Summer 2007 • Issue 25, page 13

Profile: Bill Brandt

By Rense, Kirk*

RECEIVER/TURNAROUND CONSULTANT/TRUSTEE/AUTHOR/TELEVISION COMMENTATOR AND ADVISOR TO CONGRESS ON ALL THINGS INSOLVENT (OR ABOUT TO BECOME SO)

[Editor’s Note: William A. Brandt, Jr., is President and CEO of Development Specialists, Inc., a firm specializing in providing management, consulting and turnaround assistance to troubled and reorganizing entities with offices in New York, Chicago, Los Angeles, London, Miami, San Francisco, Columbus and Boston. He is a noted writer, lecturer, television commentator and advisor to the United States Congress on matters of insolvency and bankruptcy policy. He describes for readers of the RN the curious circumstance of his entry into the profession, and some of the notable moments of his career in finance, turnarounds, bankruptcy and politics.]

Perhaps as a result of my original roots in academia, I have made it a conscientiously adopted habit for a little more than three decades to try and keep up with all of the literature in our field. As a consequence, I’ve been a frequent reader of Receivership News since its earliest editions, and more than a few times, in viewing the various profiles of individuals that have been featured, have taken note that one of the common threads in all their stories seems to have much in common with the screenplay from that 1988 movie The Accidental Tourist.

I say that not because the wonderful individuals who’ve been profiled could be accused of doing what William Hurt did in that movie, which was sleepwalking through life, but rather for the other premise of the movie, which, loosely framed, would be “no matter what you plan for, it’s something else you’re going to wind up doing.”

If my compatriots and colleagues who’ve been profiled in this fine column previously offer a strong hint of that, then I’ve got to say I’m a prime candidate for Exhibit A, in that I’m a classic example of someone who started out aiming to do one thing but wound up doing something entirely different.
Well more than thirty years ago, I was on my way to becoming a college professor in the arcane fields of Demography, Statistics, and Mathematical Models of Labor Force Analysis (which certain of you will recognize as being roughly akin to what some insurance actuaries do). In this endeavor, I was the black sheep of the family, as for more than a century my forebears and siblings had been engaged in the mining and minerals industry. Rather than pursue that vocation, I had decided to opt for a life in academe.

Following the completion of all of my studies toward the goal of a Ph.D., but short of completing the written dissertation needed to get that degree, I was casting about—as academic beggars often do—for a way to scrounge up an office, some secretarial staff, and what in those days passed for a rudimentary photocopy machine in order to work on my dissertation. I had been fortunate through my entire graduate school experience of being the beneficiary of academic scholarships which not only paid my tuition, but also paid my living expenses in full. What a shock it was then to finish the formal schooling portion of my degree program only to discover that not only was the flow of tuition money now over, but with it, as well, the monthly stipend that had kept me in victuals and libations through the course of my academic career to that date. Well, here’s where fate intervenes, as it often seems to have done many times for the other authors of similar profiles I’ve read in this wonderful publication.

One of the nation’s most prominent bankruptcy lawyers and, by chance, a passing social acquaintance, knew of my family’s background, knew that I understood the mining and minerals business, and proposed a deal (continuing with our cinematic theme) similar to the one that enticed Tab Hunter in Damn Yankees. The bargain was such that he would find me an office, a reasonably alert secretarial staff, and one of them newfangled Xerox machines (where each sheet went in separately in a plastic-coated sheath), and all I would have to do would be to serve as his and his firm’s “eyes and ears” in connection with the daily operation of a business—a mining and mineral enterprise undergoing reorganization under the regime of the then-in-force Bankruptcy Act.

But there was another aspect to this arrangement. Given what I was studying in my academic endeavors, and this lawyer’s interest in discussing some of the more arcane aspects of demography, he’d teach me more than a little about a business operating in bankruptcy if I’d return the favor and teach him a bit about statistical inference as related to the probability of success in business decision making. Copping another phrase from the cinema (this one from The Wizard of Oz when the wizard explains to Dorothy how he managed to wind up with the gig), “times being what they were,” I readily accepted this deal.

The short version of the success story thereafter is that there were deep-pocketed money folks roaming about the country in that era doing roll-ups in the mining and minerals industry, for that was the time of the first fabled oil embargo. These same people, having accumulated a number of deals over the years, later were the same folks that brought down the Penn Square Bank in Oklahoma, and caused the subsequent banking crisis of the mid- to late-1970s. However, at the time our paths crossed, they were still, as Eddie Murphy said in Trading Places, “buying.”

I didn’t know I was supposed to be selling the business, for after all, I was merely the “eyes and ears guy.” I had noticed, however, many of the senior executives had headed out the door and I was by default one of the few people left who understood anything about the business. So these money people started calling me, telling me they wanted to buy the business. Unsure of myself, and wanting to get back to paying attention to writing my dissertation, I simply said that I couldn’t talk about selling the business.

These deep-pocketed money men, being as most of them were from Texas and all, evidently considered my response to be the epitome of a shrewd bargaining technique and took to calling me about every four to five days and raising the price. After one of the last such calls, even I (given my background in the mining and minerals industry) had come to the conclusion that, at the price level they were lately offering, they would be massively overpaying for these assets.

So I dialed up my old friend the bankruptcy attorney, humbly offered in advance an apology that I was probably sticking my nose in where it didn’t belong, but that these fools kept calling me back, raising the price to a level where, even though I wasn’t supposed to be doing anything about selling, I felt an obligation to apprise my friend that, from my limited perspective in the industry, the purchase price had now gone to a height that just couldn’t be ignored. Piqued with curiosity, he seemed not too concerned that I had meddled in what was becoming a sales process (albeit heretofore unknown to him), and he inquired as to what price the offers had grown.

"...the thud I heard...was him fainting and falling...."

As I later found out, the thud I heard at the other end of the phone when I related the latest price offering was him about fainting and falling out of his chair. To shorten the story, the deal was concluded, creditors received an unimagined recovery, the case was proclaimed an incredible success, and I was proclaimed a genius. Much like Peter Sellers in the movie Being There, and since I was now a recognized genius (through no fault of my own), I was asked if I could do it again. I merely adopted the word that Cary Grant often invoked in his movies with the simple answer, “Sure.”

So here we are, almost thirty-three years later, and what I’ve realized is that I got into this industry at the beginning of an era when the business of turnaround and workout consulting, as well as receiverships, wasn’t a business. For the next few years, I learned and learned well, and as you might guess, never got around to finishing that dissertation.

I’ve acted as a Chapter 11 trustee or Chapter 7 trustee, as an Assignee for the Benefit of Creditors, or as a receiver in state or Federal court matters in more than seven thousand cases in those thirty-three years. Once, in 1984, stuck for a way to get into a case but not be called a trustee, I used my experience with friends from my days working under the Bankruptcy Act to resurrect a variation of the concept of the “Designated Party for the Debtor in Possession” that had been occasionally employed in cases under the Act. It was about the first time that a senior outside individual was more or less imposed on the management and operations of a company without having had to pass the judicial hurdle of being appointed as either a Trustee or Receiver. That decision, in a case called Gaslight Clubs, went up to the 7th Circuit Court of Appeals in the early 1980s and was affirmed. Twenty-five years on, its progeny are what we now call the “Responsible Party,” the “Chief Restructuring Officer,” or any other variation on the theme that professionals employ around the country.

Along with these new business pursuits, and probably as an offshoot of the field of study I had been pursuing in graduate school, I was active in both the Civil Rights Movement and politics. While I had joined the NAACP in 1964 in order to ride buses in the South, both my work in causes connected to that movement and in politics were unrelated to what I was doing in the business world, and essentially served as my hobby. Where others may have gravitated to golf, I liked to tinker with political campaigns. One of the offshoots of doing this was that I got to know a lot of folks in the political world, and as the 1980s progressed, those contacts served me well.

For example, in the early 1980s, in a case in Central California, I got the chance to bargain across the table from my old friend Cesar Chavez, who was then leading the negotiations on behalf of the agricultural workers union at a series of mushroom farms that I was helping to administer for the bankruptcy court and the lender. Since he and I knew each other from the political wars, a bond of trust existed between us that isn’t usually evinced when management sits down with its unions. That bond of trust helped us to rapidly conclude a negotiation on terms sufficiently favorable to both sides that the agricultural concerns were promptly sold to a buyer whose purchase price reflected the fact that the farms were getting long term labor peace.

My political work has led to other requests from time to time. After former Alabama Supreme Court Justice Howell Heflin left the bench and ran for the U.S. Senate, I worked on some of his campaigns. I also worked on those of Mike Synar, the Congressman from the 2nd District of Oklahoma; he and Senator Heflin were the individuals in Congress that knew the most about bankruptcy during the late 1980s and early 1990s. Reacting to the criticism that the Bankruptcy Code was engendering five to seven years after its enactment as its “shake-out period” was coming to an end, Senator Heflin and Congressman Synar asked me to take a hand in discussing with them selected minimal changes and alterations to the Code that, while not representing wholesale change, would still offer refinements to its operation so as to preserve the integrity of what the Bankruptcy Code was seeking to achieve at the time of its enactment but yet mitigate certain critical glitches.

To that end, I wound up writing amendments to the Code on various technical matters with perhaps the best known piece of my authorship being something that was adopted in the 1994 amendments to the Code, the then-§1104 (b), which created the method for election of Trustees in a Chapter 11. My work in politics continues to this day and I’m about to embark on my fifth presidential campaign.

"...I'm about to embark on my fifth presidential campaign."

During the Clinton administration I served as a member of the President’s National Finance Board as well as serving as a delegate from the State of Florida to the 1996 Democratic Convention. In 2000, I served as a member of the Democratic Party’s Platform Committee, and in 2002 served the newly elected Democratic Governor of Illinois as a senior member of his gubernatorial transition team. Governor Davis of California dispatched me, along with Willie Brown, Tony Coelho, and others, to meet with Fidel Castro in the early part of this decade as a member of one of the first business delegations to Cuba from the State of California.

Although I have mixed feelings about the intrusion of politics into our industry, I can tell you from long experience that such an intrusion was probably inevitable, is certainly irreversible, and will only grow in extent as time passes. To that end, and given the fact that my endeavors bridge both worlds, I have recently begun to see elected officials and state agencies reach out to me and my firm more and more in connection with bankruptcy and quasi-insolvency matters. For example, my firm and I were asked by a variety of senior State of Ohio government officials to quickly step in and manage two rare coin funds which received $50 million in investments from the Ohio Bureau of Workers’ Compensation and are at the center of a major national political and financial scandal. Similarly, the Controller of the State of New York requested that my firm and I assist it in the windup of the affairs surrounding the plea and sentencing agreement for Bernie Ebbers and, in connection with that, oversee the operation and disposition of almost $1 billion in business interests.

While I continue my business efforts apace, I’ve also found time recently to join the National Advisory Council for the Institute of Governmental Studies at the University of California at Berkeley. I’ve even found time in the past few years to appear in a documentary movie entitled What Happened, which humorously chronicled the dot-com bust and premiered at the New York City Film Festival a few years back. One of my “co-stars” in that adventure was my good friend Peter Gilhuly from the Los Angeles office of Latham & Watkins.

I married a lady who at the time was a press secretary to a Republican Senator. Today we have four kids, with the oldest two in college, and one of those at the University of San Francisco. I’m proud to report to all that after several decades of marriage, I’ve been able to convert my wife to the “Dark Side” (as George Lucas would say), and she’s now maybe a more staunch Democrat than I.

As I look back now, I realize that I was literally there at the inception of the modern era of our industry. I’ve been fascinated to watch it grow, develop and mature over these last three and a half decades. These are exciting times in our business and if I have a regret, it’s only that I’m not just now starting out and won’t have a chance to relive three and a half decades all over again as this business evolves into its next heady formulations.

An “accidental tourist” I was, but the ride’s been fantastic.

* William A. Brandt, Jr. is President and CEO of Development Specialists, Inc., an international firm that provides turnaround, management, consulting assistance to troubled or reorganizing enterprises. He splits his time between his firm’s San Francisco and Los Angeles offices and is a new member of the CRF. For more information about Mr. Brandt and his firm, visit www.dsi.biz.