On Feb. 7, the Sunbeam Corporation, $3.2 billion in debt, gave up hope that it will sell enough Mr. Coffee machines, Oster blenders and Coleman camping lamps to pay all of its bills, and filed for bankruptcy. The case is likely to be one of the biggest Chapter 11′s filed in Manhattan’s Southern District this year, and already the press and the lawyers are salivating.
Investors with stock in Bank of America are also salivating–hungry for revenge. Stock in Bank of America, Sunbeam’s largest lender, has sunk in recent months, thanks to the small-appliance company’s troubles.
But if you are one of Sunbeam’s investors, don’t fret: Bank of America has teamed up with Sunbeam’s investment bank, Morgan Stanley, and brought in the best creditor counsel in the business. Chaim Fortgang, the scourge of red ink everywhere, aims to recoup every last penny.
Then again, don’t relax: Sunbeam has done Bank of America one better. Harvey Miller, the Dean Acheson of distressed debt, is on the case.
Mr. Fortgang and Mr. Miller, two formidable attorneys and long-time courtroom nemeses, are again squaring off. How does Mr. Miller feel about that?
“Chaim’s a yeller ,” said Mr. Miller. “I’m not a yeller.”
“He’s strong-willed,” said Mr. Fortgang of Mr. Miller.
Of course, they were just being polite. The two men have said much nastier things about and to each other, and everybody else, in the heat of other messy cases. Who wouldn’t?
In the competitive and emotionally fraught world of corporate bankruptcy–where the same handful of attorneys, bankers and federal judges keep coming up against one another, and where billions of dollars and thousands of jobs are routinely at stake–tempers flare. Personalities grate. And if you are Harvey Miller or Chaim Fortgang, the most feared and most sought-after debtor and creditor counsels around, you flare and grate a lot more than the next guy. Especially at each other.
Exacerbating the friction are their respective roles: Mr. Miller’s job is to protect his clients from banks and keep them in business. Mr. Fortgang’s is to recoup money for his clients, the banks.
Physically, too, they are opposites. Mr. Fortgang, 53 and stout, stalks around Wachtell, Lipton, Rosen & Katz with the coiled intensity of a factory-floor manager. He is known for being brazen and loud. “There are people who don’t understand anything unless you scream it at them,” he says. His colleagues in the legal world refer to him as “the junkyard dog.” A fellow lawyer–one who likes him–compared him to Damon Runyon’s Lemon Drop Kid.
In contrast, Mr. Miller, 67, is dignified in his suspenders and combed-back gray hair. He does not as easily invite either nicknames or comparisons–although a Wall Street Journal reporter once labeled him “Dr. Doom.”
His towering, well-accoutered frame quietly demands fealty; he is not known among the partners at Weil, Gotshal & Manges for raising his voice, though in one notorious incident he throttled someone. He is the Machiavelli of Chapter 11 to Mr. Fortgang’s Falstaff.
To their colleagues, however, there’s not much difference.
“They’re both pricks,” said one, speaking for many. “But we’re all pricks,” he added–meaning bankruptcy guys, not all lawyers.
Pricks perhaps, but with about 10,000 Chapter 11′s declared in 2000 and with mergers and acquisitions–the cheesecake of corporate law in a bull market–slowed to a trickle, Mr. Miller and Mr. Fortgang are the pricks of the moment. And at $675 an hour, they are rich pricks.
True, the two have never lacked for work. Even during the go-go 1990′s, they maintained their usual schedules: 15-hour days and work through the weekends. Their names are plastered all over documents down in Federal Plaza.
Between them, Mr. Miller and Mr. Fortgang have been involved in almost every headline bankruptcy of the last 10 years, and on many of them they have butted heads: on the Donald Trump case in 1990, for instance, where they represented Citibank and Bankers’ Trust, respectively; on Macy’s in 1992, a case in which Mr. Miller represented the department store and Mr. Fortgang the largest creditor, Prudential; on Marvel Entertainment in 1996, when Mr. Miller was for the company and Mr. Fortgang the lead bank, Chase; and on Montgomery Ward in 1997, in which Mr. Miller represented the parent company, G.E., and Mr. Fortgang represented Bankers’ Trust. (Montgomery Ward is in the midst of closing all its stores.)
But now they are up to their ears in it. Mr. Miller’s group at Weil, Gotshal, which shrunk from around 100 lawyers in 1994 to its present 75, is growing again. And Mr. Fortgang admits that, for the first time since the early 90′s, he is turning away work. The economy may be cooling. But whatever the cycle, these guys are hot, hot, hot.
Like Him, Hate Him
“Chaim is a shouter, and he is raucous and can be foul-mouthed,” said a bankruptcy lawyer who’s worked with them both extensively. But that’s all “bombast,” the lawyer said. “Chaim’s got a good heart.
“Harvey is a very, very difficult person. I don’t think you’ll find anyone who will speak of Harvey with warmth or affection, other than maybe the people who work for him.”
In fact, it is hard to find anyone to talk about either of them with warmth or affection–though that’s not to say that they are universally reviled. On the contrary, everyone likes (using “likes” liberally) one or the other. But never both.
The divide is purely professional: If you’re in the business of representing debtors, you despise Mr. Fortgang and admire Mr. Miller, in spite of his domineering nature; and if you represent creditors, precisely the opposite holds true.
A restructuring banker who works with distressed debtors and has faced them both on many cases called Mr. Fortgang a “take-no-prisoners kind of guy,” and said that he is so arrogant as to frequently “overplay his hand … and wind up producing an outcome [for his clients] less favorable than had he been more human.”
Of Mr. Miller he said that, “in Harvey’s mind, there is no question who’s running the case–and that’s Harvey.” But while working with Mr. Miller can be like “taking a tiger by the tail,” this banker went on, all the bluster is “a posture,” and he is ultimately “desirous of doing a deal” (high praise in banker talk).
The lawyers have as many stories about the two as they have opinions.
One banker recalled a particularly contentious night during the Trump negotiations when he was called to an emergency meeting at Citibank, which had taken control of the Trump Shuttle and the Plaza Hotel and which Mr. Miller was representing. He arrived, before Mr. Miller, to find Mr. Fortgang openly deriding Marcia Goldstein–a partner in Mr. Miller’s group at Weil, Gotshal–because he thought she had deceived him about a certain minor detail. “He was going on about ‘that fucking c–-’ in front of about 30 people,” he said.
“I think he’s mellowed since then,” said Joel Zweibel, a retired partner from the firm of O’Melveny & Myers who was also present, and who claims that he is one of the few people who “understands” Mr. Fortgang.
Mr. Fortgang, who did not remember the incident, called the Trump case one of the most complicated and nerve-wracking of his life. He represented Bankers’ Trust, the lead in a group that included five banks and 10 other financial institutions.
“It was [my] job to get all of these disparate groups to pool all their collateral and work out some arrangement, so that no one group could pop the guy [Trump]. That required daily hand-holding.
“People think I’m difficult,” said Mr. Fortgang. “I’m not difficult. I don’t fool around and I get to the point.
“But usually,” he went on, “the best way to come up with the right result is not to ram the other person, but to explain what your position is, why you’re right, why you’re gonna win in litigation…. You’re not going to get 15 institutions involving $10 billion on the same page just by screaming and jumping around, grabbing people by the throat.”
But, he believes, screaming is also part of the job.
“You scream to show the other side that you’re angry, that you think you’re being taken advantage of or that they’re not telling you the truth.”
And his colleagues and family understand him, Mr. Fortgang believes. “Like the other day,” he reminisced, “I was screaming on a conference call–it was my view that I was being pushed around–and I was with my wife and the babysitter and my granddaughter. And I was waving at them to say, ‘You see, I gotta do this.’ And my wife was laughing her head off.”
Robert Rosenberg, a partner at Latham & Watkins who represents debtors and creditors, fondly remembered working with Mr. Fortgang on the Harrah’s bankruptcy in 1995.
“I called him one night after we’d finished to tell him an idea,” Mr. Rosenberg recalled, “and before I could say anything Chaim asked me, ‘What could you possibly have come up with that I haven’t already thought of?’”
Of Mr. Miller, Mr. Rosenberg only said, “I have a hard time talking about Harvey.”
That might be because Mr. Rosenberg was on the short end of one of the most infamous Miller stories. In the heat of the Eastern Airlines case in 1990, Mr. Miller, who was representing Eastern, became so enraged at something Mr. Rosenberg said that he grabbed the very short Mr. Rosenberg by the collar and throttled him. This was in the judge’s chambers and, as it happened, a reporter was present.
“He said something,” Mr. Miller said, somewhat contrite. “And I told him not to say it again. And he said it again.”
Joel Zweibel, who was present, claims that Mr. Miller would have punched Mr. Rosenberg had Mr. Zweibel–who is also pretty short–not jumped up and grabbed his arm.
“It was very unfortunate,” Mr. Miller said of the incident.
“You have to understand that [bankruptcies] are dramas,” he explained. “Some of them are like divorce cases.”
But he admitted that’s also what makes the business exciting. “It’s the lives, the drama. It’s real people.” He added that he finds standard corporate law “very dry.”
It is not only Mr. Miller’s and Mr. Fortgang’s temperaments that invite comparison.
Mr. Fortgang was born to Polish refugees in a displaced-persons’ camp in Germany after World War II, but grew up in Brownsville, Brooklyn. Mr. Miller grew up in Gravesend, Brooklyn. Both attended Brooklyn College (which in the 50′s and 60′s was Harvard for smart Jews with no money) and then law school: Mr. Fortgang at N.Y.U., where he now teaches a course in bankruptcy law, Mr. Miller, after a stint in the army, at Columbia, where he also teaches a course in bankruptcy law.
But the similarities end there.
Mr. Miller began representing clothing-makers and retail concerns for a small firm in Manhattan’s garment district. Then as now, the apparel industry was singularly prone to financial trouble, and Mr. Miller got his first taste of what was as yet an unnamed and uncharted field of giving legal help to bankrupt companies and their angry lenders. In 1969, Mr. Miller arrived at Weil, Gotshal, and in 1970 he took over the bankruptcy group.
“Harvey is more personally responsible for the Chapter 11 business–with a capital B–than any other person,” said Mr. Rosenberg.
An anti-peripatetic by nature, Mr. Fortgang joined Wachtell directly out of N.Y.U. in 1971, and has been there ever since. He claims to have never represented a debtor in his career–and implies that there is some moral significance to this. Mr. Fortgang said that he represents banks out of “idealistic persuasion … I’m of the view that creditors should be paid, not of the view that companies who are out of money should exact value by using the bankruptcy process.”
Mr. Miller, who until about 1990 divided his practice between creditor and debtor work, said that he “identif[ies] with my clients” irrespective of the side: “I identify with the needs of my clients.”
But Mr. Fortgang sees a fundamental gap between his side of the table and Mr. Miller’s. “You can’t one day be on the methodology of extracting value,” he said, “and the next day represent a bank.”
Mr. Fortgang says that his first duty is to the “wonderful relationships” that Wachtell has built with such banks as Chase, Bankers’ Trust and Morgan Stanley over the last two decades.
The same moral rectitude informs his personal life. Although he is surely rich (he claims not to remember how much he’s made from his biggest cases, except to say that “it must be in the millions”), Mr. Fortgang still lives in a modest house in Midwood, Brooklyn, with his wife and the youngest of his four daughters, who leaves for college next fall. He is an orthodox Jew, which means that he cannot be in the office from sundown Friday to sundown Saturday–virtually the only waking hours when he is not working. He gives a good portion of his income to Jewish causes.
Mr. Miller lives in an apartment on Fifth Avenue, also with his first wife. He is not a practicing Jew and has no children. “Children would have been an added pressure,” he told a Wall Street Journal reporter in 1990. “You have to have time to give them love, and I didn’t.” (“I was probably joking,” he told The Observer , when asked about those comments.)
Mr. Miller tends toward finely tailored suits and, one would guess from his hands, manicures. His office looks west and north across Central Park from the 29th floor of the G.M. building at 767 Fifth Avenue in a city-sweeping view straight out of The Sweet Smell of Success . It boasts the classic white-shoe appointments–green leather couch, throw rugs, a large mahogany desk and a separate writing table–and is immaculate, eerily absent of the reams of documents that litter most attorneys’ offices.
Mr. Fortgang, whose wrinkled suits reflect his punishing hours, conducts much of his business from Wachtell’s conference rooms, because there is not a tidy surface in his small corner office, which looks out onto Sixth Avenue. Aside from a white mountain of a desk and some sagging, Office Max-looking bookshelves, there is a miniature basketball hoop sitting in the corner.
But neither has been in his office much this year. Since early January they have been sitting across from one another in various boardrooms, negotiating management contracts, debt work-outs, severance pay, options, retention programs and everything else for Sunbeam. And apparently no fireworks have erupted–yet.
“You see, when we have our discussions, we start at 98 percent,” Mr. Fortgang explained of his professional relationship with Mr. Miller. “We’re not going to fool each other.”
“And I haven’t screamed at anybody, I haven’t hit anybody,” he joked.
Mr. Fortgang says that he and Mr. Miller do interact socially. “We’re not best friends, but we chat.”
And Mr. Miller? No comment. But he said that the Sunbeam case is going “very smoothly.
“I find tremendous satisfaction in working through these problems,” he added, in an unexpected flourish of self-reflection. “If you’re successful, people have jobs, they have a rehabilitated business…. They look at you like you’re a god.”
Mr. Fortgang agreed. He said that in cases like this, when there is a lot of red ink on the books but also a lot of value left, he would like to see the subject stay in business.
“If you successfully restructure a company,” he said, “creditors get paid, the company survives, employees keep their jobs, stock-holders may have some hope.” He added with a smile, “You got a bunch of happy people.”