties, Snell said.

“Mr. Worth will no longer lend money or guaranty debts for STW, and Mr. Vickers will not buy lots or bring in investors or funds, either,” Snell said in an email. “That, together with the lack of cash flow … and the expense of defending Mr. Moody’s suit may result in some or all of the properties being foreclosed or at the very least being sold off at ‘fire sale’ prices to meet debt obligations.”

Guerra said in a Feb. 13 letter that Worth was “solely responsible for putting STW in this horrible position” and is “so responsible for fixing it.”

Worth made more than $2 million in loans to STW to help meet its debt obligations from 2016 to 2018, Snell added. Worth also has not received most of his management fees during that time.

None, if any, of the distributions to Worth caused the cash-flow problems, Snell said. He attributed the issues to the debts on the properties, internal STW debts, living expenses for the Stehlings up until their deaths and specific bequests made to beneficiaries who must be paid before Moody and any of his trusts.

Patrick Danner is a San Antonio-based staff writer covering banking and civil courts. Read him on our free site, mySA.com, and on our subscriber site, ExpressNews.com. | pdanner@express-news.net | Twitter: @AlamoPD

Design by Joy-Marie Scott.

A version of this article will appear in print on April 14, 2019, on Page A1 of the San Antonio Express-News. | Today's Paper

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