Unlocking the Krocks, Part One: Tough Nut to Krock

With the demolition of the Central Building (332 Main Street) coming up before the Historical Commission tomorrow evening, I thought it would be a good idea to write a series about the business endeavors of the Krock family.  That Krock works so well in so many puns factored into this decision.  Here’s part one.

Aaron Krock

The life of Aaron Krock is part Horatio Alger, part Gordon Gekko.

Krock was born in Europe in 1901 (or 1899), and came to Worcester ten years later.  He worked as a Telegram paperboy and a Western Union messenger boy.  At age 15, he’d saved up enough money from his work as a paperboy and a messenger boy to go down to Wilmington, NC, and open a small dry goods stores.

Two years later — at age seventeen — he sold the store and became an auctioneer.  (From what I can tell, I think he started in tobacco auctions and later moved on to auctioning off pretty much anything, mostly higher-end deals.)

After two years as an auctioneer in North Carolina, he came back to Worcester and started Aaron Krock Auctioneers.

By the late 1930s, he was working as an agent to find buyers and operating personnel for various businesses, but he also owned various box, paper, and furniture companies.

In 1945, he acquired the North Works of American Steel and Wire.

In 1955, forty years after leaving Worcester to open his first business, he opened Commerce Bank & Trust with $525,000 in capital surplus and undivided profits.

Whatever else one can say about the Krock family — and I think most of us have our opinions — it is pretty extraordinary for someone to come to this country with little money, work hard as a young boy, and open one’s first successful business at age 15.  What is both good and bad about the Krock fortune comes from Aaron Krock and his relentless drive to make lots of money, own lots of property, and owe no one anything.

After opening a bank, after buying, running, and selling numerous businesses, Krock never forgot his first love — auctioneering.

Indeed, in the early 1960s, he was auctioning off fleets of planes, shoe factories, and an iron works mill.

Auctioneering was certainly lucrative — he said that ‘One auction pays me more than a bank president makes in a year.’  From what I’ve read, many of these auctions were federal bankruptcy auctions (or auctions of companies that had seen better times), and his fees ran between 3 to 7.5 percent of the sale price.   (In 1996, one anonymous city official told Worcester Magazine that Aaron Krock “used to make his money on other people’s problems.”)

By the early 1960s, he had also acquired one of the properties most associated with his family — the Commerce Building (340 Main Street, bought in the late 1950s when State Mutual Life Assurance Co. moved to Lincoln Street), as well as the entire block on the corner of Main and Pleasant where the Honey Dew Donuts is now.

By the time of his death in 1972, Aaron had seen Commerce Bank’s assets grow from $525,000 to more than $36 million.

Whether or not Krock made his money on other people’s problems, a man was able to go from paperboy to owning whole city blocks, and build a financial foundation that continues to make his family one of the most powerful and influential in the city.

Edward Krock — an aside

No discussion of the Krocks would be complete without a short diversion into Aaron’s younger brother, Edward, with an equally Algerian rise to fame (Worcester newsboy to teenaged grocery store owner to personal fortune of $50 million) and a Gekko-like fall (serving on the boards of major corporations to largest personal income tax evader of his time).

I don’t think Aaron and Edward did business together — I haven’t found anything about it in my reading — but I figured I’d mention it in case anyone was wondering if it was Aaron who had to flee to the Bahamas to keep out of the federal penitentiary.  Nope — that was Edward.

The Rise of Barry

When Aaron passed away in 1972, his son Barry, then 39, stepped into the role for which he’d been groomed for years.

Barry attended Worcester Academy and BU.  He began working at Commerce Bank in 1955 as a messenger.  By 1956, he was assistant treasurer, then assistant vice president in 1957, and vice president in 1963.

In 1965, Aaron Krock acquired a controlling interest in Shrewsbury Bank & Trust Co., and Barry was made president.  He was 31 “and reportedly the youngest bank president in the country.”  In 1968, it merged with Commerce Bank, and he became vice president of Commerce.

In an extremely rare interview he gave to the Telegram in 1973, he said that, “My father wanted me to succeed him.  He stipulated it in his will.  I did not know it.  This is one thing he never told me.  It shows he had faith in me.”

Krock was also “a trustee and acting investor of National Trust of 390 Main St., a securities holding company which underwrites securities, manages industrial enterprises, serves as consultants and invests in special situations.”  The trust was, of course, owned by the Krock family.

Barry continued his father’s work in banking, real estate, and acquiring companies at a steep discount.

I gather that at some point 340 and 390 Main Street were no longer owned by Aaron Krock and his business partner Harry Talman (I think they had a falling-out).  In 1975, the buildings were acquired by Barry Krock and his then-business partners Herb Ingram and Commerce Bank vice president William Roberts.

Krock and Co. also acquired the building that inspired this post — the Central Building, 332 Main Street — in 1981.

Lawyers, Guns, and Money — and Burgers and Real Estate

This is not to say that all real estate deals Barry was involved in were as amicable.

The Park Chandler Realty Trust was established to buy the old Harrington & Richardson gun factory property on the corner of Park Avenue and Chandler Street (where the Walgreens drug store is).  Barry was one of the trustees.

The Harrington & Richardson factory was demolished with the intention of putting in a Burger King.

Some of the shareholders in Park Chandler Realty Trust alleged that Barry had a secret shareholders meeting on September 20, 1986, didn’t tell the other shareholders, and removed two people as trustees while electing himself and William Roberts (his real estate partner/Commerce Bank VP) as the sole trustees.

[How did this happen?  It seems he had 600 of the 1200 total shares, and worked with another shareholder — a majority of the shareholders at that point — to name Krock and Roberts the sole trustees.  I clearly do not have these kinds of skills.]

Barry, his wife, Janet, and some other trusts owned by family members also bought the Coppus Engineering Corp land — which adjoined the Park Chandler Realty Trust land — without involving the other members of the Park Chandler Realty Trust.

So they alleged that he cut them out of buying land next to the existing land — a conflict of interest — in an underhanded way.

I’m not sure what happened to the initial allegations (from 1987), but keep this in the back of your mind as we discuss what was eventually built on the property and another lawsuit about Krock’s actions as trustee of the Park Chandler Realty Trust.

So — Harrington & Richardson’s factory is knocked down, but the Burger King that was anticipated was never built.

For years (if you’re my age, much of you childhood), the lot seemed to be devoted to everything that an unsightly dirt lot is good for: carnivals, used car sales, waiting for something better to come along.

“Something better” in this case was a Stop & Shop supermarket, which Krock had attracted to the site in the early 1990s.

The problem was that Big Y was also pursuing a property for their own supermarket — at the corner of May and Mayfield, the site of the former Zayre.

Neighbors liked the proposal of the Big Y at May and Mayfield, and hated the proposal of another supermarket at Park and Chandler.

Barry fought anyway — he appealed the variance granted to the Big Y, which I think held up the process somewhat.  But — as we all know — Big Y was still able to get a building permit for the supermarket.

Barry was still stuck with the Harrington & Richardson property, and had earned the disgust of many of the neighbors in the Beaver Brook neighborhood and then-D5 councilor Wayne Griffin.

But he wasn’t stuck for long: Krock and Roberts (the trustees of Park Chandler Realty Trust) signed a 50-year lease with Walgreens in 1994.

Among other things, the lease said that a third of the rent should go to Superland Associates Limited Partnership, which is the trust for the land Barry & Co. acquired without the other members of the Park Chandler Realty Trust way back in 1986.  This would be to ensure that the Superland property would not be used to build a business that would compete with the Walgreens.  (That the Superland property is a dump that could never have anything that would compete with the Walgreens is, of course, beside the point.)

So, shareholders of Park Chandler Realty Trust (PCRT) sued Krock and Roberts (who died in 1996) for mismanagement and abuse of fiduciary discretion.

From “Krock to repay $500,000 to trust; Trustee diverted rental income from real estate trust” by Milton J. Valencia, 26 July 2006, Worcester Telegram and Gazette:

From 1988 to April 2005, Superland collected $707,250 in rent from the deal. The real estate appraiser, Martin J. Coleman, estimated it should have been more like $73,000. …

Much of the allegations pertain to Mr. Krock, such as the management fee of $170,000 he gave himself in 1997, which he said was owed for his duties. From 1998 to 2005, he paid himself $342,000.

Trustees are often paid for their services, and there’s no set law on how much they should be paid. Accountants testified managers could be paid 3.5 percent of gross rental income, though that work includes cleaning, management of the property, landscaping, snow removal and bookkeeping.

Mr. Krock did none of that, according to the court records, but charged a rate of $600 an hour, or $5,000 a day.

He was ordered to repay $282,000 of the money he collected, reducing his fee from $342,000 to $60,000.

That that particular Walgreens seems to be stuck somewhere between the first and third circles of Hell is not surprising when you think back to everything that’s happened there: stacking the trustee deck without involving all the shareholders, trying to build a supermarket no one wants after trying to build a fast-food restaurant no one wants, grossly overcharging management fees…

And that’s just one property.

In our next installment, we’ll talk about the ups and downs of Krock properties on Main Street.

Sources:

“Elect Krock Director, President of Bank” by Joseph H. Gauthier, 10 August 1955, Worcester Telegram

“Just Another Auction for Aaron Krock: Fleet of Planes Go on Block in Boston Next Week” – Worcester Evening Gazette, 1963

“For Him, Business Is a Vocation and Avocation” by Peter Donker, 11 February 1973, Worcester Telegram

“Three Area Men Buy Division of Singer Co.” 16 February 1978, Worcester Evening Gazette

“Coppus Site Purchase: Defendants Answer Suit” by Billings Kingsbury, 8 September 1987, Worcester Telegram

“Krock Is Sued in Land Purchase” by Billings Kingsbury, 7 August 1987, Worcester Telegram

“Ingram has stuff to make it work” by Robert R. Bliss, 10 February 1989, Worcester Telegram

“Who is Barry Krock?”, by Ellen O’Connor, 28 August 1996, Worcester Magazine; hie thee to the clipping file and read this article; you will not be disappointed!

“Mac attack“, by Walter Crockett, 1 May 1998, Worcester Phoenix; if you’ve gotten this far, read that column.  I aspire to be that level of biting commentary.

“Krock to repay $500,000 to trust; Trustee diverted rental income from real estate trust” by Milton J. Valencia, 26 July 2006, Worcester Telegram and Gazette

Many, many, many thanks to the biographical clipping files at the Worcester Public Library.