Marvel Comics: The Untold Story (51 page)

Gruenwald was forty-three years old, a nonsmoker who exercised regularly. But over the last year he’d been in the position of removing dozens of freelancers from titles and seeing his longtime colleagues put on the street. Those closest to Gruenwald had no doubt that Marvel’s disintegration was one of the reasons for his death. In the words of one friend, “He was so attached to that place, and it had stopped being what it once was, and what he had worked so hard for it to be. It took the soul out of him.”

Against all odds, things had gotten even worse at Marvel—“Mark’s death just seemed to symbolize the collapse of the whole place,” said one former editor. But rather than address the crumbling of the core business, the Perelman regime continued to focus on inflating the company’s paper value. Before Marvel CEO Bill Bevins retired, due to his own heart trouble, he made a move to replace Jerry Calabrese, who’d only been president a year. David Schreff, a clean-cut former president of marketing at the NBA, succeeded Calabrese. And when Bevins stepped aside, Schreff had a new boss: Scott Sassa, a thirty-seven-year-old, Hollywood-connected whiz kid from Turner Entertainment Group. Although Sassa spent more time in the Marvel offices than the haughty Bevins had, his focus was on moving the company’s characters into other media—clearly, the comic books weren’t making much money. Sassa drew up plans for theme restaurants and Internet initiatives.

“All of the outside executives that were brought in after Stewart and Calabrese thought that they were joining Disney, that the Marvel brand was much more ubiquitous than it really was,” said sales director Matt Ragone. “Marvel was not Disney. The characters have edge; the stories have violence. But they counted the number of characters and changed the tag line of all press releases to say that Marvel owned 2,000 characters, because they wanted to leverage the entire character library. Well, the reality is that only a handful of these characters—The Hulk, X-Men, Spider-Man, Captain America, Iron Man—had any identity to the general population.”
*

It was too late, anyway. After posting third-quarter losses, Marvel’s public debt—$1.2 million in junk bonds, about 50 percent more than the stock value of the company—was downgraded, and stocks dropped. Wall Street experts expected a cash infusion from Ron Perelman, who’d just lined his pockets selling New World to Rupert Murdoch for $2.5 billion. “MacAndrews & Forbes is not going to sit by and allow its investment to slide into bankruptcy,” an analyst said of Perelman’s holding company.

After discussions with Ike Perlmutter and Avi Arad, Perelman finally presented a recapitalization plan: Marvel would pay $22 a share to purchase Toy Biz (Perlmutter and Arad would get $200 million and $60 million, respectively, plus bonuses); then 410 million new shares of the merged company would be printed and sold to Perelman for $350 million. The trouble with this plan, of course, was that the millions of new shares (which Perelman would purchase at a bargain price of 85 cents each) would dilute the company stock by 80 percent. And it wasn’t just stockholders who were aghast; shares in Marvel had also been used as collateral to bondholders. Within days, stocks dropped again, and shareholders filed lawsuits against Perelman.

At the end of the week, Scott Sassa—who had been on the job for less than a month—announced another staggering round of layoffs. A third of the remaining 345 Marvel employees were cut.

Reports surfaced that one of Perelman’s advisors had quietly met with major bondholders, who dumped their investments only days before his controversial recapitalization announcement; lawsuits followed.

There was another major bondholder, though, who didn’t get a warning. Carl Icahn, like Perelman, was a corporate raider with ties to Michael Milken; he’d been one of the inspirations for the character of Gordon Gekko in
Wall Street
. If anyone was less abashed about grabbing for money than Perelman, it was Icahn, an abrupt, high-stakes gambler. Once, when asked during a congressional hearing why he’d instigated a hostile takeover, he’d responded, “Do you ask Willie Mays why he jumped a certain way for a ball?”

Now Icahn aimed to use his position as the chief bondholder (he owned nearly a third of the debt) to block Perelman’s plan. And if Marvel defaulted on its bank loans, the bondholders could collect the collateral—a substantial number of (undiluted) shares. Icahn could take over Marvel.

There was an escape hatch for Perelman, however: if Marvel declared bankruptcy, the court might rule in favor of his Byzantine recapitalization plan; he wouldn’t even need the approval of the bondholders. On December 27, 1996, Perelman’s various holding groups, set up like Russian nesting dolls, filed for Chapter 11 protection in Wilmington, Delaware: Mafco Holdings, which owned MacAndrews & Forbes, which owned Andrews Group, which owned Marvel III Holdings, which owned Marvel Parent Holdings, which owned Marvel Entertainment Group and Marvel Holdings.

For the fourth quarter of 1996 alone, Marvel posted losses of more than $400 million. Some bar mitzvah.

A
t the beginning of 1997, as fleets of lawyers were shuttling from New York to bankruptcy court in Delaware, Scott Sassa and David Schreff brought in Shirrel Rhoades, a veteran of the magazine world, as vice president of publishing. Rhoades was assigned two immediate tasks, both of which involved undoing actions by previous administrations.

One was to pull the plug on Heroes World. Marvel quickly laid off all fifty-seven employees and announced an exclusive deal with Diamond Distribution, which would now have a virtual monopoly on all comic book sales. Marvel’s foray into self-distribution had not only been self-sabotaging; it had also upset the balance of power throughout the industry.

Rhoades’s second mission was to fly out to California and tell Jim Lee and Rob Liefeld that Marvel was canceling the “Heroes Reborn” experiment. Liefeld had seen the writing on the wall when, on a trip to New York, a pair of Marvel editors smugly reminded him that the executives who’d decided to hire him were no longer at Marvel. Although sales had increased, the degree of improvement couldn’t justify the high fees. Marvel was also tired of Liefeld pushing deadlines. “The only way he’d give Marvel the pages of each issue,” Rhoades recalled, “was by flying a guy to New York with instructions not to turn over the disk of finished material until we handed him a check—something like a hostage exchange. I would hold out the check, he would hold out the disk.”

Marvel wasn’t the only company displeased with Liefeld. The Image fraternity had fractured the previous year, after Todd McFarlane had vocalized his disapproval of Lee and Liefeld’s return to Marvel. (Even Frank Miller, who’d practically been Image’s patron saint, said he “felt like I’d made a fool of myself by standing up for those guys.”) Then, amid allegations that Liefeld was poaching talent from his partners’ studios and not paying employees, the other six cofounders told Liefeld over a conference call that he was going to be ousted from the company.

McFarlane’s thick Canadian accent droned over the speakerphone. “Uh, in case we’re doing something illegal here, you know, then we’ll come back and do it again, but uh, we don’t like you no more, and we’re kicking you out of the company, and do I hear anybody disagree with me? And if I don’t, then let me take a formal vote. . . . Okay, bye, is that it? Anybody else got anything to say? Nope? Okay, good-bye.” The line went dead. Liefeld was out.

McFarlane went on to rant about his former sidekick in interviews. “Over my dead body,” he declared, “will that kid come back to Image Comics.”

Liefeld would soon be singled out by Marvel as well. “I got to California,” recalled Rhoades, “and at two in the morning, I get a call from Scott Sassa, who said, ‘Just make this a goodwill ambassador mission, I know you can do it, you’re our Great White Hope.’ What it really came down to was that Sassa and Jim Lee were both Korean-Americans, and they liked each other, and Scott didn’t want to screw Jim over. So I go out and make pretty to everybody, and Jim shows me his office that looks like the deck of the Starship Enterprise, and Rob invites us in and does his self-serving little dance.” As soon as Rhoades returned to the East Coast, he sent a letter to Liefeld informing him that his contract for
Captain America
and
The Avengers
was being terminated. (Jim Lee, who by now enjoyed a rivalry with Liefeld, would take over the titles until the contract ran out.)

Liefeld quickly announced plans for a comic called
Agent America
, featuring a suspiciously familiar-looking patriotic character (complete with teenage sidekick and an archenemy named the Iron Skull), into which he would rework his leftover
Captain America
plots. After Marvel threatened legal action, Liefeld abandoned
Agent America
and bought the rights to the Fighting American—the star-spangled, shield-wielding rip-off hero that Joe Simon and Jack Kirby had created in the 1950s as a riposte to Marvel’s ownership of Captain America. Then, to amplify the similarities even more, Liefeld gave Fighting American a shield to throw. Marvel sued, and a judge ruled that Liefeld could continue to publish
Fighting American
only if he made specific changes. Both sides claimed victory. In a matter of months, Rob Liefeld had gone from competitor to prodigal son to pariah.

I
n the minds of many, Marvel’s time in bankruptcy court would be reduced to a power struggle between Ron Perelman and Carl Icahn. But there were, in fact, two other major forces at work: there were the banks to whom Marvel owed money, who just wanted their hundreds of millions of dollars back, and there was Toy Biz, which wanted to protect its exclusive and nonexpiring license to make Marvel toys. Over the next several months, a head-spinning number of alliances would be formed and dissolved between the four sides, in varying permutations, as teams of lawyers screamed obscenities at one another.

After the bankruptcy judge ruled in March that Icahn and the bondholders could foreclose on the stock collateral, Ron Perelman withdrew his recapitalization plan, on the condition that Icahn would not bring legal action against his team for any mismanagement of Marvel over the previous years. (Perelman did not, however, insist on immunity for Toy Biz’s Ike Perlmutter and Avi Arad. If Icahn needed to squeeze them out of the company, so be it.)

By now, Ike Perlmutter was no longer on speaking terms with Perelman. “How you feel when somebody promise you and agree to pay you eighteen and a half a dollar a share, and a few months later you find you have zero?” he asked the court. “How you feel when you lose $200 million?” Perlmutter and Arad briefly aligned themselves with Icahn, until Icahn confirmed their worst fear—if he took control, he would try to nullify Toy Biz’s contract for the Marvel license. So in April, Toy Biz announced its own plans for acquiring Marvel, a leveraged buyout in which the banks would receive $420 million in cash and a 28 percent share in a merged Toy Biz/Marvel company, plus proceeds from the sales of Fleer and Skybox. Icahn was furious. “I will crush your company,” he told Perlmutter, “just like I did at TWA, at Texaco, and at U.S. Steel.” In response, Perlmutter faxed Icahn a clutch of threatening pages from the Old Testament.

But Toy Biz second-guessed the terms of the merger after conducting due diligence and withdrew its proposal. Perlmutter instead cut a deal with Icahn, and then, just as suddenly, backed out of that, too. Toy Biz was flailing around, looking for delaying tactics.

The court, however, was ready to move forward. On June 20, the bondholders were granted control of the Marvel board, with Carl Icahn installed as chairman. The company wasn’t entirely his yet, though. Marvel would remain in bankruptcy while the banks continued to wait for an acceptable proposal. At the behest of the banks, Ron Perelman would remain a fly in the ointment, doing what he could to prevent Icahn from winning ownership of Marvel. But his days with Marvel were effectively done. He’d done okay for himself, though, having lined his pockets over the years to the tune of $300 million.

“One day [Scott] Sassa was there in the center of the bullpen assuring the publishing staff that Perelman would prevail over the barbarians at the gate,” recalled publisher Shirrel Rhoades. “The next day he’d disappeared, never to be seen in the Marvel offices again.” The following week, employees were surprised to see retired Marvel executive Joe “the Squid” Calamari saunter into the office. Calamari, who had volunteered his consultancy services to Icahn at the rate of $1,500 a day, was the new president. “Joe Calamari shows up and says, ‘I’m in charge,’ ” recalled another senior-level employee. “We didn’t even know if it was true! It wasn’t like Carl Icahn came in and called a meeting and introduced Joe Calamari as president. It seemed like Joe just showed up on the doorstep one day.”

Even more than the executives who’d preceded him, Calamari was eager to implement his own ideas for the company. Some of his strategies seemed to reflect a desire to return to past glories: Chris Claremont was hired as editorial director,
*
and Michael Golden, the fan-favorite artist whose early 1980s work had inspired the Image generation, was named art director. Other Calamari initiatives—like promoting Marvel’s comics at hot-air balloon festivals, or creating the world’s largest pizza for the Chicago Comic-Con—seemed downright quixotic. He tried, to no avail, to convince the editorial department that it should create two new universes to replace the classic Marvel one. They’d been down that road with Jim Shooter already.
*

“It was a bit of a disaster,” Shirrel Rhoades said of Calamari’s appointment. “Calamari is ADD. He cannot hold a coherent thought for 13 seconds. You go in and ask him A, and he’s off on B and G and Z, and you walk out saying, ‘What did we decide?’ I thought Calamari was the worst boss that I’ve ever had in 45 years in publishing. He meant well, but he was very ego-driven, and he wanted to screw around with movies.”