Beauty turns ugly

ATLANTIC CITY, N.J. -- For 81 years, the Miss America Pageant has managed to right its crown and keep smiling -- through sex scandals, bra-burning protests, judging improprieties and its own struggle to remain relevant.

These days, no one is smiling at 2 Miss America Way.

Worsening financial problems, the messy departures of CEOs, a wave of criticism by state pageant officials and back room politicking by the Miss America Organization's board of directors have put the pageant in tumult.

"It still has intrinsic value, but I think it needs leadership very badly," said former CEO Leonard Horn, who retired in 1998. "Unless and until they do the right thing to try to find the right leadership, I think the future of the Miss America program is in doubt."

Strictly speaking, Miss America is not a beauty pageant. Under its bylaws, the Miss America Organization is a tax-exempt charitable organization that provides scholarships to young women.

Living off $6 million

Historically, it has managed to subsist on the $6 million it had been paid annually by its TV-network sponsor. But burgeoning production costs, huge increases in payroll and the economy have taken a toll.

Wall Street, in particular, has hurt the pageant: Investment income, which had averaged $1.3 million annually in the late 1990s, dropped to $176,000 in 2000. Last year, Miss America's portfolio lost $919,000, according to a recent report by outside auditor Matthew J. Reynolds, a CPA.

According to its tax returns, the Miss America Organization has lost money on an operating basis each of the last five years.

As of its 2000 tax filing, the Miss America Organization still had $10 million in the bank. But the auditor suggested cutting the amount spent on scholarships -- the purpose of the program -- from the $1.1 million directly spent last year. He did not suggest an amount.

More fiscal headaches could be on the way.

ABC, which paid $300,000 less for the TV rights in 2001 than it did in 2000, could pay even less this year, although ABC spokeswoman Cathy Riehl declined to comment on the reason for the decrease.

And the organization may face a major tab from its lawyers when the case of fired CEO Robert L. Beck goes to trial.

Beck, who was hired in 1999 to replace Horn, proposed that the pageant drop its long-standing ban on contestants who had abortions or had been married. Loyalists were outraged, saying the changes would undermine the feminine ideal Miss America stands for.

Beck was fired two weeks after the plan was made public. In addition to severance pay, his suit seeks to force the pageant to drop the ban. It goes to trial April 8.

Creating slot games

His successor struggled, too.

Robert M. Renneisen Jr., a former casino executive, developed an agreement for a Miss America slot machine. That was criticized by Miss America 2002 Katie Harman and others who cringed at the idea of a machine that plays "There She Is."

Renneisen's plan to move the pageant to the Mohegan Sun Casino in Uncasville, Conn., was defeated by the pageant's board of directors.

Five state pageant directors came to Atlantic City to complain to the board about Renneisen and his staff, and presented a 1 1/2-inch-thick file of correspondence backing up their gripes. It included a letter sent by Harman's parents criticizing the way they and their daughter had been treated. The complaints ranged from Miss America being billed for $2,248 in catering expenses for a post-crowning party in her honor to unreturned telephone calls to pageant headquarters.

Three weeks after the five state officials aired their complaints, Renneisen resigned on March 1.

Ten days after that, interim CEO George Bauer announced the dismissals of two vice presidents in what he said was a cost-cutting move.

Two board members who sided with Renneisen's proposal to move the pageant out of Atlantic City also resigned but declined to comment.

A confidential Feb. 8 memo written by Renneisen offers a glimpse inside the board room. In it, Renneisen complained that board member David Frisch -- who had been a candidate for the CEO job when Renneisen got it -- worked against him.

Frisch, described in the memo as "embittered and resentful," did not return telephone calls seeking comment.