Why Should White Guys Have All the Fun? (26 page)

Wright walked off toward a midtown destination where other closing matters awaited. Before he left, he gave Lewis a contact phone number. As Fugett waited, Lewis used a pay phone to call Clarkson back at Lewis & Clarkson.

“Wright is standing by if you need him,” he told Clarkson. “Call him if you need something taken care of.” Not long afterward, Clarkson summoned Wright to the law offices, but there was no work to do when Wright got there. When Lewis called again to check up on things, he was furious to learn that Wright was sitting by idly when there was plenty of work to do on the McCall deal.

“Why the hell did you call him up there if you don’t have anything for him to do?” Lewis barked into the phone. “Why do you have him there when he could be doing something else?”

In the meantime, McCall’s chief financial officer had come up with a balance sheet showing the company had less than $1,855,000 in cash on its books. According to the agreement between Lewis and Playtex, TLC Pattern Inc. was owed $627,000, the amount of the deficit. Esmark balked at paying the amount and the matter was sent to arbitration. Lewis won in arbitration a year later and as part of the settlement was allowed to repurchase the TLC Pattern, Inc. stock—7.5 percent—that Smilow had demanded. As a result, all of the common stock in TLC Pattern was controlled by Lewis.

On January 29, 1984, the date of the McCall closing, everyone wondered about the $1 million Lewis was supposed to bring to the party. It should have been taken as an article of faith that he would show up with it, but not everyone was so sure.

“Until the day we got to the closing, everybody thought that some white guy was the money man and he was going to appear at the last minute,” Kevin Wright says.

Lewis arrived early at the offices of Kaye, Scholer, Fierman, Hays & Handler, a Manhattan law firm where the closing was to take place. After visiting the suite of offices reserved for the McCall closing, Lewis and Wright went downstairs to take care of some other matter.

Meanwhile, businessmen associated with the closing were starting to trickle into the closing offices upstairs. Where was Reginald Lewis? Surely he wasn’t going to be late for the closing? Was he out somewhere making a desperate, last-ditch effort to round up the $1 million, or was he really just a front man all along?

When the check for $1 million arrived, it wasn’t with a white businessman making a dramatic last-minute entrance, but in the hands of Reginald Lewis. He hadn’t lied when he claimed to be representing investors trying to buy McCall; Lewis just hadn’t bothered to say that he would be the principal owner. It is worth noting that he’d gotten a major deal done only after diverting attention away from himself—and his race.

As Lewis took his place at a conference table in one of Kaye, Scholer’s offices, he got another vote of confidence from Peter Offerman, who’d made the $19 million in Bankers Trust money possible. “I already put $20 million in your bank account,” Offerman coolly volunteered.

As the final touches to Lewis’s deal were administered, one part of Kaye, Scholer was devoted to real estate closings for mortgages on McCall land and property. Banking people were in another room. In the conference room that served as the nerve center was Reginald F. Lewis, standing serene and dignified near a conference table. Comporting himself in the manner of a powerful captain of industry would be no problem—Lewis had always carried himself that way. He was flanked by a coterie of advisers seated at the table, including Tom Lamia, who periodically passed along documents that required Lewis’s signature.

Like falling dominoes, the conditions for closing McCall were being satisfied one by one. Several hours had elapsed by the time the last document had been signed. The only thing left to do was wire the money to the bank. Afterward, Lewis and the scores of people working for
him waited for the ceremonial confirmation of the wire transfer, which would signify that the deal was closed. When confirmation came, Lamia turned to Lewis and said, “We’re now closed.”

Reginald F. Lewis was now the chairman of the board of the McCall Pattern Company. He had managed to acquire the company for $22.5 million without putting up a cent of his own money.

Lewis approached Lamia and did something he had never done before: He hugged Lamia, an act out of character for Lewis who hated being touched by nonfamily members. Lewis then handed Lamia his fee, a check for $75,000.

Although there was no doubt McCall belonged to Lewis, he still wanted to see something indicating it was his. He turned to a beaming Kevin Wright and said, “Okay, Kevin, where’s my stock certificate in TLC Pattern, Inc.?”

A look of dismay flashed across Wright’s face. “Oh, shit!” he thought. In fact, Wright realized that no one had prepared Lewis’s stock certificate, which would have been a big issue only if Lewis had been hit by a bus after leaving the closing. Still, Lewis wanted to see and hold that piece of paper, tangible evidence that he was attaining his true station in life. Wright scurried from the room and hastily had a stock certificate with Lewis’s name on it prepared.

After all the I’s are dotted and T’s crossed in a corporate buyout, it’s a tradition for the investment banking firm involved to throw a party in honor of the new purchaser. Bear, Stearns never held such a celebration for Reginald Lewis, to the consternation of Phyllis Schless. Chagrined, Schless and her husband took Lewis and his wife to dinner at The Four Seasons in Manhattan.

But all this was far from Lewis’s mind as he fielded congratulations. After taking a few moments to bask in the glow of his accomplishment, Lewis took Wright, Tom Lamia, and Charles Clarkson to the Harvard Club for lunch. Champagne flowed like water. After 11 years of trying to conclude a major transaction, and after nine roller coaster months of hell, he had finally pulled it off.

       
Piloting McCall for a 90-to-One Gain

Established in 1870, McCall Pattern is one of the nation’s oldest home sewing pattern companies. Its executive offices are located in Manhattan, New York City, while its production facilities are in Manhattan, Kansas. In 1984, the company had 580 employees.

At the time of Lewis’s acquisition, McCall was making approximately 740 patterns for home sewing. Many of the patterns were based on drawings by such well-known designers as Willi Smith, Liz Claiborne, and Laura Ashley. Eighty-seven percent of its revenue came from the United States, with the rest coming in from Puerto Rico, the United Kingdom, Japan, Mexico, Canada, Australia, and other countries.

McCall was then the second-largest company in the home sewing pattern business with 29.7 percent of the market. Its major competitors were Simplicity Patterns with 39.4 percent of the market, Butterick with 19.1 percent of the market and Vogue with 4.7 percent of the market.

The company had revenues of $51.9 million with income of about $6 million.

This was the company that Reginald Lewis took over and by the time he sold McCall three years later in June 1987, Lewis had piloted the company to the two most profitable years in its history. Under him, McCall’s income doubled in 1985 and 1986, years the company
earned $12 and $14 million, respectively. And Lewis made himself a very wealthy man in the process. But within two years after he sold the company, he would be the subject of a major lawsuit. All this was still to come, as Lewis assumed the chairman’s office at McCall’s 230 Park Avenue headquarters in February 1984.

As intense and focused as Lewis was prior to buying McCall, he kicked up his intensity level a couple of notches and became even more driven. He acted as if every decision carried life and death ramifications.

Lewis ran McCall with a firm, yet innovative, hand. His style was an amalgam of Wall Street financial savvy, Harvard legal acumen and brassknuckle street toughness from East Baltimore.

“When he realized how people reacted when he turned up the heat a little bit, he used it,” Kevin Wright says. “It was fun for me to watch this African-American intimidate these very senior, established Caucasian businessmen. His entire demeanor just changed and sometimes he was acting and sometimes he wasn’t. He could generate incredible passion, angry passion. He would just tell you in no uncertain terms that your way was fucked up, that this was the way it was going to be done, he’d tell you why it had to be done this way and that’s it. He’d give you a speech, an angry, passionate speech that could go a minute, two minutes, however long he felt he had to talk to get his point across.”

“Reg was a powerful person even before he became rich,” Tom Lamia remembers. “He could be bullying at times, he could be charming at times, and he could be bullying and charming in the same conversation. Reg could intimidate people rather easily. There were many people who wouldn’t have dared to breathe a word of criticism around him. He had a dark side, a brooding side.”

Ultimately though, Lewis was toughest on himself. Whatever his successes, he would invariably ask himself, “Why didn’t I accomplish more?”

At home in his study, Lewis would indulge in a lifelong habit of rating his performance as well as those of his executives. Like a hard-to-please schoolmarm, Lewis would dole out A pluses, A’s, B minuses, C pluses, and so on.

Nor was his personal life exempt from constant assessing and quantifying. He loved to talk about his tennis game and where it was at a given point in time, but Lewis couldn’t resist the impulse to dispassionately analyze the components of his play, be it his net game, serve or return of service. He’d grade himself on his oft-used A to F scale.

Lewis would even rate novels or magazine pieces he was reading. His mind was constantly gauging, seeking ways to fine tune and perfect. It didn’t matter that perfection was usually unattainable—the quest for perfection was its own reward.

Lewis was also constantly writing notes to himself, calculating the bottom line, scribbling out agendas and tasks to be accomplished during the day, a habit that first surfaced at Virginia State. Whenever Lewis would meet with Wright or Clarkson or members of McCall’s management team, he would always take copious notes.

Lewis actually spent little time at McCall’s plush executive offices on the entire 10th floor of 230 Park Avenue in Manhattan. He had a two-office suite created for him there, but his favorite lair was his law firm at 99 Wall Street. He would go to McCall’s offices periodically to make his presence felt, however, and to put the executives on notice that the new owner was watching.

Lewis still tried his hand at practicing law from time to time, but those occasions had grown infrequent enough to become noteworthy.

“Every so often during the McCall days, Reg would expressly remind us that he was the client. I mean, he’d say it in those many words,” remembers Laurie Nelson, one of Lewis & Clarkson’s lawyers. “He’d say, ‘Laurie, right now I am the senior partner of this law firm and I am your client. And when I ask you certain questions, you’re going to report to me as the client first. When I am done listening as the client, I’ll put on my senior partner hat. And then we can analyze the work.’

“Sometimes the demands he would make on people would seem unreasonable. The thing was, the demand was 300 percent of the expected result. So if you took the demand at face value, you’d go nuts. You needed to take the demand to mean, ‘I want the best you can give me, only I want it twice as fast as you’re capable of doing it,’” Nelson says.

Lewis’s demanding attitude may have made him a difficult boss but it also enabled him to raise the level of everyone’s game.

“One of his strongest traits or characteristics was his leadership ability,” says Everett L. Grant, III, whom Lewis hired in 1985 from the Price Waterhouse accounting firm to be a TLC Group vice president. Lewis had the ability to make people “achieve more than they ever thought they could,” Grant says.

Under Lewis’s stewardship, McCall undertook a number of innovations that increased its profitability.

Under Norton Simon, McCall had focused on operating profits and market share. Because of the shrinking market for home sewing patterns, its former owners believed that operating profits and market share were critical to the company’s survival.

However, under the Lewis regime, a new yardstick for measuring operations emerged: cash flow. Because of the highly leveraged nature of the acquisition, McCall had a sizable amount of debt to retire and thus Lewis devoted most of the company’s efforts to conserving and generating cash. That meant many things would be done differently than in the past. For example, whereas bills had always been paid when they came in the door under Norton Simon, Lewis decreed that they would be paid within 30 days, freeing up accounts payable money for an additional month.

Under Lewis, McCall’s assets were always operated with an eye toward generating additional cash. He came up with the idea of using idle presses not grinding out sewing patterns to make greeting cards. As a result, greeting cards became an important profit center for the company and eventually McCall began to export these cards to overseas markets.

Lewis also shelved McCall’s pension plan and instituted a 401k program, freeing up an additional $648,000 in cash that was used to pay down debt.

Not all of Lewis’s McCall innovations were financial in nature. He set out to change the home sewing pattern industry’s less-than-glamorous image by having the company sign up celebrity licenses with, among others, Diahann Carroll, Shari Belafonte-Harper, and
Brooke Shields. All three appeared in publicity photos wearing McCall designs.