The Snowball

by Alice Schroeder

  On what turned out to be Susie Jr.’s fiftieth birthday, the adjourned Clayton shareholder meeting finally reconvened. After four months, no other bidder had come forward, and Cerberus had declined to make a deal. In the end, 52.3 percent of the shareholders voted for the Berkshire deal, barely enough. Excluding the Claytons, the other shareholders had voted no by a margin of two to one. Buffett sat by the phone until he got the news. Then he took his daughter out and gave her the gift he had selected for her with the help of Susan Jacques at Borsheim’s—an eternity ring crowned with a large pink heart-shaped diamond—and her latest million-dollar birthday gift. The supposedly cold-blooded financier was a soft-hearted sentimentalist when it came to his daughter, with whom he had an increasingly close and even dependent relationship. He had been carrying this ring around for a couple of weeks, pulling it out to look at it and getting teary-eyed with anticipation of his daughter’s reaction. When Susie Jr. saw the ring, she threw her arms around him and cried.

  While they were hugging, Milberg Weiss and Orbis’s William Gray were already starting to try to undo the vote. Gray challenged the election and won the right to audit the ballots. The Delaware Chancery Court upheld the vote. Handed defeat, Orbis then joined with Milberg Weiss to ask Tennessee Blount County Circuit Court Judge Dale Young to restrain the deal from being consummated. Judge Young instead said the merger should proceed. With Milberg Weiss barking at the door, the Claytons wasted no time. On August 7, the day the merger was scheduled to close, Clayton’s Delaware attorneys were waiting at the door of the Secretary of State at daybreak to file the paperwork to certify the merger. By seven-thirty a.m. it was done.42

  As soon as the merger was effective, Milberg Weiss and Orbis rushed to file an appeal with the Tennessee Court of Appeals to overrule Judge Young’s decision of the day before. The next day, the Tennessee Court of Appeals concurred and temporarily blocked the merger, which had already closed. That prevented Berkshire from paying out the proceeds. The Court of Appeals gave the lower court a homework assignment, asking it to rule on a number of issues within two weeks. Clayton started working to fulfill Milberg Weiss’s eighteen-page document request. Lawyers and company people were working almost around the clock.

  Kevin Clayton and his wife had just had a baby; she was colicky from a protein allergy. “It took twenty-seven formulas before we found one from London that would work,” says Clayton. “Plus, I got shingles right in the middle of it, from stress. I called up my dad and said, ‘Dad, this is rough.’ And he said, ‘Well, son, I had paralysis on the left side of my face when I was your age from stress.’ Then I called up Warren, and he said, ‘Well, Kevin, when I was younger, I lost a lot of my hair from stress.’ I got no sympathy from either one of them.”

  On August 18, Judge Young ordered a trial before a jury. Clayton immediately appealed.

  Clayton stock had ceased trading weeks ago, but Berkshire could not pay out the merger proceeds, since the deal marinated in the galley of the appellate court. Forty thousand shareholders awaited their money from Berkshire Hathaway. All $1.7 billion sat in the bank, earning interest for Berkshire.

  Buffett got a fax from a couple who were being foreclosed out of their home. They needed the money from the Clayton stock to pay their mortgage. Pay what you can, he told the couple, and just explain the situation. Probably that will be enough to avoid foreclosure.

  “It’s the Perils of Pauline,” he said.

  The stalemate dragged on for nearly two weeks. Finally, as the calendar turned to September, the court found “not a scintilla of evidence” that the Claytons had manipulated the voting process. Six days later, Milberg Weiss filed an appeal with the Tennessee Supreme Court. Buffett was incredulous—or, rather, he would have been incredulous had it been any law firm but Milberg Weiss. They were still seeking to have the merger overturned. That was not going to result in a big fat check for the law firm. How did they expect to get paid? The photocopy machines were running late at night at Clayton’s law firm, kachunking forth documents and legal bills. Buffett reasoned that Milberg Weiss must be trying to make such a nuisance of itself that Clayton would simply pay it to go away. He talked to Kevin Clayton. Never, Clayton vowed.43

  Buffett mused about the historic position of the Tennessee Supreme Court, which potentially could become the first court in the history of the United States to unwind a merger that was already complete. The court, evidently finding itself of the same mind, dismissed the appeal.

  Clayton’s insurance company, St. Paul, wanted to settle the remaining shareholder suit filed by Milberg Weiss for $5 million. The Claytons and Buffett hated the thought of paying people they considered stickup artists and ambulance chasers because so little of the money would go to the shareholders—maybe a nickel a share. The lawyers would get most of the money. However, the insurer argued that unless they settled, the legal bills would cost the company even more. Feeling ransomed, they went ahead and paid. And thus ended the battle to buy Clayton Homes.

  But soon it became clear that sales of manufactured housing were not going to turn around.44 Buffett had not bought just as the bounce was coming back. In fact, as Ian Jacobs had flown back to report, the downward spiral in manufactured housing had just begun. The price that had looked so cheap was barely reasonable. To help the deal’s economics, Buffett had Kevin Clayton begin buying portfolios of distressed loans. It was going to take some mighty fine footwork to make the Clayton deal work out.

  58

  Buffetted

  Omaha • Summer–Fall 2003

  In September, Buffett was in a state of high excitement. Fortune magazine had named him the most powerful person in business. To many oohs and aahs, he had recently auctioned his battered wallet with a stock tip inside for $210,000 to benefit Girls Inc., a nonprofit cause of Susie Jr.’s. Next, he had auctioned himself off on eBay—or, rather, lunch for eight people with him—to benefit Glide Memorial Church in San Francisco, Susie’s main cause. Glide gave HIV tests during services and held funerals and memorials for gay men whose families and churches had rejected them. The Reverend Cecil Williams’s watchword was “unconditional love,” a term that Susie had adopted like a mantra and even Warren now used from time to time. At Glide, everyone was welcome: hookers, junkies, winos, drifters.1 According to the highest of fifty bidders on eBay, two hours of Buffett’s time and a lunch for eight at Michael’s were worth $250,100—that is, more than the stock tip in his wallet. Within days, an artist’s rendering of him dressed in a toga as if descended from Mount Olympus would appear in Forbes to illustrate a list of “Best-Dressed Billionaires.” However limited the competition for that list (although billionaires were becoming pretty commonplace these days), Buffett could never have been considered a contender for best-dressed anything, were he not so celebrated and popular that pictures of him sold magazines. Not only that, the two Susies were scheduled to speak on philanthropy at Fortune’s Most Powerful Women Summit the following week, at the beginning of October, before an audience made up of many of the most important women in America, including CEOs, entrepreneurs, and women of stature in many different fields. Buffett was elated at this coronation of his wife and daughter, particularly that they would be making the presentation together.

  On the Friday afternoon before the conference began, Susie called Warren to tell him that she was going to be arriving a day late, because on Monday she was having a biopsy. She had seen her periodontist in June, an appointment that had been delayed from May by her earlier bowel obstructions, esophageal ulcer, and and anemia. The periodontist had found some pin-dot-size spots on the floor of her mouth and referred her to a specialist. Two months had passed as Susie tried to work around the specialist’s schedule and her own complicated travel itinerary to arrange an appointment. Once the appointment was finally booked, she had almost canceled it in favor of a visit to the Gates Foundation.

  “No. No, no, no, no, no. You’re not canceling,” said Kathleen Cole. It was rare for Cole to contradict her friend
and boss outright. But now she insisted, “You have to go.”2

  At the appointment, Dr. Deborah Greenspan had felt around Susie’s neck and found swollen lymph nodes on one side. She insisted that Susie see yet another specialist, Dr. Brian Schmidt, the following Monday for a biopsy. Susie seemed unconcerned about the biopsy. She wanted to delay it in order to avoid missing any of the Fortune conference. “I have to do this,” she told Kathleen, referring to her appearance there. The specialist, Dr. Schmidt, refused to postpone the procedure, however.3

  Buffett absorbed the news quietly, but was deeply shaken. A few hours after Susie called, he carried on a long, rambling phone conversation with someone else, filling the unrelenting minutes after he got home from work. Seconds before his bridge game was due to begin, he said casually, but in a low, serious voice, Oh, by the way, Susie’s having a biopsy on Monday.

  For what?! asked his shocked listener.

  Some kind of thing in her mouth, he said. Well, I’ll talk to you later. Then he hung up.

  Susie had the biopsy. She went and spoke at the conference, then flew east to Decatur to visit Howie on the farm, see her grandkids, and ride on the combine for the harvest before returning to San Francisco. With hindsight, Howie would think to himself, Gee, she’d always talked about coming out for the harvest, but she’d never done it before.4 At the time, however, he noticed nothing unusual, for she behaved as she always did.5

  Warren kept his face glued to the computer screen, whether surfing the news or playing bridge or helicopter. His rising anxiety showed in the usual manner; he repeated the same questions and statements about a subject over and over while denying—if asked—that he was concerned.

  On Friday, Susie and Kathleen Cole went to USC Medical Center to learn the biopsy results. Susie continued to seem oblivious to the potential seriousness of the situation. When they arrived at Dr. Schmidt’s office, Susie said to Kathleen, “You’re so nervous. Why are you so nervous?” Kathleen thought, “Oh, my gosh, doesn’t she get that this could be bad news?” When they met with the doctor, he told Susie that she had stage-three oral cancer. She was stunned by the diagnosis. “It was like somebody shot a thunderbolt through her,” says Cole. She had apparently not even considered this as a possibility.6

  Susie had her moment of tears. Then, characteristically, by the time they got into the car she had pulled herself together and started chicken-souping everybody but herself. She called Warren. He did not say much. She called Susie Jr. and told her, “Call your dad. He’s going to be a mess.” Then she went home and talked to Warren again and to Susie Jr., Howie, and Peter.7 By then, Susie Jr. had already gone to the Internet to research.8 She called her father and said, “Don’t read the oral cancer Web site.”

  Oral cancer strikes only 34,000 people a year but kills more than 8,000. An often painless but fast-growing cancer, it is more deadly than melanoma, brain cancer, liver cancer, cervical cancer, or Hodgkin’s disease;9 it is particularly dangerous because it’s usually discovered only after it has spread to the lymph nodes of the neck, at which point the primary tumor may have invaded surrounding tissue and potentially migrated to other organs. A person with oral cancer has an especially high risk of developing a second primary tumor. Surviving a first bout with the disease carries a twentyfold greater risk of recurrence.

  At least ninety percent of those diagnosed with oral cancer are longtime smokers or use smokeless tobacco. Alcohol use combined with smoking raises the risk even more. Susie Buffett never smoked or drank. She had no significant risk factors. The fact that her cancer was stage three meant that it had already spread to at least one lymph node but probably not to more distant sites.

  Susie returned to her apartment overlooking the Golden Gate Bridge, every wall covered with a souvenir of a trip, a gift from a friend, or a piece of art that meant something to her. The woman who never let go of anything or anybody started telling people, “I’ve had a wonderful life. My kids are grown. I’ve lived to see my grandkids. I love my life, but I’ve done my job and I’m not really needed anymore.”

  “If it were up to me,” she told Kathleen, “I would go off to a villa in Italy in privacy and just die.” She was far more fearful of a protracted, painful death than of dying itself. But if she simply gave up, she would be abandoning people who were important to her, people who had been part of her life for decades. It was really Warren for whom she was going to have the surgery. However, she told Kathleen and her friend Ron Parks, among others, that she hadn’t decided whether to do the follow-up radiation that was a standard part of the treatment to reduce the risk of a recurrence, which was high. For some reason, perhaps because she was in a state of shock, she didn’t seem to grasp how important it was.10

  The following morning, as she and Kathleen were making plans for what was to come, Susie unaccountably refused to authorize Kathleen to pay for the equipment that would be needed to make her apartment accessible postsurgery. Kathleen needed to get elevator chairs to carry her up all the flights of stairs to her apartment at the top of the building. Susie would not hear of it. Kathleen decided that Susie was in some kind of shock or denial and finally called Susie Jr., who simply said to ignore her mother and make the necessary arrangements.

  Meanwhile, a stunned Warren paced through his routine, as he invariably did in a crisis. He escorted a very upset Astrid to the Nebraska football game in Lincoln. He flew out to San Francisco the following morning, where he learned that Susie needed major surgery within the next few weeks. She had a fifty percent chance of surviving for five years. A large portion of her jaw and most or all of her teeth might be removed. For more than a month after the surgery, she would be fed through a tube in her nose that led directly into her stomach. She would not be able to talk during that period and the surgery was potentially disfiguring. Susie told Warren little more; she did say she was worried that she would frighten her own grandchildren. They decided she would fly to New York City for a second opinion at Memorial Sloan-Kettering Cancer Center the following week, although this was largely a formality.

  Once back in Omaha, Warren filled his every conscious moment with phone conversations, Internet bridge games, work, and strategizing how to handle an upcoming meeting with Karen Elliott House, publisher of the Wall Street Journal. Buffett by now had had several run-ins with the Journal over its coverage of him, beginning with the 1992 story that called him a “tough, polished man” beneath the “mask” of a folksy sage. House was arriving perhaps on a repair mission, perhaps to sound him out about buying the financially troubled paper. But his mind never really left Susie; he touched on her in brief cloudbursts of conversation. He had decided to spend every weekend in San Francisco with her during the coming months. Although he didn’t really know what he was letting himself in for, he wanted to give her in some fashion what he knew she would have given him, had their situations been reversed. He felt certain, he said, she needed his presence. For sure, he was going to need hers.

  The meeting with House proved uneventful; nobody got strangled, nor did Buffett buy the paper. For the rest of the week he started every morning in a thunderhead mood—a sure sign that he was not sleeping well—then brightened through the course of the day. Other than Debbie Bosanek and a few other people, nobody at Berkshire Hathaway headquarters knew the reason.

  During that week he rarely left his corner of the floor next to the Xerox room and the two file rooms, spending much of his time on the phone with Susie. Although they talked for hours, she was vague about the ordeal that she faced. Initially, she herself had not grasped the extensiveness of the surgery, which might also involve a bone graft taken from her leg. The surgeons were not sure how much of her face would be involved, although they thought they could spare her tongue. Most devastating to her was that she would probably not be able to sing again. She had discussed the surgery with her former son-in-law, Allen Greenberg, who had a longtime familiarity with her medical problems, having taken his friend, boss, and former mother-in-law to the e
mergency room several times over the years. Sensitive to the way Buffett recoiled at anything to do with illness, Greenberg did not even mention Susie when he went to Buffett’s office to update him on the foundation’s projects.

  Yet while Warren didn’t want to know much, he talked and talked about what he did know. “They’ve got a team of five guys, and it’s at least a ten-hour deal. She’s got the best care in the world. She got a letter from Howie that—no mother could get a better letter. She’s got a lot going for her. But it’ll be a tough ordeal. They’ve given her a lot of information, and she knows I don’t want the details. She’s told me what she thinks I can handle. I’m sure the doctors think it’s crazy that I’m not talking to them directly. But I can’t take that, so she’s sort of told me the key elements.”

  A few days later Susie flew into Omaha to pick up Susie Jr., who was going to accompany her to Memorial Sloan-Kettering in New York for her second opinion. Tests there gave them the good news that there was no indication that the cancer had spread, and they flew back to Omaha, where Big Susie was going to spend the weekend. But while there she had another episode of crippling pain from her abdominal adhesions. This attack, coming less than five months after the obstruction that had prevented the Buffetts from traveling to Africa the previous May, was disturbing. She had to stay over at Susie Jr.’s, but for once heavy doses of painkillers enabled her to avoid hospitalization, which had always been required before.

  Haggard and pasty-faced, Buffett dragged himself to the office, then left in the middle of the week for a Coca-Cola board meeting in Atlanta. By the time he returned, Susie had begun to recover and went to pay a visit to Astrid. When she saw Susie, Astrid simply broke down in sobs, and, once again, it was Susie’s turn to comfort someone else.

  After the weekend, when Susie flew back to San Francisco, Buffett’s mood turned dark again, his voice went gravelly, and he was clearly having trouble sleeping. The biennial Buffett Group meeting, which was being held a few days later, weighed on his mind. Susie’s doctors didn’t want her to travel to the meeting, which was taking place in San Diego. Thus, for the first time since 1969, Warren would be going alone. Not only would Susie not be there, but his friend Larry Tisch, an early partner and the head of Loews Corporation, also would be absent, because he was too ill with advanced stomach cancer to attend.