Why Should White Guys Have All the Fun? (19 page)

Lewis was proud of his wife’s achievements. After Loida passed the 1974 New York Bar examinations making her one of the first Asians to do so without attending a law school in the United States, she applied for a lawyer’s position at the U.S. Immigration and Naturalization Service and was turned down. With Lewis’s backing and his firm as her counsel, she sued INS alleging discriminatory hiring practices and won three years in back wages. During the three-years’ hiatus, Lewis supported Loida’s decision to practice law with Antonio Martinez,
who ran a law office specializing in Hispanic immigration. In 1979, she was sworn in as a general attorney with the INS and, for eleven years, stayed on the job even after Lewis’s success in the business world. She finally said goodbye to the service in 1990 in order to relocate to Paris with her husband and children.

Loida sums up her 24-year marriage as exhilarating. “I knew I would not meet another man like him again,” Loida Lewis says of her late husband. “He was masterful.”

       
“I Was Not Ready”

When he was the subject of glowing news stories after acquiring Beatrice International in 1987, Reginald Lewis would complain about how some of the media made it look as if he’d achieved his success quickly and effortlessly. “That’s not true. I was no overnight success. It took 25 years of hard work to get to where I am. That’s what everyone has missed,” he would tell people.

His success had been achieved at great personal expense. His metamorphosis from unknown, struggling lawyer to celebrated, international financier was a lengthy, at times painful, affair. His initial attempts to purchase companies uniformly failed, not for lack of effort, but for a host of reasons that Lewis later crystallized into one.

“I was not ready,” he concluded, characteristically coming down hard on himself.

These early failures resulted in numbing depression and stinging self-doubt the likes of which the supremely confident Lewis had never encountered.

As an attorney, Lewis participated in scores of deals where his legal expertise helped others acquire companies. Tired of operating based on the whims of MESBICs and borrowers, Lewis was ready to leave law practice behind and do corporate acquisitions himself.

One source of Lewis’s disappointment with his law practice came in 1979 when new Ford Foundation head Franklin Thomas, who happened to be African-American, decided to cut off all business to Lewis’s law firm. The Foundation had been one of the firm’s
largest clients and to lose this revenue for no clear reason frustrated Lewis.

Another setback suffered by Lewis had to do with Aetna Life and Casualty. Lewis & Clarkson had been doing legal work for the mortgage financing division of Aetna since 1979. The division had made it a practice to use minority firms whenever possible. In 1984, Aetna’s legal division changed managers and the new regime demanded that Lewis & Clarkson go through the whole interview process from scratch, including submitting bios for all of Lewis’s attorneys, as well as an explanation of the type of work they did. The demand enraged Lewis. He and Clarkson drove over to Aetna’s offices with Lewis bellowing the entire time as a cringing Clarkson kept his mouth shut, silently wishing they would get to their destination quickly, so he could leave the car.

“Why the fuck do we have to prove ourselves over and over?” Lewis asked. “I’ve got to go to the other side of the table. This is not the way I want to spend the rest of my life.”

Lewis’s first opportunity to “go to the other side of the table” and become an acquirer and owner of a company came in 1975. The target was a black-owned firm in Baltimore named Parks Sausage. The company’s founder, Henry Parks, was suffering from Parkinson’s disease and ready to get out of the business.

An old friend once said that you have to kiss a lot of frogs before you meet one prince. This sums up the search for deal opportunities. When Henry Parks was said to be ready to sell Parks Sausage, of “More Parks Sausage, Mom” fame, I joined the fray. I lined up some local Baltimore support and talked to Chemical Bank and even got a letter out of them saying they would support my proposal. Parks Sausage was then traded publicly, but it was controlled by Henry Parks and his longtime partner, Willie Adams, who was a legend in the Baltimore community
.

Ellis Goodman, Lewis’s friend from his days at the Baltimore country club, had a connection to Parks: his father-in-law knew Henry Parks personally. Lewis asked Goodman to arrange a meeting.

I came down to Baltimore for the meetings and met Henry Parks privately first, then with Willy Adams at Ellis’s office. I might as well have been the man from the moon. They just were not having any of it. I persisted nonetheless, explaining how I knew how to put the deal together, inviting them to stay involved, and saying all the things from deal-making 101
.

The total value I proposed was about $3 million, which was a good premium to the then stock price. After several more visits and the bank letter, as well as other letters from my sources of financing, Willy Adams said, “Look, you’re a sincere young man and I believe in helping our young people, so before I take another bid, I’ll give you a shot at topping the other offer.”

Well, I thought, that’s progress. Wrong. Within a week, Lehman Brothers brought in another buyer, signed and announced the deal the same day at a price roughly the same as mine. When something like that happens to you and when you are inexperienced and let your ego run wild, you are crushed. You second-guess every decision you made, when rarely does any of that matter
.

It’s just a deal that got away. You move on. Easy to say now, but not then. I felt it for weeks. But I was later to learn it gets worse
.

Lewis, who was 31 at the time, had made quite an impression on the Parks team.

“He was dapper,” recalls Parks Chairman and CEO Ray Haysbert, who was a company vice president at the time. “And he had an air of confidence. I guess that stemmed from his education and prior experiences as a lawyer. And he dressed like a New Yorker—as I recall it, dark blues, and very white shirts with very stiff collars and I guess what passed for power ties.”

But it wasn’t enough to carry Lewis over the top, Haysbert muses. “As usually happens to young black people—black men—there was a credibility gap. They didn’t believe he could back it up.”

Lewis’s mother, Carolyn Fugett, recalls that her son came to Baltimore with a check for $1 million in his briefcase when he was trying to close the Parks deal. It was all she could do to keep her composure upon seeing his immense disappointment over the failed transaction.

“It hurt him deeply,” Mrs. Fugett says. “He foresaw that he could take that company and make it a giant among all companies. I think it impugned his ability.”

Lewis managed a wan smile for the benefit of his mother, who wound up doing more talking than he did. She assured him that one day he would buy a business that would make Parks seem puny by comparison.

“I hope you’re right, Ma,” said Lewis, who had nothing else to say.

Returning to New York, Lewis rededicated himself to the practice of law. But his desire to buy and run a company continued to burn unabated. Lewis was to take a second stab at the corporate takeover game, an experience that left the aspiring business mogul shattered and reeling.

The subsequent attempt took place in 1977, two years after Lewis’s unsuccessful run at Parks Sausage. The opportunity materialized one day during a tennis match in Los Angeles, where Lewis had travelled for a business conference. During the game, Ricardo Olivarez, a close friend whom Lewis had met during one of his MESBIC deals and would later nominate to the boards of both McCall Pattern and Beatrice International, introduced him to a businessman named Paul Christian.

Paul, Rick, and I loved tennis and we got in a game during a break in the conference. Paul had heard about my ability to raise capital and asked me about the kinds of situations I was interested in. I said, low-tech, high cash flow, and good management. Paul, who was a finder (broker) and had a lot of contacts, responded with the proverbial “Do I have a deal for you.” Ever eager, I said, “Let’s hear it.”

The company’s name was Almet. Well, it was a fine company. Superb record of growth in an interesting industry—leisure furniture. Sales about $12 million, profits about $1 million; $3 million in cash on the balance sheet at year end, two plants. It was 40 percent owned by an outside investor who was ready to exit after 17 years in the deal, and 40 percent by the president of the company, a 61-year-old man named Bill Cammer
.

Paul arranged for a meeting between myself and Bill Cammer. Almet’s plant and offices were in Vernon, California, in an industrial park near downtown Los Angeles. What followed was a 1½-year
courtship of Bill and his associates. To this day, I believe it was among my best work
.

Detail-oriented Reginald Lewis left no stone unturned in his efforts to woo Cammer, marvels Charles Clarkson, who was also involved with the Almet deal. Not only did Lewis send birthday and wedding anniversary cards to Cammer, he even sent them to Cammer’s wife, along with gifts and roses, Clarkson says. Lewis even went to the trouble of helping Cammer’s daughter get a job.

Cammer was a chain-smoking, hard-working, driven man who has been described as “a lunatic.” He later said he was favorably impressed by Lewis, who had a Harvard Law School pedigree and shared his ambitious plans for Almet’s future with Cammer.

Almet was a medium-sized company with a profitable market niche. It made aluminum beach chairs and umbrellas. The key to buying Almet was Cammer, whom Lewis was counting on to manage the company as President and Chief Operating Officer.

Lewis painstakingly put the pieces of the puzzle together. As his acquisition vehicle, he set up a company called Republic Furniture and Leisure, Inc. whose initials just happened to be RFL. RFL, Inc. would purchase all the shares of Almet including those held by Cammer and other managers and Cammer would operate the company for RFL, Inc. with a fat employment agreement as his incentive.

Lewis convinced Chemical Bank to put up $5 million of the $7 million purchase price. He then went to several of his MESBIC clients, including Equico, and asked them to put up the rest of the money in subordinated debt. Six of them agreed. An actual contract of sale was signed by Cammer and the other shareholders. Chemical Bank transferred the $5 million to its branch in California where the closing would take place. Everything seemed to be going according to Lewis’s plan.

The day of the closing arrived. Clarkson had flown to California while Lewis stayed in New York and dealt with the bankers. The final signing of documents was scheduled to take place at the offices of Almet’s law firm.

Representing Lewis were Clarkson and Tom Lamia, Lewis’s California counsel, of the firm Paul, Hastings, Janofsky and Walker. Also present in the room were representatives of Chemical Bank and the six MESBICs. On the other side of the table were Cammer and his lawyers.

Ah, but the story does not have a happy ending. In fact, it was a disaster—no deal
.

We got to a definitive agreement after 1½ years of meetings. I put together a $7 million package consisting of $5 million in bank financing and $2 million of subordinated debt with warrants to own about 40 percent of the company. I was putting up about $200,000 together with my brother Jean Fugett, who was then a tight end with the Washington Redskins. To make a long story short, after two years of work—on the day of the closing—Bill decided to back out of the deal
.

It was unbelievable. He simply wanted out and figured he would break the deal, contract or no contract. The fact is that I had to let it happen because if he did not want to continue after the sale to help run the business, then it was a very different deal
.

The deal never closed because at the last minute, Cammer announced that he would not sign his employment agreement, which was one of the conditions of the acquisition. Worried, Clarkson and Lamia decided to call Lewis. Lamia briefed Lewis and then put him on speaker phone in the room.

That conversation remains etched in Clarkson’s memory. Huddled around the phone on the West Coast were Clarkson, Lamia, the various representatives of the lenders, and Cammer and his lawyers. Lewis and his associates hovered around a speaker phone in Manhattan. Also listening in at another speaker phone were Chemical Bank executives at their office in New York.

Cammer puffed on one cigarette after another. Appearing quite nervous, he seemed to be shaking slightly during the conversation. He began by saying that the conditions for closing had not been met and therefore the deal couldn’t close. He repeated to everyone that he would not work for Lewis and would not sign the employment agreement.

“And since he was really the pivotal operating person, the whole deal fell apart,” Clarkson says.

Cammer did not stop there however. Clarkson was incredulous when he heard what Cammer said next. “I do not want to work for Reginald Lewis. I will not work for someone who has offered me money under the table,” Cammer said.

Everyone involved in the acquisition attempt blinked disbelievingly. “Here we are taking notes at a conference call and this guy is, you know, saying things that any intelligent person in the world would know would be libelous—slander! He virtually called Reg a liar and a cheat,” Clarkson says.