The Chairman (10 page)

“Vince and I want to buy McGuire & Company back from you.”

And that explained everything. “That’s interesting,” Gillette said slowly. “Obviously, it’s a surprise and I need time to think about it.”

Everest had acquired McGuire & Company three years ago for a hundred and fifty million dollars. Tom and Vince had done well in the original buyout, grossing five million each, but the venture capital firm that had originally backed the brothers had raked in the lion’s share of the payout. Tom and Vince were comfortable now, but not wealthy. After paying taxes and what they owed on several personal loans, they’d netted a million each in cash. A decent sum, but not enough to retire on.

So they hadn’t. They’d stayed on after the transaction to run the company for Everest, signing long-term contracts to be co-CEOs. And they’d run it well, doubling revenues and tripling profits in the last three years. Now they wanted the big payoff. They wanted to cash in on the stock options Everest had given them as part of the contracts to stay on after the acquisition. The options were worth tens of millions on paper, but nothing in cash because the firm was private and the shareholder agreement didn’t allow them to exercise the options and sell the underlying shares unless Everest consented. Gillette could see that money-hungry look burning in Tom McGuire’s eyes.

“You and Vince have done a great job running this thing, Tom. You know how much we at Everest appreciate that.”

“Then let’s agree on a price and do a deal,” urged McGuire.

Gillette didn’t want to have this discussion now. As the widow had counseled him at the funeral reception, he wanted to negotiate on his terms, at his time. But he didn’t want to irritate Tom McGuire, either. The man was directly responsible for his personal security. “Where would you get the money?”

“We have a backer,” McGuire answered quickly, giving away nothing specific. “Someone who’ll supply the funds and give us 50 percent of the stock to manage the company. And we don’t have to put up a dime.”

“Fifty percent?”

“Yeah.”

“When did this person approach you?”

“A few weeks ago.”

“Did you tell Donovan?”

“Of course. Right away. Bill thought it was a great idea. I’m surprised he didn’t tell you.”

“Me, too.” There was no way to know if McGuire was telling the truth about that. The McGuire brothers were different in many ways, but they shared a poker face a Vegas high roller would have cut off a hand for. “Who is this person?”

“Asked me not to say yet. Not until we’ve agreed on a price.”

“Why?”

McGuire shrugged. “Beats the hell out of me. You probably have a better idea than I do why there’s so much concern about staying anonymous. You finance guys are more paranoid about secrecy than we are in the security business.”

This was a problem, Gillette realized. A
huge
problem. He needed the McGuires on his side. He needed to be able to trust them—with his life, given everything that was going on. But if he didn’t negotiate with them, they’d be furious. Then how safe would he be? “How much were you thinking about paying?”

McGuire smiled. “I was thinking you’d tell me. You’re the money man. I don’t know much about this financial stuff. I’m just a security guy.”

McGuire was trying to be cagey, trying to get the other side to talk first so he wouldn’t leave anything on the table, but it wasn’t going to work. Gillette had a lot more experience in this kind of chess match than McGuire. “I’m sure your backer gave you some indication of what he’d pay.”

“Well . . .” McGuire’s voice trailed off.

Gillette saw McGuire struggling. “When he does, let me know.” Gillette turned to open the limousine door.

“Three hundred million,” McGuire blurted out. “That’s twice what you guys paid three years ago. That’s very fair.”

Maybe in a normal scenario, Gillette thought to himself, but with the threat of terrorism heightened around the world, the security space was hot, especially for a multiservice global firm such as McGuire & Company. Two top investment banks had approached Everest several months ago about taking McGuire & Company public, and the price talk from the Wall Street firms was five hundred million—which was why Gillette doubted Donovan would have thought a Tom and Vince McGuire–led buyout would have been such a great idea. The IPO would be a nice payday for the McGuires, but the public market would never give the brothers 50 percent of the company for no money down. Which was what they really wanted. That was how they could ultimately make
hundreds
of millions, not just tens.

“When are you back from London, Tom?” asked Gillette. He was very close to signing an underwriting agreement with one of the investment banks—basically agreeing to do the IPO. Which Tom would quickly find out about because, once the agreement was signed, the investment bank would immediately start the due diligence process, digging deeply into the company’s records to confirm figures and legal issues. It was the first step in the IPO process, and Tom and Vince would have to be intimately involved in it as CEOs of the business.

“Sunday,” McGuire answered.

“Okay, if for some reason we don’t hook up in the next couple of days, let’s get together early next week and talk.”

“But give me your initial reaction now, Christian. I want to be able to tell Vince and our backer what you thought.”

Gillette hesitated. “It sounds good. I’m inclined to start talking to you seriously about it, but let me run it by a few of my guys at Everest.” Never let the other side think that you can make the decision on your own—even if you can. “All right?”

McGuire shook Gillette’s hand warmly. “That’s great, Christian. I appreciate it very much.”

“Sure.”

Gillette would never leave two hundred million on the table—the difference between the IPO price and what the McGuires were offering. He’d have to find a way to string McGuire along without letting him know about the discussions he was having with the investment bankers about taking McGuire & Company public. At least for a little while.

He was still fifty miles from the nearest town, still out in the middle of nowhere, creeping through the pitch black and the driving snow because the Explorer’s headlights had given out ten minutes ago, along with the windshield wipers and the defroster. Now the engine was beginning to falter, slowly losing power like everything else in the vehicle already had.

The man tried punching the accelerator, but it didn’t help. It was just a matter of time before the truck would be done, and he cursed himself for knowing nothing about engines. He’d been warned to have at least a basic knowledge of how the things worked, but, in all the years, he’d never gotten around to it.

A few minutes later the engine died and the Explorer drifted to a halt. “Damn it!” The man banged the steering wheel as he turned the key over and over again in the ignition, trying in vain to restart the engine. But no amount of urging was going to make it start again. There was nothing to do but wait for help, which could take days. Especially if the snow kept falling heavily. He might be dead by then.

He switched on a flashlight hanging from the rearview mirror, then picked up several photographs of his two children that were lying on the passenger seat and gazed at them. Bill Jr., thirteen. Cindy, eleven. They lived with their mother in Houston. She’d gotten custody of them two years ago in the divorce. He could still remember the judge shaking her head when she heard how much time he spent away from the family.

He touched Cindy’s face. Now he saw them two weeks a year. It didn’t need to be this way.

As he was staring at the pictures, the driver-side door flew open, and, before he knew what was happening, he was facedown in the snow beside the truck. Still grasping the photographs.

Two men held him down in the drift while a third reached onto the floor in front of the passenger seat, picked up the box containing the seismic tapes, and switched it for another box. “Got ’em.”

They tied his hands behind his back, picked him up roughly, and hustled him into another truck—snow covering his beard and mustache—then drove a mile to the lake. There, they pulled him outside into the blizzard again, untied his hands, and tossed him into a large hole they’d cut in the foot-thick ice. He tried, over and over, to pull himself from the water, but each time he clutched at the ice, one of the men stepped on his fingers. He’d scream in pain each time a finger snapped, but there was no mercy.

Finally, he slipped below the surface—and the darkness closed around him for the last time.

9

Confrontation.
Most people hate confrontation in any form—standing up to the boss in person, fighting an unauthorized credit card charge over the phone, or calling a neighbor out for something her child did to yours. People shrink from confrontation like vampires from the sun, putting off the battle until it becomes unavoidable. Oftentimes they’ll roll over at the last moment rather than face the enemy.

And people hate confrontation for good reason. It causes their palms to perspire, brings on shortness of breath, makes their hearts race like there’s no tomorrow. It isn’t natural to like confrontation.

But a private equity professional must embrace confrontation—almost seek it. Because, ultimately, confrontation leads to progress—one way or the other. And any progress is better than no progress. So, the sooner the better.

After all, time is money.

“YOU’RE FORTY-FIVE MINUTES LATE.”

Gillette sat down beside Senator Stockman at a table in a quiet corner of the Racquet Club’s large dining room. “It couldn’t be helped.” He glanced at the glass in front of Stockman. It was half full of a clear liquid, but he couldn’t tell if the liquid was alcohol.

“You should have at least called the club to let me know what was going on,” Stockman sniped. “My time is
extremely
valuable.”

Gillette noticed several sidelong glances coming from the other tables. Stockman was instantly recognizable at this point. He hadn’t officially announced his campaign yet, but his aides were setting up photo ops everywhere. Here in New York and down in Washington. Local news and national. Everywhere and anywhere they could get airtime. “So is mine,” Gillette said firmly.

“May I get you a drink, sir?” A waiter in a white dinner jacket and tuxedo pants appeared at the table.

“What are you having, Senator?”

“A little something to take the edge off.”

Gillette glanced up at the waiter.

“Beefeaters and tonic,” the young man replied.

“Two,” Gillette ordered, glad he always tipped well. “Another for my guest and one for me. Bring us water, too, will you?”

The waiter gestured to a busboy as he moved off to get the drinks.

“When will you officially announce your campaign?” Gillette asked softly, watching the busboy pour.

Stockman finished what was left of his drink. “This week. The plans are already made.”

“I’m surprised all this hasn’t leaked to the press.”

“My inner circle’s very loyal to me.”

“Only eleven months until the election, Senator. You’ve waited till the last minute, haven’t you?”

“A conscious decision, Christian. I wanted to let the other eight jokers make idiots of themselves in the first televised debate before I declared. Makes me the clear choice very quickly.”

“It gives you less time to raise your war chest, too,” Gillette pointed out, remembering from Tom McGuire’s report that Stockman wasn’t wealthy.

“Money won’t be a problem.”

He’d said it confidently, Gillette noticed.

The waiter was back quickly, placing the drinks down on the table.

Gillette picked up his glass. “Here’s to your campaign, Senator. I wish you the best.”

Stockman picked up his glass, too. “Thank you.” He took a sip. “I’m surprised, Christian.”

“Why?”

“I thought you stayed away from alcohol.”

Gillette glared at Stockman for a moment. So the senator had his own Tom McGuire combing through backgrounds. “I usually do, but I’m making an exception today.” Ordering alcohol was standard procedure when he wanted to get information out of someone at lunch or dinner. To make the other person think he was drinking, too. That way they felt more comfortable, and most people didn’t notice that his glass stayed full. “This is a special occasion.”

“You better drink it,” the senator said, raising an eyebrow. “Otherwise, I’ll wonder about your motives.”

Gillette took a healthy swig. “Satisfied?”

Stockman glanced around, making certain people at the other tables weren’t trying to listen. “Let’s talk,” he said, leaning toward Gillette.

Gillette leaned forward, too, aware of the gin already seeping into his bloodstream. He hated how he loved the feeling. How the alcohol made him relax so fast. Made him less worried about all the critical decisions facing him. And made him less competent, which was a problem. A small lapse in judgment could cost millions.

“Tell me about the companies in the Everest portfolio,” the senator said.

“What do you want to know?”

“What kind of companies are they?”

“All different kinds.”

“Give me a few examples.”

“We own a food company that—”

“Where’s it based?”

“Boston.”

“What do they make?”

“Frozen entrées, cookies, rolls—”

“What else?” Stockman interrupted.

Gillette took a sip of water, aware that Stockman was paying close attention to which glass he chose. “A power-tool manufacturer in Philadelphia, a waste management company based in Cleveland, a—”

“Anything in California?”

Gillette nodded. “An information management company.”

“What do they do?”

“They maintain data files for state governments: driving records, criminal records, credit information. That kind of stuff.”

“Personal information?”

“Very personal.”

“Now that could be valuable,” Stockman commented. “How about Texas? Anything down there?”

“We own a couple of businesses in Texas: the third largest rental car company in the country, and one of the largest grocery chains in the western half of the U.S.” Gillette watched the senator’s eyes bulge. “All that information is on our website.”

“I don’t have time for research, Christian. People do that for me,” Stockman said curtly. “I assume these companies you own have operations all over the place.”

“That’s right. The waste management company is based in Cleveland, but it operates landfills and hauling companies in twenty-one states. The food company has facilities up and down both coasts, and in Chicago and St. Louis. I believe, in total, with the twenty-seven companies in the portfolio, we have offices, plants, and distribution centers in all fifty states.”

“Excellent.”

“Why?”

“As I told you at Donovan’s funeral reception, I want votes from you, Christian. Those million employees at your portfolio companies as well as their families and friends. I want you to let me talk to them, then I want you to follow up with memos and videotapes that support me.”

“Senator, I don’t—”

“And, over the next year, I want to make announcements and speeches from your factories and offices. You know, with lots of cheering people in front of me while the TV cameras are on. In return, you’ll have a friend in Washington who has lots of other friends in Washington. Understand?”

The waiter was headed toward their table, but Gillette waved him off. “I appreciate that offer, Senator.”

“Good,” Stockman said, continuing quickly. “I know one of the companies in your portfolio is a media company. Newspapers, magazines, and a string of radio and television stations. NBC affiliates on the TV side. Correct?”

“That’s right.”

“Which will be very helpful. You should work with my PR people on ideas there. Point is you need to do everything and anything you can to get me elected.”

“I’m not prepared to go that far,” said Gillette flatly. He didn’t like Stockman now that he’d had a chance to spend some time with him, but he could have gotten past that. He did business with plenty of people he didn’t like—and who didn’t like him. But he didn’t believe in trying to influence people at their workplace. Even so, he could have figured out a way to string the senator along without committing to anything so as not to make an enemy—at least, not right away. The reason for his up-front refusal was that he
wanted
to provoke a reaction. He wanted the confrontation because he wanted to know why Stockman had dug so deeply into his background. Why the senator was going after Everest—and him—so hard. Maybe it really was just for votes, but Gillette suspected there was something else. “I’m not letting Everest Capital get dragged into all that.”

“Dragged?”

“You heard me.”

Stockman straightened up in his chair and paused, moving his lips without speaking. Silently counting to ten to let off steam. “Do you understand what will happen if you don’t cooperate with me?” he asked. “Do you understand how powerful I am?”

Gillette remained silent.

“You’ll have an
enemy
in Washington instead of an ally.”

“I hear you.”

“Is that good business?”

“Maybe not, but I’m chairman of Everest, and I have to do what I think is best in the long run. And I think it’s best to stay out of this.”

Stockman smiled. A fake smile. Like he had a pain in his side but was trying not to let on. “I hear Everest Capital is going to be raising a new fund soon.”

Gillette looked up slowly from the table. “How did you hear that?”

“I hear lots of things. Which is why you’d be a fool not to work with me.”

Gillette ticked off the different ways Stockman could have gotten that information. Remembering who he’d told about his plans for the new fund. “What are you saying?”

“You still own shares of companies you’ve taken public. Don’t you, Christian?”

When private equity firms sold companies to the public, they didn’t sell all their holdings in the initial public offering. The investment bankers—who distributed the new shares to their individual and institutional clients—wanted the private equity firms to retain at least some of their ownership after the IPO. As a sign of good faith. So the new investors would feel like the existing owners had continuing confidence in the business’s prospects. That they weren’t getting out at the top. And, once a company was trading publicly, there were strict rules governing how and when the original owners could sell their shares.

“That’s right,” Gillette agreed. “We own some publicly traded stuff.” Which was no secret. Stockman’s aides could have found that information in the mandatory SEC filings available on the Internet. “But we don’t count those as portfolio companies. Not like the twenty-seven we control.”

“One of those public companies you still own a piece of is Dominion Savings & Loan down in Virginia,” Stockman continued. “It’s headquartered across the Potomac River from Washington in Alexandria, but it has branches in the District. I see them all over the place on my way in to the Capitol from my apartment in Georgetown.”

“Yeah, so?”

“What if the federal regulators were to uncover problems at Dominion?”

“Dominion’s squeaky-clean. There’s nothing—”

“Still, what if they did? Would that be a problem?”

“It’s a waste of time to talk hypothetically. At least, in this case.”

The senator smiled thinly. “Humor me, Christian.”

“What are you trying to tell me?”

Stockman spread his arms, shrugged, and gave Gillette a quizzical look. “I don’t know what you mean,” he said. “It’s just a simple question. If the feds start a probe into Dominion’s IPO, would that be a problem for Everest?”

“Depends on what they find,” Gillette said bluntly.

“My aides tell me Everest took in two billion dollars on that IPO. After investing just two hundred million three years ago,” Stockman added.

“Our profit on the deal was a billion eight,” Gillette acknowledged. “It was a great transaction. And, like I said, we scrubbed Dominion with Ajax and steel wool for ninety days before the SEC came on the scene. Then they were in our shorts for months before the IPO.”

“All the same, if an investigation was announced, it wouldn’t be good for your next fund, would it? Might make your partners wonder what was going on at Everest. Might even make them not invest.”

Dominion’s loan portfolio was almost forty billion dollars. In a loan portfolio that huge, there were bound to be problems, especially when the portfolio was grown quickly. And Gillette knew that to maximize the value of the transaction, to get that billion eight profit, Donovan had grown the Dominion loan portfolio
very
quickly during the year before the IPO. Gillette also knew that Donovan had given Dominion’s employees huge bonuses to grow the business, even the credit officers—the people charged with making certain the loans Dominion made were good-quality loans, loans that were likely to be repaid—had gotten something. Which was a tremendous conflict—to pay credit officers to
grow
a portfolio rather than
protect
it.

Donovan had been chairman of Dominion while Everest controlled it, and Marcie Reed had been his second—like at Blalock. She and Donovan hadn’t told the other managing partners much about what was going on, but Gillette knew that the general strategy had been to grow Dominion as fast as possible. Suddenly he was concerned that Stockman’s threats might be backed up by credible information.

“One of the Big Four accounting firms audits Dominion,” Gillette pointed out, “and has since before it was public. I’m comfortable everything is fine there.”