There was only one significant deal in the pipeline for the growth fund, involving a transaction with Maple Gulf Coast Properties, a company partially owned by a consultant to Prudential. That transaction had been recommended about two weeks before but would not provide cash returns quickly enough to boost the upcoming distribution.
Within a week of the management committee meeting, the deal with Maple was changed. The growth fund agreed to purchase $6 million worth of preferred stock from Maple, although the true cost to the investors was closer to $7 million. About $1 million of their investment had been taken off the top for fees to Pru-Bache and Graham. The remaining money was handed over to Maple in November.
Of course, for there to be a distribution, the growth fund had to transform its investments into cash. So a few weeks after it handed Maple the $6 million to buy the preferred stock, Maple handed the same cashâfrom the same bank accountâright back. The money paid part of a loan Maple had received from the growth fund. Effectively, the investors in the growth fund had paid off the Maple loan themselves. Then another 15 percent was sliced off the $6 million for the back-end fees to Graham Resources and Prudential-Bache. The remaining $5.1 million was distributed to the growth fund investors.
The growth fund celebrated its 14 percent distribution as a sign of its strength. No investors were told that they had just suffered a $1.9 million loss.
David Wrubel, a bearded young executive with a long history in the partnership business, sat in an anteroom outside of Darr's office. He had been scheduled to meet with Darr at 2:00 P.M. and had been waiting for almost half an hour. He was supposed to be interviewed by Darr as the last step in getting hired as a marketer in the Direct Investment Group. He didn't like the idea, but he needed the job and tried to be philosophical about it. If his father could survive World War II, Wrubel figured, then he could survive Prudential-Bache.
In a wave of cutbacks following the stock market crash a few weeks before, Wrubel had just lost a job marketing partnerships for Drexel. The timing was dreadful. He and his wife were expecting their first child in a matter of weeks, and at that moment, throughout Wall Street, thousands of people like him were being shown the door.
He had heard from some friends at Prudential-Bache that there was an opening as a regional marketer in the Northeast. He feared it would be nothing like his last job. Despite all the investigations of Drexel's junk-bond department, he thought the firm was a great place to work. Everyone there seemed concerned about turning out high-quality partnerships. But Prudential-Bache had the reputation of being a schlock house that attracted lightweights. During his years in the partnership business, he had heard too much about Darr's ego and bizarre behavior to think that the Direct Investment Group might somehow be an exception.
He had already had a taste of the department's peculiarities. The previous night, he had received a call at home from Barron Clancy, one of the senior executives in the Direct Investment Group. Clancy said he had terrible news: Darr didn't like beards.
Wrubel was floored. He'd had a beard throughout his entire Wall Street career. No one had ever objected before. He told Clancy that if he shaved that night he would look terrible at the interview. Clancy warned him to be prepared for Darr's reaction.
As Wrubel waited outside Darr's office, he tried not to be self-conscious about his beard. Finally, at about 2:30 P.M., he was shown into Darr's office.
Wrubel had never seen Darr before, but he lived up to his image. He was dressed in the standard-issue outfit for Wall Street in the 1980s: pin-stripe suit, suspenders, yellow tie, cuff links, and a light blue monogrammed shirt with a spread collar. Wrubel looked about the huge office, trying to find something he could admire that might help break the ice. But as soon as he took a seat, he realized it didn't matter. Darr was not a man for small talk.
“So,” Darr said, “what the hell makes you think you can be successful at Prudential-Bache?”
What the hell kind of question is that?
Wrubel thought.
No small talk? No
co fee?
But he needed the job too much to say any of those things. He swallowed his pride and gave Darr a quick, snappy answer.
“Because I was successful at Drexel with a bunch of brokers with a similar mind-set to the ones here,” he said. “I was able to develop a sense in their minds of my own personal credibility. I kept at it, I worked real hard, and I can do the same thing here.”
Darr raised his hand to his chin and sat back in his chair. He seemed to like the answer.
For the next half an hour, Darr drilled Wrubel with questions. Finally Darr placed his hands down on his desk and started to get up.
“Well,” he said. “Welcome aboard.”
Darr walked around his desk, shook Wrubel's hand, and patted him on the back. As he started to escort him out of the office toward the elevators, he stopped suddenly.
“Oh, by the way,” Darr said, chucking Wrubel under the chin. “Nice beard.”
Darr turned to walk away, a devilish smile on his face. Wrubel stood there, thinking he had just spoken with one of the oddest people he had ever met.
A few weeks later, on January 25, 1988, Wrubel headed up the steps at the Smith & Wollensky steakhouse for his first quarterly dinner with the Direct Investment Group. The weather was terrible, and Wrubel was soaking wet. As he walked into the restaurant's private dining area on the second floor, he saw Darr across the room, sitting on a bar stool. He looked angry.
By this point, Wrubel had already had his fill of the oddities from Prudential-Bache and the Direct Investment Group. He was one of the very few executives in the department who had not developed a career at Prudential-Bache or with some general partner affiliated with the firm. He knew the partnership business. He knew what Wall Street could be like. And this wasn't it.
Already, he had been warned by other regional marketers to watch himself around the department. If anything ever went wrong, he heard, Darr and his supporters would rationalize it away. They looked for any reason to throw their weight around and cared nothing about the quality of the partnerships. All that the senior officers of the Direct Investment Group wanted was heavy, continual sales of partnerships. Another acquaintance told Wrubel that he might have some trouble with the senior executives of the department because he was Jewish. The Direct Investment Group, he was warned, was laced with anti-Semitism. All this was not the kind of information that endeared his bosses to Wrubel.
As Wrubel checked his coat and umbrella, Darr signaled from his bar stool for him to come over. This would be their first conversation since the job interview. When Wrubel walked over and said hello, Darr glared at him angrily.
“I have a real problem with you,” Darr said.
Here we go again
, Wrubel thought.
Aren't you going to o fer me a drink?
“What's the problem?” he said.
“I told you to shave off your beard. And it's still there.”
The beard again. This was getting to be ridiculous.
“Jim, you didn't tell me to shave off the beard. When I left your office the day you hired me, you said âNice beard.' Don't you remember?”
“Yeah, but I told Barron Clancy to tell you to shave it off. Didn't he tell you?”
Wrubel didn't want to get Clancy in trouble. But he had never passed a direct order that Darr wanted it shaved off. He'd only told him that Darr didn't like beards. It would be a few days until Wrubel found out that Darr had never asked Clancy to tell him anything.
“No, he didn't tell me.”
Darr picked up his drink and squinted at Wrubel. “What if I told you right now, shave off your beard or you're fired. What would you tell me?”
Somehow, perhaps because the beard had come up so often, Wrubel had a ready response.
“I'd tell you that you ought to give me three months with it,” he replied. “These are the months that I am going to be meeting with brokers and branch managers and establishing who I am. They're used to somebody else. But, when I leave the office, they will remember the new guy. They might not remember my name. But they'll remember me as the guy with the beard.”
Darr roared, “That's a great answer.” He finally chuckled. “Keep the damn beard.”
Later that night, everyone took a seat at the table for dinner. Waiters were walking about the room, bringing wine or refilling the drinks. A clinking noise cut through the conversation. Darr was tapping his glass with his knife as he stood up.
“Welcome to the first quarterly meeting of 1988,” he said with a smile. “Since we are blessed with a new regional coordinator, and we have never heard him speak before, I think it would be particularly appropriate for our new Jewish friend to say grace over the meal.”
Amid some laughter, all eyes turned toward Wrubel. He was furious and offended. He had never experienced such disgusting behavior during his years on Wall Street. Another time, in another situation, he would have quit on the spot. But he had a family to support. He swallowed his pride and stood up, a wineglass in hand.
“Dear God,” Wrubel said. “You've got better things to do than pay attention to a group of people like us tonight.”
The crowd of Direct Investment Group executives laughed and clapped as Wrubel sat back down. He smiled as he looked at Darr, trying to control his hatred.
This place was worse than anything he could imagine.
The next day, it got worse. At about 7:30 in the morning, the executives from the Direct Investment Group gathered in a large auditorium to hear the latest about partnerships being planned for the future. Darr would not arrive until later, so the opening speech was handled by Paul Proscia. He impressed a number of executives in the room as a terrible speaker.
About an hour after the meeting began, Darr came in and took over. Before he went through the production reports for the year, he wanted to mention a few promotions and new hires.
“I would like to introduce our new regional coordinator for the metropolitan region,” Darr said. “He comes to us from Drexel Burnham, where he essentially had the same role. David Wrubel.”
Darr looked up and nodded toward Wrubel. “David, would you please stand up.”
Wrubel stood and looked about the room. “Jim, thanks a lot,” he said. “I'm really excited to be here at the best direct investment firm on the Street. It's going to be a real challenge, and I look forward to getting to know all of you.”
As he sat down, Wrubel noticed a deathly silence descending on the room. It was as if the birds in the jungle were quaking in fear at the arrival of the lion. In the front of the room, Darr was staring at him, looking like he wanted to teach Wrubel a very rough lesson.
“Who told you to say that?” Darr snapped.
Wrubel muttered an apology. He was starting to learn the rules of the game in Darr's domain. No one was permitted to speak unless he asked them. Wrubel wouldn't make that mistake again.
His first temptation to speak out of turn came later in the meeting. Darr was describing his new pet project, a super real estate partnership that would purchase distressed properties at rock-bottom prices. The idea would bring together three general partners in real estate: the Related Companies, A. G. Spanos, and Fogelman Properties. All of the general partners had already sold a number of deals through the Direct Investment Group, many of which were struggling.
As Wrubel listened, he realized that what Darr was describing was similar to a deal that Drexel had already put together. That one involved Lincoln Properties, a general partner that at the time had one of the best reputations in the business. But even with all that quality, the Drexel deal was not working. Lincoln had not been able to find enough good-quality real estate at bargain prices, and it wasn't about to buy lousy properties just to generate some fees for itself. Instead, the investor money sat in the partnership, doing nothing. That was the primary sign of a deal that should never have been done.
Wrubel started to say something, but held himself back. By this point, he knew the truth of the Direct Investment Group. Substantive discussions were not welcome. Darr did whatever he wanted. At a Drexel meeting, Wrubel would never have hesitated to bring up his point, and the deal would likely have been shelved. But disagreements with Darr were not permitted.
As Wrubel sank lower into his chair, Darr finished his presentation and asked if there were any questions. An executive in the back of the room responded.
“I don't know how the brokers are going to feel about a deal like this,” the executive shouted. “I mean jeez. Maybe we should call it the Prudential-Bache Jewish General Partners deal.”
Darr cracked up. “You know, you have a good point,” he said. “On the other hand, because the deal is all Jewish general partners, it'll probably be a good thing in the minds of our brokers.”
Wrubel was shell-shocked. It was the most amazing thing he had ever heard in a business meeting.
Fred Storaska strode toward the podium at a partnership sales meeting in Vancouver, British Columbia. He had just been introduced as the number-one broker in the firm in direct investments for 1987. In that one year, he had sold $22 million of the partnerships to his clients. If Storaska were a branch, he would be the fifth most productive in the country, an emcee had said in an introduction. Now Storaska was going to share the secrets of his success.
Storaska arrived at the podium amid a smattering of applause. He looked up sharply and began speaking quickly in a rambling, disjointed manner. After talking about some of his strategies, Storaska began to discuss himself and his style.
“I make it a point to work 105 hours a week,” he said. “I'm up at 4:00 A.M. I go to the office and I'm at the office on Monday morning at 5:30. I usually don't leave the office until about either Tuesday night or Wednesday night. I usually catch a couple of hours sleep on my couch on Monday night and Tuesday night.”