Why Should White Guys Have All the Fun?

by Reginald Lewis

  Lewis had a pronounced bias for substance over style. His law firm mirrored that. The decor at 30 Broad Street could best be described as utilitarian. The carpet was an unattractive orange and visitors sat on a plain black leather sofa.

  The firm had four small offices, one for each attorney plus the odd additional lawyer who joined the practice periodically. There were also three secretarial bays and a conference room dominated by a large round table.

  In areas where a direct correlation existed between money spent and money generated, however, Lewis went all out. His law offices had top of the line copier machines, which allowed him to turn around documents—the life’s blood of any legal practice—faster. That let him be more profitable than if he’d invested in fancy furniture and ancient copier machines that broke down all the time.

  Lewis’s bread and butter in his law practice was an emerging market of big Minority Enterprise Small Business Investment Companies, known as MESBICS. Created by the Nixon Administration, MESBICS are basically venture capital firms formed by corporations or foundations. They operate under the aegis of the U.S. Small Business Administration.

  For every dollar a MESBIC kicks into a minority-run company, the SBA matches that by investing or lending up to $3. This multiplier effect means that a MESBIC scraping together $1 million for a deal would have $4 million to pump into a business after the SBA’s contribution.

  Part of the SBA’s loan is of a nonrecourse nature, meaning that if a company goes belly-up, its assets are liquidated to pay back the SBA. In time, Reginald Lewis became probably the top lawyer in New York City—and arguably the country—when it came to doing major MESBIC transactions.

  Lewis’s negotiating skills were legendary. He routinely out-negotiated far more experienced negotiators when aiming to protect his interests.

  “You had to fight and squeeze whatever you got out of him, and negotiate and manipulate and play every game you could,” says Suggs. “He was intensely competitive and he could not negotiate without trying to get as many marbles on his side of the table as he could get. He always drove the hardest bargain he could. He was looking long-term structurally and financially, but he wasn’t looking long-term in his relationships with people that he felt he could just use and, when they left, replace.”

  Suggs left Lewis after receiving an offer representing a 60 percent raise over his $15,000 annual salary. Lewis offered to meet the pay increase for six months, to be followed by a review. But after having seen Lewis continually increase the timetable for making partner and seeing him balk on a promise to pay health care insurance, Suggs decided it was an opportune time to leave.

  “IF WE DON’T GET IT, WE’RE NOT CLOSING”

  Like all new attorneys growing a law practice, Lewis had to beat the wolf away from his door at times. Plus, clients were constantly devising ways of wriggling out of his fee schedule, which always flipped the switch on Lewis’s volcanic temper.

  So intent was Lewis on getting his practice up and running that he sometimes dipped into his personal savings account to meet payroll during his start-up days. At home, there were piles of returned checks stamped “insufficient funds.” Around this time, the wife of one of Lewis’s Harvard classmates was working in a doctor’s office where Lewis was seen. At one point, while Lewis was being examined by the doctor, Marion Auspitz took Lewis’s frayed shirt into another room and stitched the collar. When Lewis put his feet up on his desk, a Lewis trademark once he started running the show, there would be circles on the soles of his shoes where the leather was nearly worn through to his socks.

  Lewis pushed hard to collect his fees. He knew he was good. Damned good and not to be hired on the cheap. He had no qualms with charging fees comparable to those of large white-run law firms.

  In the typical MESBIC deal, the legal bill usually isn’t discussed up front. And an entrepreneur putting up $25,000 and getting $2 million was usually so happy that lawyers’ fees were the furthest thing from his or her mind. So, Lewis generally saved the best for last.

  “I’ve seen some borrowers really wince when they saw his fee,” says Howard Mackey, the head of Equico, a major Lewis client and the largest MESBIC in the country at the time. “Personally, I never blamed him—I mean the man’s out there on his own and that’s his work.”

  With his business savvy growing exponentially, Lewis came up with effective ways of making sure his fees got collected. He began to stipulate that clients had to pay his firm as a pre-condition to closing their financing transactions.

  But there were still occasions when Lewis simply had to back down and reduce his bill after a client complained and the MESBIC involved didn’t go to bat for Lewis. He found this particularly galling, because most of the borrowers were black and Lewis knew they wouldn’t dream of trying to make a white law firm reduce a legal bill.

  Every now and then, Lewis would butt heads with an entrepreneur as ego-driven and stubborn as he. One such instance was when he worked on a MESBIC deal making it possible for Black Enterprise founder Earl Graves to buy two radio stations.

  Lewis demanded his fee at closing; Earl Graves said no—Lewis would be paid in 30 days. “That’s unacceptable,” Lewis replied flintily. “If we don’t get it, we’re not closing.”

  If Lewis wanted a test of wills, Graves was up to the task. Graves got on the phone to the chairman of Equitable Life, Equico’s parent company, to complain about their intransigent attorney. However, only after Lewis received assurances from Equitable that he would be paid in a timely manner did he relent and close the deal.

  Again, it was just business for Lewis. There were no hard feelings on his part. He’d gotten what he’d wanted, which was to be paid immediately for the hard work he put into Graves’s transaction. Graves came away with a heightened respect for Reginald Lewis—in fact, he was one of the first people to tell Michael Milken to keep an eye out for a budding business superstar named Reginald Lewis.

  Equico president Mackey figured Lewis wouldn’t have the nerve to quibble with Mackey about money. Wrong. “I always found him to be kind of hard-boiled, and we spent some time arguing about fees. I got mad at him, because I put him in the position at Equico where he was doing all of our business. I figured the last thing he would want to do would be to argue with me, but he started in on me like anybody else. We worked it out, but that’s the kind of guy Reg was,” Mackey recalls.

  Lewis didn’t even cut relatives slack. When his uncle James Cooper bought a Baltimore bail bond business, he hired Lewis to represent him. Cooper flew to New York, where Lewis ironed out the final terms of the sale.

  Cooper got his bill and blanched. He asked Lewis, “Are you sure?” Yes, Lewis replied, his hefty fee was correct. There had been no error.

  “Either pay me all of the bill or pay me none of it.” Lewis told his uncle calmly.

  Cooper paid his bill.

  LEARNING THE ART OF THE DEAL

  After a few years, Lewis’s law firm began to prosper. In time, it pretty much cornered the market in terms of representing MESBICs. But Lewis was deriving something from his MESBIC work that would be far more valuable in the long run than income: He was amassing an incredible body of knowledge about how to structure corporate acquisitions through the use of debt financing.

  Lewis was retained as general counsel by the American Association of Minority Enterprise Small Business Investment Companies and was shuttling down to Washington on a regular basis, attending meetings related to MESBICS.

  He was staying abreast of the latest developments in this field and was also building his network of contacts. He made it a point to devour every piece of MESBICS literature he could get his hands on.

  In Washington, Lewis frequently ran into childhood friend Dan Henson (to whom he had sold his first paper route). Henson worked for the SBA and later the Minority Business Development Agency. In “the mid- to late-70s, Reggie was getting pretty sophisticated in terms of his knowledge of how to do deals. He was learning the art of the deal,
” Henson says.

  With his overcoat draped over his shoulder and briefcase in hand, Lewis would stride into MESBIC meetings in Washington, make contacts, then dash out the door and head back to New York—sometimes after just an hour.

  In 1970, the same year he left Paul, Weiss, Lewis encountered someone who became a major client, friend, and future business confidant rolled into one. Lee Archer had just retired from the Air Force and was put in charge of running General Food’s MESBIC, which was known as Vanguard. A no-nonsense former fighter pilot, Archer had been scouting around for a lawyer familiar with the MESBIC industry. Though Lewis had only two years of experience then, he came highly recommended to Archer.

  The young lawyer dropped by Archer’s office, where the two men sized each other up. Lewis was impressive as usual.

  “I decided he was just what I needed,” Archer recalls. “He knew a heck of a lot about venture capital and he seemed to have the personality to sit on the board. He was smart, he was straight-forward and honest. He liked the kinds of things I liked, like plays and concerts.”

  Lewis was eventually named as legal adviser and member of the board of both Vanguard and a Specialized Small Business Investment Company formed by General Foods known as North Street Capital.

  Lewis participated in an incredible 64 business deals funded by General Foods. Being on the board also meant Lewis got a piece of the action in some of the transactions, including a movie by the name of “River Niger,” which was financed by $40 million in MESBIC money. Lewis and Archer both owned the rights to the music in that movie.

  When black-owned Johnson Publishing and another company made individual bids to take over Essence magazine, Lewis and Archer possessed just enough stock to hold the crucial swing votes to approve or kill the deal. Lewis believed that Essence was already well managed and in excellent hands, so he and Archer nixed the takeover attempt, even though they would have profited handsomely if they had sold their stock.

  By helping block the Essence takeover, Lewis had thwarted the ambitions of the then-wealthiest black man in America, John Johnson, who owns Johnson Publications and publishes Jet and Ebony magazines. (Lewis would later supplant Johnson at the top of the Black Enterprise list of the 100 largest black-owned companies with his acquisition of Beatrice International.)

  Lewis and Archer worked well together in that they were somewhat similar: Both were formal, rather reserved, and not given to wasting time when there was business to be taken care of. Occasionally the two would disagree. Nevertheless, Lewis later named Archer to the board of directors of both McCall Pattern and TLC Beatrice International.

  Word of mouth about the quality of his legal work was starting to bring dividends for Lewis. In 1973, Lewis managed to snare the largest MESBIC of them all—Equico Capital Corp., a subsidiary of Equitable Life. Then-Equico president Mackey felt Lewis’s work was head and shoulders better than that of Equico’s own in-house lawyers. Mackey wound up funneling Lewis all of Equico’s work.

  “He was very thorough,” Mackey remembers. “He was always what I call a businessman’s lawyer. Some lawyers basically were so conservative they would spend most of their lives telling you what you could not do. Reg’s attitude and approach to doing work was to figure out how to get done what it was you wanted to get done. And the quality of documents, in terms of making sure you were well protected and that you had proper covenants in your loan agreements, was good.”

  Lewis often went above and beyond the call when it came to helping his clients. Mackey had a car with Washington, D.C., license plates that New York City police loved to ticket for not having New York tags. When Mackey’s citations reached a critical mass, Lewis agreed to accompany him to the city parking violations bureau, where Lewis successfully negotiated a 50 percent reduction in Mackey’s large fine.

  Years later, when Lewis tried to take Beatrice public in 1989, with Merrill Lynch as the primary underwriter, Lewis made the black investment firm Pryor, McClendon, Counts & Co. Inc. an underwriter as a favor to Mackey, who was employed there.

  As had been the case since high school, Lewis still had an affinity for fine clothing, when he could afford it. One of his shopping excursions led him to a small, black-run clothing store in Manhattan named LeMans Haberdashers. Lewis was impressed by the cut of the clothing, which came primarily from Italy and France, and by the manner in which it was displayed.

  The LeMans visit started an interesting business and personal relationship with the shop’s three proprietors, including Kermit Morgan, that generated more than its share of laughs and heated discussions.

  Lewis felt comfortable around Morgan, a fellow black entrepreneur fighting to make a living in the rough and tumble of New York City. Morgan found Lewis to be very funny, ambitious, and committed to helping other black businesspeople.

  Lewis would always exhort Morgan to give back to the community by helping other black entrepreneurs who had the potential to excel, but hadn’t been exposed to essential contacts or financing sources. Lewis envisioned a network of black entrepreneurs that would be able to prosper by sharing information and helping others avoid pitfalls.

  Morgan recalls that as far back as the early 1970s, Lewis was setting aside time to share his business expertise with black businesspeople, free of charge. But he was doing it quietly and selectively. Nothing was more valuable to the discerning Lewis than his time: It couldn’t be wasted on someone lacking a total commitment to achieving success.

  If Lewis harbored expansion-oriented dreams for himself during his days as a lawyer, he also had them for some of his clients. Lewis was impressed with LeMans, which had two stores in Manhattan. But Lewis envisioned it becoming even grander. He and Morgan butted heads constantly over whether the business should expand beyond its two locations and beyond targeting black consumers.

  “We argued all the time,” Morgan laughs. “He wasn’t right all the time, although he thought he was.”

  Using his contacts, Lewis enabled Morgan to open a third store in Columbia, Maryland, an affluent, largely white bedroom community between Baltimore and Washington. The store did poorly and eventually closed.

  “I guess what we learned from Reggie was to think large, because he had more exposure than we to raising capital and he stressed thinking on an international level,” Morgan says.

  More than a decade before Lewis purchased Beatrice, the seeds of doing business on an international scale had already taken root. In 1974, Lewis helped LeMans get $500,000 for business expansion purposes, a transaction Lewis “put together rather simply, based on his contacts,” according to Morgan.

  Lewis was more than just another attorney who drafted contacts or reviewed leases. He was always prodding Morgan to accompany him to the Harvard Club, or to wine-tasting sessions, activities the down-to-earth Morgan hated. Lewis wanted to introduce Morgan to influential white businessmen who might prove valuable to both of them later on.

  “But it just wasn’t my style,” Morgan says. “He meant well and he wanted to expose us to big money, he really did.”

  Their business relationship ended on an unhappy note. Morgan’s version is that he and his two companions—while generally very impressed with Lewis’s work—felt he was just a tad too nice when negotiating with LeMans’s business opponents. More than once, Lewis was reminded that he was being paid to represent LeMans, not the other side.

  Charles Clarkson questions Lewis being too “nice” while negotiating for a client. “That would have been out of character for Reg,” Clarkson says. “He was always very zealous when it came to representing a client.”

  But it says something about Lewis that his friendship with Morgan survived even after their business relationship broke up.

  “I PAY MORE IN TAXES THAN THESE GUYS MAKE IN SALARY”

  Lewis’s prestige was burgeoning; his income was rapidly growing. However, despite all this and his Harvard law degree, the fact that he was black meant he could be “put in his place” within a matter of seconds.<
br />
  Once a casually dressed Lewis came to 30 Broad Street on a Saturday to do some work. Lewis nonchalantly nodded to the security guard as he strolled past his desk. The guard ordered him to stop and state his reason for being in the building.

  Lewis was justifiably outraged. Sensing the challenge was really about race as much as anything, Lewis felt the blood rushing to his face. Hassling a person on his skin color made as much sense to him as discrimination based on shoe size or the shape of one’s earlobes. Could anything be less germane to a person’s intrinsic worth?

  “Reg was very sensitive about that,” Charles Clarkson says. “He had a sense that he was black all the time and people treated him a certain way and he was always on guard. It was a big part of his life.”

  Still angry hours after the incident, Lewis mailed off a strongly worded letter to the building manager. Lewis knew nothing would come of his complaint, but failing to vent the rage eating away at him would be unhealthy and to stay passive in the face of bigotry would be untrue to himself.

  One night, Lewis was changing a tire on his Mercedes outside of his Manhattan brownstone. Two city policemen pulled up behind Lewis’s car and ordered him to spread his legs and place both hands on the hood of his vehicle. Lewis protested that not only did he own the Mercedes, he owned the brownstone, too. After the cops were shown the registration for the car, they apologized and drove away. Lewis later told a friend that during the confrontation he couldn’t help but think, “I pay more in taxes than these guys make in salary.” Wisely, he did not articulate that observation.

  When confronted with racism, Lewis’s response was to meet it head on. If he felt a maitre d’ placed him too close to the kitchen, or that a waiter delivered indifferent service, Lewis would buttonhole the manager and bring it to his or her attention. Once when a taxicab passed him by in Manhattan, Lewis set out on foot after the offending driver. Sprinting at top speed along a New York City sidewalk packed with people, Lewis edged close enough to the cab to write down its number on a scrap of paper. He folded it, put it in his wallet and dashed off an angry letter to the city taxicab commission the same day.