Thursday, November 10, was a special evening for the library, the eighth annual Literary Lions dinner, a fund-raiser that also honored twenty of the literary world’s most luminous lights. Between the lions that evening filed the upper crust of New York society, names like Astor and Trump and Bass, as well as the honorees, gifted writers like Art Buchwald, George Higgins, and Richard Reeves. Cocktails were to be served, then dinner in three of the reading rooms, followed by the actor Christopher Plummer reading a Stephen Leacock short story.
As the moon rose, guests and honorees gathered in tuxedos and sparkling dresses in the McGraw Rotunda, a long stone hall running the length of the building’s third floor. Everyone was there. Nancy and Henry Kissinger strode by. Jacqueline Onassis, looking ravishing in a white-over-black ensemble, was there. John Gutfreund, who served as the library’s treasurer, appeared with his wife, Susan, who was stunning in a dress of vintage Balenciaga. Gutfreund waved when he saw Kravis walk in with Carolyne Roehm at his elbow.
Suddenly a murmur trilled through the room. Cameras flashed, and heads craned to see what the commotion was all about. There, amid the revelry, Kravis was talking with, of all people, Peter Cohen.
Smiling for the cameras, the two men strained to make small talk. “This thing’s terrible,” Kravis said, one eye on the gathering crowd. “You know, it’s too bad things didn’t work out between us.”
Cohen said something about keeping their options open.
“I don’t know what we’re going to do,” Kravis said. “I honestly don’t know.”
They stood there for a minute, both on their best behavior, frozen in the headlights of New York society.
“It’s just too bad things came out the way they did, but so be it,” Kravis said. “You do what you have to do. We’ll do what we have to do.”
Kravis broke from Cohen and, with Roehm on his arm, headed into dinner. On the way he spied Billy Norwich, society columnist for the New York Daily News. In September, Norwich had been left off the guest list for the Kravises’ Metropolitan Museum party and, in a pique, Norwich had accused the financier of “loathing the press” in his column. Kravis had had all he could stand of the press and particularly didn’t like Norwich, whom he thought enjoyed taking potshots at his wife.
Roehm saw the confrontation looming and attempted to steer her husband away. “Come on, Henry,” she whispered. “Let’s go eat.”
It was too late. Seeing Norwich, Kravis grew flushed. When the columnist walked up to him, he and Kravis exchanged words. First Kravis called Norwich an asshole. Then Kravis, raising his voice, said, “I’m going to break both your kneecaps.” Several people clearly heard his words and turned their heads.
Just at that moment, socialite Brooke Astor walked up. “Have you had a drink?” she asked.
“Yes, I have,” Kravis said.
“I wasn’t asking you,” said Astor. “I was asking Billy.”
Astor’s intervention, intentional or not, killed the brewing argument. Kravis stepped away and continued into dinner. Dick Beattie, overhearing the conversation, thought Kravis was joking. Not so Norwich’s companion, a British writer named Meredith Etherington-Smith, who told Women’s Wear Daily of the incident.
“I was absolutely shocked,” she said. “You would expect that kind of behavior at a low-life party but not at the Literary Lions.”
Tensions grew, too, within the management group. Recriminations were only to be expected, given its sorry performance to date. The Salomon bankers—the Sausages—came to loathe Tom Hill, who made little effort to hide his contempt for his Salomon counterparts. The Sausages complained that Hill didn’t return their phone calls. He treated Mike Zimmerman, in one banker’s words, “like live-in help.” They found Hill so tailored, so Waspy, so condescending, so…Tom Hillish.
“This asshole Hill, as you call him, has got the number-one merger department on Wall Street,” Chaz Phillips reminded his colleagues one day. “Need I remind you that his department was substantially smaller than Sally’s four years ago.” The bankers looked at Phillips as if he were crazed.
The Sausages were a constant source of consternation for Cohen. “Do you know who all these people are?” he asked Andrea Farace one afternoon as his office filled with Salomon people. “Where are they from? What the hell do they do?” Cohen would take Gutfreund aside and ask, “Can we have a small meeting?” It was impossible.
Johnson was also amazed by the endless procession of advisers. Cohen seemed to trail aides like a wedding train. “Geez, Peter,” he said at one point, “no wonder you people took a wrong turn at the Red Sea.”
Gutfreund was growing irritated with Steve Goldstone’s handling of the special committee. Goldstone remained the group’s sole conduit to Peter Atkins, and Gutfreund was exasperated by his inability to get any guidance out of the Skadden lawyer. Gutfreund had his people look into Goldstone’s background; they found he had little reputation to speak of. On several occasions Gutfreund suggested to Cohen that Salomon’s counsel, Peter Darrow, be allowed to speak with Atkins. Nothing came of it. The Salomon executives, in fact, were disenchanted with Johnson’s entire team. They blamed Johnson for the management agreement fiasco. And as coverage of the greed issue mushroomed, some grumbled that Johnson was more trouble than he was worth.
For Johnson’s seven-man management group, life at Nine West was fast approaching the surreal. Johnson, always a security fanatic, was having the offices swept for bugs daily; he turned down an offer to bug Kravis’s office. Meetings were often interrupted by high-pitched pings: John Martin’s aide, Bill Liss, had insisted that all top executives wear beepers, as did a dozen or so reporters with whom Liss kept in constant touch.
For all the bustle, many of Johnson’s aides felt strangely isolated, as Shearson and Salomon took over preparations for the following week’s bid. “When a banker is talking about raising money, he’s your employee,” Sage would say. “When he starts writing the checks, you become his.” Sage felt so out of touch he brought a television set into his office to idle away the hours.
Johnson, meanwhile, was growing despondent. Nothing about his Great Adventure had gone as planned: the Kravis ambush, the failed peace talks, the uproar over the management agreement, the Del Monte imbroglio, his daily pillorying in the press. And more and more, Shearson was calling the shots. Nothing about this fight was fun. “Nothing happens until the sun goes down,” Johnson groused. “Then in comes all this horseshit food and everybody has dinner and talks and talks. The last place I want to eat is in my office at night.”
Most of all, it was the bidding level that bothered Johnson. Even if they won, his great Ferrari would be stripped down to the chassis to pay down debt, and he would be handcuffed to the steering wheel for years to come. Johnson’s moping became so tiresome that, during one strategy session, an investment banker took Ed Horrigan aside and suggested he give his boss a pep talk. It simply wouldn’t do, the banker suggested, for the group’s spiritual leader to give up the fight.
“We can’t walk away from this,” Horrigan told Johnson. “I’d rather go back beaten, bloody, and bowed than walk away. If anybody knows how to run this company at a higher level, in a way that minimizes the pain, it’s you and me. If we have to lose, I want it to be in a pitched battle, not a concession. You gotta win, Ross. You’ve got too good a reputation to lose.”
But if “Battlin’ Ed” Horrigan was rising to the fight, Johnson was sinking fast. “You don’t understand. We don’t have to win at all, Ed,” he said. “It’s poker. You can’t put your pride in front of your mind.”
On Thursday, November 10, Johnson left New York for the condo in Jupiter, where he looked forward to a quiet weekend. He didn’t bother to stop in Atlanta for the grand opening of the new hangar at Charlie Brown Airport. In fact, the gala celebration they had planned was anything but. Hardly any of the invitees showed up: not city officials, not workers from nearby hangars, not even RJR Nabisco’s own top brass, who only wanted to lick thei
r wounds. No one, it seemed, wanted anything to do with Johnson. The evening was cut short and employees took the leftover food home to eat themselves.
That weekend Johnson took a call from Hugel, who was just back from Moscow. Hugel had seen a copy of a new SEC filing made by RJR Nabisco. There, in the fine print, he learned that Johnson had boosted Andy Sage’s compensation to $500,000 a year from $250,000. He had grown angry as he read the filing. Hugel was certain the board had never approved the raise.
“The board approved that in July,” Johnson said. Hugel checked the notes of the July meeting and didn’t find anything. He called Johnson again. This time Johnson explained that the raise had been approved in September, retroactive to the July meeting.
Charlie Hugel didn’t believe him. It was the second time in a week he thought he had caught Ross Johnson in a lie.
“I’m going to make you rich, Johnny!”
Johnson’s words still echoed, unreal yet undying, in John Greeniaus’s mind. The path he had chosen since his fateful meeting with Johnson was radical but, as he saw it, unavoidable. It was a matter of either being loyal to his people at Nabisco or to the man who would set them adrift. I’m going to make you rich, indeed. How could Johnson do this, Greeniaus wondered, and think that money would make it all better? It wasn’t money that made John Greeniaus tick; it was making Nabisco a well-oiled machine. Now Johnson wanted to take his machine and sell it for spare parts.
First he had been numb. The numbness gave way to anger. It was all so clear now: why Johnson had reorganized Nabisco and Del Monte into separate, bite-size, easy-to-sell operating units; why Johnson had given 300,000 shares of restricted stock to tobacco people that summer and almost none to Nabisco people;* why Horrigan had always gotten his way. Johnson had been setting this up for a long time, Greeniaus decided, lying to them all. Now he was promising to take care of Greeniaus, provide a happy landing in some new corporate haven. He would never believe Johnson again.
Greeniaus hated the very idea of this LBO, yet he hated equally the fact that he hadn’t been invited to join the management group. It was a bitter tangle of emotions. Finally, as was always the case with John Greeniaus, hot anger gave way to cold reason. No use getting mad; he would get even.
He had flown back to Nabisco’s New Jersey headquarters the day the LBO was announced. Within days he slipped a confidential planning document into an envelope and mailed it to Charlie Hugel, marking it “confidential and urgent.”
It was the first part of a plan that may, Greeniaus thought, just be a fantasy. He was almost certain Johnson would get the company. Johnson knew the kinds of things no competitor could find out. He had the board in his pocket. But if a top-secret tidbit helped the directors see Johnson’s true colors, Greeniaus would see they got it. If another bidder gave Nabisco a better shake than Johnson, he would aid and abet the enemy.
He summoned Nabisco’s chief financial officer, Larry Kleinberg, into his office. They were going to dissect Nabisco and reinvent it in revved-up form, he told him. They would dress it up for the big party, showing how money could be saved and cash flow spurred. If other bidders saw Nabisco’s true potential, they might up the ante and beat Johnson. And if they won, they might keep Nabisco. It was a long shot, Greeniaus said, but it was their only chance of saving the company. “This is a survival game,” Greeniaus told Kleinberg. “Let’s play it to the best of our ability.”
As he secretly prepared for his guerrilla war, Greeniaus took pains to keep his troops happy. From his office a steady stream of anti-Johnson cartoons and memos poured forth to amuse the depressed Nabisco executives. One cartoon showed a divorce court judge addressing a boy. “Junior, would you prefer to live with a smoking or nonsmoking parent?” Greeniaus’s accompanying line: “Who knows—we might just be better off with a nonsmoking parent.”
When Kravis appeared on the scene, Greeniaus had begun his campaign in earnest. Introduced to the special committee’s bankers at Dillon and Lazard, he had kept them amused with RJR Nabisco “factoids.” “Guess how many members of Team RJR Nabisco there are,” Greeniaus asked. The guesses came in: eight, ten, maybe a dozen. “How about twenty-nine?” Greeniaus said. “How about a cost of seven to ten million dollars a year?”
He titillated them with the famous—Jack Nicklaus and his million-dollar deal—and amazed them with the obscure. Who was Vijay Amritraj and why was he on Team RJR Nabisco? Greeniaus regaled them with tales of the villa in Castle Pines, the compound in Palm Springs, the apartments in New York. There was method to Greeniaus’s madness: the more waste the board bankers could see cutting, the higher the “fair” price they would demand.
Finally, after three weeks of teasing the bankers with tidbits, Greeniaus was ready to make his move. He took his idea to Josh Gotbaum of Lazard, who immediately grasped its significance. “We’ll tell these things only to the special committee,” Greeniaus said. “It can’t go to management, to Ross. Some of what we have to say could cost us our jobs.” Gotbaum had guaranteed Greeniaus that word of their plan wouldn’t get back to Johnson.
Greeniaus was scheduled to address the special committee at Skadden Arps on Monday, November 14. By coincidence, so was Johnson, who had been called in to answer questions as part of the board’s due diligence. That morning Greeniaus stopped by Nine West on his way to the board meeting.
“Johnny!” Johnson boomed when he spied Greeniaus. “Come on in with us. We’re working on our strategy to handle the special committee.”
Terrified, Greeniaus followed Johnson into the fishbowl conference room, where Steve Goldstone and the management group sat around the large, round table in the midst of a spirited discussion. It was to be Johnson’s first meeting with the board in nearly a month, and everyone had an idea how they should handle it. Horrigan, as usual, urged a combative approach: Don’t give the bastards an iota of new information. Johnson vacillated between cool and courteous. Greeniaus sat frozen in fear he would be found out.
When it came time to go to Skadden, Johnson discovered that no provisions had been made for transportation. He turned to Greeniaus, who commandeered a Nabisco limo. They rode to Skadden together; once there, they sat in a small holding room. When Hugel arrived to escort Johnson into the board, Greeniaus stood, anxious and confused. For all the courage he had mustered, there was no way he was addressing the board in Johnson’s presence.
Hugel fixed him with a puzzled look. “John, you’re not part of the group, are you?”
“Uh, no,” Greeniaus said.
“Well, you wait then,” Hugel said.
Relieved, Greeniaus returned to his seat.
“There’s a rat fink in this room,” Hugel said, striding around the conference room and staring at people accusingly. “There’s a rat fink, and I’m going to find out who it is.”
As they prepared for Johnson’s appearance that morning, the board members were clearly testy. It was day twenty-seven of the LBO crisis, and they all felt as if they were hostages to it. Hugel’s ire was directed at press leaks, which had continued nonstop since the committee’s first meeting three weeks before. Felix Rohatyn of Lazard urged Hugel to calm down. The leaks could be coming from anywhere, he suggested, and witch hunts would only exacerbate the tension they all felt.
Privately, several directors thought Hugel more than a little hypocritical. They all knew Johnson was talking regularly with Hugel, an advantage other bidders didn’t have, and that could leave the committee exposed to lawsuits. Twice board advisers had tried to bring the subject up with him, but had gotten nowhere. Hugel had also gotten his wrist slapped for a series of newspaper interviews in which he suggested, among other things, that the board would look favorably on the bid that contained the most cash, as opposed to junk bonds and other securities. “Cash is cash,” he said.
Adding to the snappish air that morning was a letter from Ronnie Grierson, the British director. Grierson, the directors all knew, was keenly worried about his liability in any lawsuit. Patched into board
meetings via speaker phone from London, he was forever slowing meetings with questions the others thought nit-picking; Hugel had been forced to cut him off several times. Other directors, however, shared Grierson’s concern. All board members had been told not to take notes unless they wanted them subpoenaed at a later date.
Now Grierson was demanding the resignation of Johnson and the entire management group. It was “highly improper,” he suggested, for them to continue running the company while attempting to acquire it. Hugel was later able to talk Grierson out of his demands, but for the moment, everyone found them irksome. This was no time for him to break ranks.
The mood didn’t improve when Johnson and Horrigan were escorted in to address the board. Asked about the management agreement, Johnson stuck to his line that The Times had it wrong, that his share of the profits wasn’t out of line with that of other LBOs. Asked for ways to cut costs in the tobacco business, both Johnson and Horrigan stated flatly that there weren’t any. Their attitude bordered on hostile, and it made them no points with the board.
At one point, the developing rift between Johnson and Hugel flared into view. The board had repeatedly stated its opposition to the bidders “preselling” RJR Nabisco assets, that is, agreeing to sell its businesses to outsiders before the bidding was over. When Johnson denied his group was doing so, Hugel smiled ironically and said: “Everyone’s preselling.”
“Are you challenging my word?” Johnson snapped. “That’s absolutely wrong. I want you to withdraw that statement. Maybe Shearson’s doing it and Sally’s doing it, but I can tell you we’re not doing it.” Hugel backed off, but it was clear to everyone that a number of friendships wouldn’t survive this auction.
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