1990 1991 : Winners & Losers : Some People Had Reason to Smile; For Others There Was Little Cheer
The names in the news in 1990 were a mixture of the victorious and the notorious. There were the winners and then there were those who, to put it delicately, did not fare so well.
There were fewer big deals in 1990, but the year did produce the $6.59-billion purchase of MCA by Matsushita Electric Industrial Co., which was also the largest takeover ever of a U.S. company by a Japanese firm.
And that brought huge gains in power and money to a number of participants, namely the triumvirate of Wasserman-Geffen-Ovitz.
It also was a year when the excesses of the 1980s came home to roost in a big way. Insider trading, alleged savings and loan fraud and high living were made flesh by the numerous notables with names such as Milken, Keating and Trump.
“It was sort of a watershed year in a way,” said John E. Fleming, a USC professor of management and organization and an expert on business ethics.
“Business was on some kind of an economic binge in the 1980s and now they’re getting back to basics,” he said.
Fleming said he is optimistic about the course of business ethics in the ‘90s but continues to be troubled by huge compensation packages for executives. He also is bothered by the profits many made from shady dealings, particularly in the savings and loan debacle.
“What worries me is that a lot of the sinners--well, some got tough penalties--but a lot of people who made a lot of money on S&Ls; didn’t have to pay it back,” Fleming said. “So, some of the sinners got away with it.”
Here are some of the select few who, in a tumultuous year, garnered bows instead of brickbats:
The small winners circle was crowded with participants from the MCA-Matsushita deal, signed last November.
MCA Chairman Lew R. Wasserman, who has spent 54 of his 77 years at MCA, will be able to bow out of the company with the knowledge that its future is secure.
MCA did not conduct any desperate search for merger partners, but executives realized that the company needed access to funds to continue to expand. Wasserman’s age was also a concern, even though the day-to-day running of MCA fell to 54-year-old Sidney J. Sheinberg. It is widely believed that Sheinberg will leave MCA when Wasserman does.
After the merger, Wasserman will receive $3 million a year under a new five-year contract. His 1990 salary was $900,000, not counting stock and other long-term compensation. Wasserman also will get an annual 8.75% dividend on the preferred stock he will receive in exchange for his nearly 5 million MCA shares, or about $30 million a year.
Creative Artists Agency Chairman Michael Ovitz brought Matsushita to Wasserman, who had been looking for a corporate alliance for at least five years. The deal has helped Ovitz transcend the role of super-agent as no one since Wasserman has been able to do. And the 43-year-old Ovitz now is being mentioned as a possible successor to Wasserman at MCA.
The fee Ovitz will be paid for bringing the two sides together has not been revealed, but Wall Street speculation puts it as high as $40 million.
MCA executive and leading shareholder David Geffen, who last April sold his record company to MCA, watched the Matsushita deal nearly double the value of the MCA stock he received to $710 million.
The holiday season was a bountiful one for Joe Roth, studio chief at 20th Century Fox. The studio unwrapped two surprise hits in “Home Alone” and “Edward Scissorhands.” Earlier in the year, “Die Hard II” also livened things up at the box office.
Christmas season sales were also important to San Francisco-based Gap Inc., and the ring-ring of cash registers was more cheery there than at many other retailers. Analysts have credited a back-to-basics drive by consumers and well as savvy merchandising by Gap President Millard Drexler.
Nineteen ninety was a year in which there were far more falling stars than ascending ones. Here are a handful of those who probably would rather forget the year in which their names were in lights: The public saw two sides of Michael Milken last year.
One was a deeply generous man who gave millions to charities and gathered support from both the famous and the obscure. The other was a grasping, greedy man who broke securities laws to make millions of dollars and then broke more securities laws to make millions of dollars more.
In the end, the junk bond king was sentenced to 10 years in jail and he agreed to pay $600 million in fines and restitution as well as to cooperate with the government’s investigation of insider trading.
The savings and loan crisis besmirched the reputations of many, but perhaps none has yet paid so publicly as Charles H. Keating Jr.
The Phoenix developer and controlling shareholder of the parent of defunct Lincoln Savings & Loan of Irvine spent a month in Los Angeles County jail because he couldn’t make the $5 million in bail. Keating was released after bail was lowered. He awaits trial in that suit, which alleges 46 violations of state securities laws. Other lawsuits are expected.
The former chairman of American Continental Corp. and three former company executives are accused of misleading small investors who bought some $200 million of the Phoenix company’s bonds at the Southern California branches of its primary subsidiary, Lincoln Savings. The bonds became worthless after American Continental filed for bankruptcy court protection.
Many had a hand in the S&L; debacle, but the horrible extent of the industry’s losses were revealed during the tenure of M. Danny Wall, former chairman of the Federal Home Loan Bank Board. Wall, accused of badly underestimating the mess, quit in March amid mounting criticism from Congress.
The celebrity villain of the S&L; mess has been President Bush’s son, Neil, who was a director of failed Silverado Savings & Loan of Denver. Federal regulators accused Neil Bush of conflict of interest for voting to approve $132 million in loans to developers Kenneth Good and Bill Walters who were also investors in Bush’s Denver oil company.
An administrative law judge recommended that Neil Bush be restricted in any future positions with financial institutions. Bush, who could have been barred from the banking and thrift industries, is expected to appeal.
In the meantime, Bill Walters settled down in Orange County and proceeded to file a personal bankruptcy petition. A lawsuit has accused Walters of hiding assets from creditors by transferring ownership of six cars and more than $6 million in real estate to his wife.
The ups and downs of New York real estate developer Donald J. Trump were watched with a sort of perverse fascination. The flamboyant developer’s debt-laden empire began to crumble as the East Coast real estate market slumped and Atlantic City gambling failed to live up to expectations.
Trump’s disappearance from the Forbes magazine list of the 400 richest Americans and his messy divorce from Ivana were just some of his troubles. In November, Trump agreed to put his Taj Mahal casino hotel into bankruptcy court briefly and to give his main creditors a half interest in Atlantic City’s largest gambling parlor.
A more modest fiasco in the real estate world was the collapse of Mike Glickman Realty last June. The one-time San Fernando Valley real estate phenomenon plunged with the market and critics blamed Mike Glickman himself for poor management skills and overzealous expansion.
Debt was the bullet that destroyed the department store empire of Robert Campeau. The Canadian real estate developer’s Federated Department Stores and Allied Stores operations filed for bankruptcy court protection in January. Campeau’s $10.1-billion purchases of Federated and Allied in the 1980s were done with the aid of junk bonds and the debt proved to be too much for Campeau Corp.
Campeau was forced out as chairman and chief executive of his Toronto-based company in August.
Not only did New York adman Marvin Sloves take a big fall in 1990, his ad agency was crushed by client Volvo. Volvo pressured the agency to resign the $40-million car account after the ad firm helped to produce a provocative TV commercial that showed a giant “monster” truck failing to crush a Volvo car.
What the ad didn’t reveal was that the Volvo was strengthened while other cars crushed by the truck actually had their supports weakened. The ad, which was not labeled a re-enactment, was viewed by many as one of the biggest scandals of the ad industry over the past year.
