“You won't believe what Mr. Darr did to me,” Harrison said.
“What did he do to you now?” Eastwick asked.
“Well, you know I've told you he never spends a penny,” Harrison said. “But do you believe that man made me pay for his airline tickets for him to come to my wedding?”
D'Elisa set his portfolio briefcase on the kitchen table, opened its flap, and carefully slid a tape recorder inside. He plugged a microphone wire into the recorder and slowly laid the wire up the inside of the briefcase and over its opening at the top. Then he tore off a piece of electrical tape and attached the tiny, sensitive microphone to the outside of the briefcase. He closed the flap over the microphone; it was hidden, but pointed toward an opening between the flap and the briefcase. D'Elisa turned on the recorder and checked it out. It picked up his voice perfectly.
He stood back and examined his handiwork one more time. No one would be able to see the microphone was there. Finally he was ready to go tell Darr he was quitting. Whatever tricks Darr decided to play in response would be captured on tape. It was the only way D'Elisa could think of to protect himself from Darr's manipulative tactics.
By May 1983, Darr was one of the most powerful people at Prudential-Bache. Despite the initial promise when Ball took over, the firm was still struggling with heavy losses. The Direct Investment Group was one of the rare divisions in the firm that was actually making money. And Ball believed in feeding success. Whatever resources Darr wanted had been given to the department. In speeches to brokers, Ball had almost always thrown in a line of support for the partnership effort. Ball frequently invited Darr to make presentations to senior executives. No one could have missed Ball's seal of approval for Darr and the Direct Investment Group.
That particularly delighted Bob Sherman, the head of retail and Darr's boss. To him, Darr's partnerships appeared the way to almost limitless revenuesâand fat bonuses for all of the executives involved.
“Darr's producing a lot of money,” Sherman told a group of senior retail executives at the time. “He's going to be making a big contribution to retail.” To some executives, Sherman also said that Darr had secretly confided that he had once worked with the Central Intelligence Agency. That, Sherman said, was particularly exciting.
Even with the support that the department was receiving from the firm, D'Elisa did not think he could work there anymore. He thought the department was doing bad business. He had watched all the quality people either get forced out or simply abandon the firm in disgust. Of the Futon Five, only he and Dennis Marron still survived. Too many of the executives who remained were concerned about the wrong things. In D'Elisa's mind, Darr had corrupted people with the easy money that his department was bringing in. Too many of them had seemed to forget that this business wasn't about living the highest life.
Despite his frustration, D'Elisa had stayed with the firm because he worked out on Long Island, some forty miles away from Darr. But weeks earlier, Darr had called to say that D'Elisa would have to start working in Manhattan. D'Elisa immediately had started looking for another job and had found one at Bear Stearns & Company. He didn't want to work alongside Darr; D'Elisa didn't want to risk being corrupted, too.
After setting up his tape recorder, D'Elisa traveled to Prudential-Bache headquarters and went to Darr's office. Before walking in, he turned on the recorder.
“Relax, John,” Darr said as D'Elisa sat down. “I know why you're here. I know you've got a job offer from another firm and I know you're seriously considering it.”
There it is again, D'Elisa thought. Ever since the Futon Five fiasco, Darr delighted in telling members of the department that he knew everything they did and said. Dennis Marron theorized that Darr somehow was listening in on their telephone calls. Others thought it more likely that there were spies in the department.
“So, what would it take to make you happy here?” Darr asked.
For you to leave
, D'Elisa thought. He said the Bear Stearns offer was too good to pass up. It was making him a partner, which Prudential-Bache couldn't do, since it was not a partnership. Plus, he said, Bear Stearns was paying him a lot more money.
“Look,” Darr replied. “I can't make you a partner, but this is what I can do. I'll make you a senior VP. I'll give you a $50,000 raise. And I'll vest you immediately.”
The offer was unbelievable. The raise was enormous. But the vesting offer was more important: That would guarantee D'Elisa a share in the fees and cash flow pouring into the corporations, like Bache Properties, that Darr set up for the partnerships. Each day, he was establishing new corporations, such as Prudential-Bache Energy and Prudential-Bache Minerals, among others, and they were bringing in millions of dollars a year. Darr's offer could easily have been worth $2 million. Still, it wasn't good enough.
“Jim, I don't want to commute into the city every day.”
A look of anger flashed across Darr's face. “You're willing to commute into the city every day for Bear Stearns, aren't you? Why aren't you willing to commute into the city for me?”
“Well, I just would prefer not to.”
Finally Darr caved. D'Elisa could stay on Long Island, as long as he shipped one of his staff members to Manhattan. Then Darr would live up to all the other financial promises. The offer was too sweet to simply reject out of hand.
“All right, Jim, I'll consider doing the deal,” he said.
“Come back to me tomorrow, and I'll talk with the necessary people,” Darr replied. “But it's a done deal.”
The next afternoon, D'Elisa couldn't bring himself to make the final commitment. He needed more time to think about it. Even with all that Darr had put on the table, he still was not convinced that it was worth it. He felt as if he were selling his soul.
After a sleepless night with his head spinning, D'Elisa decided to take the deal. He went into Manhattan the next morning and walked into Darr's office.
“All right, Jim, if we're going to do this, I want it in writing,” he said. “I want a contract.”
“OK, I'll give you a contract,” Darr replied. “But forget about the Long Island office. You could have had it yesterday. But you're a day late. You can't have it today.”
D'Elisa stood up and shook Darr's hand. “Thanks a lot,” he said, and he turned to walk out of the office. That was the end. He quit his job.
If Darr had been so quick to back out on the Long Island commitment, D'Elisa knew that everything else would vanish, too. He was tired of playing Darr's games. He just wanted out.
D'Elisa took the elevator downstairs, pushed through the building's revolving door, and began walking briskly down the street. With each step he took, he felt an enormous weight lifting off his shoulders. It was over. After the years of battling and intrigue, it finally had come to an end.
He didn't even want to guess how long the people he left behind would survive.
Clifton Harrison grabbed a chair in a conference room at Prudential-Bache and threw it against the wall.
“Goddamn it, you asshole!” he screamed at David Levine. “What's the matter with you? This is a great deal!”
Levine stood his ground. He wasn't going to pass on the latest partnership that Harrison brought into the firm in June 1983. By then, Levine was far along on the due diligence learning curve. He knew that Darr and Harrison were pushing bad deals through the department. This latest one, called Exchange Center Limited Partnership, was the worst. Levine decided that, this time, he was going to stick with his analysis, regardless of the pressure.
The $32 million Exchange Center deal made little sense to anyone on the due diligence team. It was an awful transaction for investors. The deal would build a thirty-nine-story red-granite office tower on South Lasalle Street in the heart of Chicago's financial district. The fees and expenses were so heavy that Levine did not see how any investor could make a penny on the deal. All told, Harrison, Prudential-Bache, and the Direct Investment Group would pocket more than 20 percent of the money that was raised.
When the Chicago deal first came in the door, Levine decided to pass it to Jeff Talbert, a new, young member of the due diligence group. He wanted to see how Talbert would react. After all, Talbert knew nothing about Harrison's criminal background or the troubles that his other deals had experienced. It was the best way to get an honest response. Levine dropped the documents on Talbert's desk without telling him any of the details.
“Let me know what you think of this one,” Levine said.
Talbert started reviewing the documents and, after just a few minutes, decided that Levine must be kidding. The deal was ridiculous: It assumed it could charge rent of $32 a square foot by 1985, when the best estimates for the rental costs in that year averaged around $27. Nobody would pay the extra $5. With such unrealistically positive assumptions, the deal had to flop. Talbert carried the documents back over to Levine's cubicle. Freddie Kotek and some other members of the department were there talking with him.
“I've gone over this, and I was surprised,” Talbert said. “There are lots of problems. I can't even figure out why we're looking at this deal.”
“It's a Cliffy deal,” Levine replied.
Talbert looked perplexed. “Who's Cliffy?”
Kotek spoke up. “Cliffy, Clifton Harrison. Cliffy's a guy we do deals with, a friend of Darr's.”
Talbert could see the disgust on his colleagues' faces. “Well, what's wrong with the Cliffy deals?”
“They're all like that one,” one of his coworkers replied. “They suck.”
“And he's a convicted felon,” Levine added.
The four talked about what should be done with the Chicago deal. Talbert said that if these Harrison deals were as bad as everyone said, he was worried about them. What would happen when they blew up? Brokers would get mad, and then the department wouldn't be able to sell anything. It seemed like an incredibly risky way to run the business.
Then it came up that there was one other Harrison deal in the pipeline, Fountain Square Limited Partnership, which would raise a little more than $6 million for a building in downtown Cincinnati. Maybe, someone joked, they should appease Darr by letting the Cincinnati deal through while killing the $32 million Chicago deal. At least that way, less money would be on the line.
Levine looked back at the documents, steaming. D'Elisa was not there anymore to fight for them. But, Levine thought, if the newest person in the department could throw aside the Chicago deal that quickly, he was not going to let it through. This one he was going to take to the mat. He rejected the deal out of hand.
But Darr refused to accept Levine's opinion. He and Harrison called Levine into a meeting in a conference room and double-teamed him. Levine refused to change his decision.
Later, Darr told Levine that since there was such a split opinion, the matter would be taken to the department's investment committee for a decision. Levine knew what that meant: Unless he could think of something, the deal would go through. Darr completely controlled those investment committee meetings.
Levine walked back to his desk with a new resolve. If Darr wanted to present the deal to the committee, fine. But Levine was going to make sure they knew, in a written memo, about the deal's problems. Word spread that Levine was going all out in his effort to kill the deal.
The investment committee met soon after. On that day, Joseph Quinn, a former official with Chase Manhattan Bank, took over D'Elisa's job as the new head of due diligence. Shortly before the meeting, Levine spoke with Quinn and told him about what was happening with the Chicago deal.
The meeting started later that morning in the department's boardroom. Senior executives, including Darr, gathered around the conference table as Levine distributed copies of his two-page memorandum on the Exchange Place deal. For the next half hour, Levine went through his memo, point by point: The deal was one-sided, in favor of the general partners over the investors; the rents were above market; the real estate market was soft. He supplied a stream of data to support his position.
Finally Levine finished his presentation. With such a massive criticism on paper, he figured the meeting was over. He couldn't see how it would be possible for even Darr to push this deal through. Levine started gathering his things.
“Now, wait a minute,” Darr said. “We have an interesting problem. We've had two people who did the due diligence here, and they don't agree.”
Levine looked up, stunned. “What?” He couldn't understand what Darr was talking about. He ran due diligence for real estate private placements. And everyone in his department agreed with his analysis.
Darr motioned toward someone sitting at the table. “Ralph, why don't you tell us what you found,” he said.
One of the department's appraisers stood up and began passing out copies of a second memo. Levine couldn't believe it. Appraisers figured out fair values of purchase prices for buildings. They never reviewed deals for their investment quality on their own. They didn't have the background to do it.
This is a total setup
, Levine thought.
For the next few minutes, the appraiser described the benefits of the Exchange Place deal. He trembled as he spoke, obviously very nervous and uncomfortable. In Levine's mind, the report made no sense. But Darr had managed to regain control. The appraiser finished his report and sat back down.
“Well, thank you very much, Ralph,” Darr said. “Obviously, David, you need to go back and take another look at this.” The investment committee gave the go-ahead for the department to proceed with the deal.
Levine and Quinn headed out of the meeting room to Quinn's office, where Levine slumped into a chair, pale and wiped out. The stress from trying to do his job properly was overwhelming.