Sister Of Water-Ski Innovator Faces Sentencing In Bank Fraud -- Rita O'brien Received $1.8 Million

The name O'Brien will always be linked to the slalom water ski, after Herb O'Brien, the innovative teenager who crafted it in his parents' Redmond basement nearly three decades ago.

But charges against O'Brien's sister, Rita, again link the family name to something else: crime.

Tomorrow, Rita O'Brien will be sentenced in federal court for falsifying information in obtaining a $1.8 million loan while she was president of H.O. Sports, her brother's second water-ski company.

Herb O'Brien lost his first company 20 years ago when he was convicted of cocaine smuggling. He has not been implicated in the fraud and said linking his business with his sister's actions is unfair.

"This company is doing extremely well," he said. "We are an ethical, professional company. What she tried to do was for her own personal, private financial dealings."

But federal prosecutors and Rita O'Brien's attorney say most of the money went to H.O. Sports, one of the world's largest water-ski companies.

The story of Herb O'Brien's rise to the top of the industry began when he was just a lanky teenager, tinkering in his parents' basement with different combinations of exotic wood. Not far from the shores of Lake Sammamish, O'Brien unveiled a water ski that would shape the industry's future.

What made it different was a wide, deep tunnel under the ski that gave it better stability than its competitors.

Almost overnight, it seemed, everyone wanted O'Brien skis. Ethel Kennedy ordered a whole batch for the Kennedy clan. By 1974, O'Brien estimated his company's worth at more than $5 million.

But the storybook tale soon soured.

The next year, O'Brien and a handful of associates pleaded guilty to involvement in one of the largest cocaine smuggling operations the Northwest had seen. More charges were filed in 1977. The conspiracy involved more than 200 pounds of cocaine, worth about $3 million at the time. The cocaine was smuggled from Chile, stuffed into O'Brien skis and false-bottom suitcases.

Herb O'Brien blamed financial woes for his involvement in the drug deals. He was sentenced to two concurrent sentences of 10 years in prison and lost everything, including his company, which was sold to an out-of-state investor.

When he was released in the early 1980s, Herb O'Brien jumped right back into the industry, starting a new company called H.O. Sports. It is now second only to his namesake company, O'Brien International, Inc. Both are based in Redmond.

"It would've taken more guts than I have to come out of jail like that," said Bill Weizner, who was president of O'Brien in the 1980s. "He has done a marvelous job."

More than building two companies from scratch, Herb O'Brien, in the eyes of many in the industry, made Washington state the center of the water-ski world. More than 80 percent of all water skis made are produced here.

Seemed destined for success

Like her brother, Rita O'Brien, 54, seemed destined for success. A graduate of Whitman College with degrees from Stanford and M.I.T., she worked her way up in AT&T in Rhode Island and became one of the first female executives in the company, said her attorney, Peter Mair. She returned to the Northwest about five years ago to help her brother, he said.

"He had been very ill and the business was in trouble as a result," Mair said.

Herb O'Brien denies his business was ever suffering. As majority shareholder of the private company, he said, he has always been in financial control.

According to an agreement Rita O'Brien signed as part of her guilty plea in September, she obtained a loan from West One Bank to buy out a minority shareholder in the company and infuse new capital into H.O. Sports.

"She claims she was trying to save a struggling company," said Kenneth Parker, an assistant U.S. Attorney.

In the plea agreement, she admitted to falsifying tax returns and financial statements in June 1992 to get the loan. She falsely claimed she had about $5 million in assets, including property on Martha's Vineyard in Massachusetts and two savings plans from her prior job worth more than $2 million.

"Rita borrowed the money as an interim stopgap seeking financing on behalf of H.O.," said her attorney, Mair. "She took a shortcut and she's paying mightily for it."

$1.2 million to H.O. Sports

Of the $1.8 million, $1.2 million was transferred to H.O. Sports. About $250,000 went for a condominium in Boston and $300,000 to cover a previous personal overdraft.

When Rita O'Brien defaulted on the loan payments, Parker said, the bank was poised to sell some of her shares of H.O. Sports to recoup its losses. Parker said she owned about 40 percent of the company at one point.

During the last day of the bank's deadline, Rita O'Brien came forward with money to pay off the loan, Parker said.

Mair said she obtained the money by pledging more H.O. stock and obtaining another loan from another source.

Parker said he will ask the judge to sentence O'Brien to four to five years in prison, the high end of the sentencing guidelines for the bank fraud. Parker said she has provided inaccurate information to her probation officer and has not admitted her criminal conduct fully or expressed remorse.

Whether the charges will affect H.O. Sports or Herb O'Brien, who has rekindled his reputation in the industry as an innovative marketer and businessman, is yet to be seen.

The water-ski industry is highly competitive.

There are simply more available skis than buyers, said Weizner.

"If you are doing well right now," he said, "you are trying to keep your neck above water."