Based on statements from confidential witnesses (CW), the plaintiffs also alleged that Monomoy’s cost cuts damaged the ability of the company to function: “CW3 observed that, in May 2013, EveryWare cut back on the bonuses it paid her staff and also radically reduced her staff from 8 to 2. CW3 explained that Monomoy tried to ‘squeez[e] every nickel’ out of the Company and was not making any investment in the Company’s future success.”
Solomon was named as a defendant when the suit was first filed, but he was later dropped when it was amended because he hadn’t been there for most of the time in question. He couldn’t be sure if “there was real fire with all that smoke” or if the suspicious series of events were the consequences of a stressed company that was poorly run.
“All I can tell you is the great sense I take away, from talking to some who were around at the time, was that because you’re trying to pump the stock and sell shares, and Monomoy is trying to figure out their secondary offering, you just don’t want any noise.” Bad news makes noise. He compared the secondary offering to selling a house. People caulk leaks in the upstairs bathroom rather than repairing them because they’ve got a showing in the morning.
“If you just look at the facts, you’re trying to move the stock, and you can see from the quarterly forecast and earnings reports there’s pressure on the top line. Ultimately, you reported 51 [million dollars of EBITDA in the October 2013 announcement]. That’s a far cry from the 60 that you’ve guided.” The reality that, as Solomon believed, the truer figure was actually $28 million “is a pretty shitty story. So that’s not a great story to be selling stock on. So the question is, ‘Who knows what when?’”
He believed Monomoy played “a game” in the second half of 2013 by running “the shit out of the factories” to put the production in inventories and account for the inventory as working capital that would goose EBITDA. In other words, the inventories were not what the company “expected to sell overseas and that simply didn’t sell,” as Kwasteniet described to the judge. They were a gimmick to caulk the upstairs bathroom so investors couldn’t see the leaks.
As of June 2016, the question of whether any of these moves were illegal remained unsettled. After months of filings and counterfilings, the IBEW suit was eventually dismissed on the grounds that some charges were too vague, confidential informants may not have had complete knowledge of the company’s true financial picture, the defendants’ state of mind may not have been to commit a deliberate fraud, and, as Solomon suggested, there were other possible interpretations of events and actions that could excuse the defendants. The International Brotherhood of Electrical Workers appealed the dismissal.
The SEC confirmed that “a law enforcement proceeding is pending or prospective,” citing it as a basis to deny my appeal for information about the EveryWare Global investigation under the Freedom of Information Act. While cautioning that any such proceeding did not imply violations of law, the SEC wrote that “the documents you seek come within categories whose disclosure would generally interfere with enforcement proceedings.”
* * *
Whatever tricks had been played in the past didn’t concern Solomon as much as what he could do about the future. He was confident bankruptcy would release EveryWare from its chains, and it mostly did. The prepackaged plan wiped out nearly $250 million in debt. In return, the lenders acquired 96 percent of the company. Monomoy and Clinton were left with about 4 percent. Monomoy, of course, was still far ahead on its investment. The $20 million it reinvested in EveryWare during the 2014 shutdown was a small price to pay to be able to walk away with its other millions. Clinton, on the other hand, took a beating. (I also tried, again over a period of months, to interview Clinton and De Perio. When I finally reached De Perio, he said, “I don’t get what’s in it for us. What’s the upside for talking about a deal that didn’t go so well?”)
Though it was “prepackaged”—meaning that the creditors and debtors agreed to a plan in advance of filing, making the proceedings streamlined—the proceedings themselves were costly. Kwasteniet, for example, billed $1,030 per hour for his time. He was one of twelve Kirkland & Ellis partners to work on the case; the top rate was $1,235 per hour. The rate at the second law firm representing EveryWare, Pachulski Stang, topped out at $1,025, for Laura Davis Jones. (It was Jones’s second turn at bat for Anchor Hocking in an eight-year period. She’d led the Global Home Products bankruptcy case.) Jefferies, the investment bank, and Alvarez & Marsal, the consultants, also billed out enormous sums. Jefferies’s fees were capped at $2.5 million. In the ninety days before the company filed for bankruptcy, EveryWare paid A&M $1,129,070. Before it was over, the bankruptcy would cost roughly $21 million, all the profit EveryWare expected to make in 2015.
Solomon, who’d never led a company going into bankruptcy, was amazed at how the superstructure of the American bankruptcy process operated—and how much money there was to be made from it.
“I think it’s an egregious expense, and it’s ridiculous,” he said. “But that’s the magic.” If you wanted to make a quarter of a billion dollars in debt disappear, you had to pay The System. “And not only the amount of money, but the rate at which it went out! Unimaginable. I remember saying to one of the consultants, ‘Hey, listen. You guys seem to know what you’re doing. This is clearly not your first rodeo. Why do I have to buy a new saddle? Can’t you use the saddle from the last rodeo?’”
As it happened, the U.S. trustee for the case, charged with protecting the rights of the creditors, strongly objected to parts of the prepackaged plan, arguing that it amounted to a hit-and-run over smaller creditors, allotted too much money to pay the professionals, and let Monomoy and Clinton off the hook for any part they played in wrecking the company. In return for its cooperation, Monomoy had demanded the same kind of release from responsibility that it imposed on Anchor Hocking for Monomoy’s advice and services.
The exculpation and release provisions in the original prepackaged plan released Monomoy, Clinton, and the lenders “conclusively, absolutely, unconditionally, irrevocably, and forever” from any claim arising out of the dividend recaps, the sale of assets like the DC, or any other action the parties took, even if such actions included “fraudulent or preferential transfer or conveyance, tort, contract, breach of fiduciary duty, violation of state or federal laws, including securities laws, negligence, gross negligence.” The plan did allow a cause of action for willful misconduct, but then gave the parties an out by allowing them to say they had taken such actions on advice of their attorneys and so were not at fault. “All someone has to say is, ‘My attorney told me to do it,’” the trustee argued.
Monomoy hoped to further inoculate itself by having the court find, in its acceptance of the prepackaged plan, that the exculpation was made “in exchange for the good and valuable consideration provided by the Released Parties” (i.e., Monomoy and the others), was “a good faith settlement and compromise of the Claims released by the Third-Party Release,” was “in the best interests of the Debtors and all holders of Claims and Interests,” and, finally, was “fair, equitable, and reasonable.”
In the end, some compromises were made in the plan to accommodate the trustee’s objections regarding smaller creditors, but the Monomoy partners got most of the free pass they wanted for their past actions.
Solomon, Schoenberger, Reisig, and Walker received something, too. As an inducement to stay on and run the business under the direction of a new board appointed by the lenders, they were promised, in addition to their salaries, 10 percent of the company when the time came for the lenders to sell. If, for example, EveryWare were to be purchased for $300 million—a figure mentioned several times as a fair estimate once it was back on its feet—they’d split $30 million, $7.5 million apiece.
In its confidential “pitchbook,” the sales document PE firms use to convince potential limited partners to hand over millions of dollars to establish new funds, Monomoy bragged about its high return rate—“3.1x”—on Anchor/One
ida/EveryWare, declaring the investment a big success, evidence of its business acumen. From the standpoint of a private equity firm, it was a success. Like a lucky old lady hitting a slot in Reno, Monomoy put a little money in and pulled a wagonload of money out. The MCP funds got rich, and so did the Monomoy partners. In 2014, for example, even as EveryWare imploded, Daniel Collin took $250,000 in board director compensation for his few days of meetings. It was deals like the EveryWare episode that enabled Presser to own a multi-million-dollar co-op apartment in the Kenilworth building, touted as “the best location on Central Park West.”
The ultimate fates of Anchor Hocking, Oneida, the people who worked for them, and the communities in which they lived were irrelevant. It wasn’t about making the product; it was about making money appear, the logical conclusion of the Friedman doctrine.
Monomoy sent what was left of Lancaster’s once-grand, 110-year-old employer into bankruptcy court while it made off with millions and the employees walked their wages and benefits backwards in time. Lancaster’s social contract had been smashed into mean little shards by the slow-motion terrorism of pirate capitalism.
* * *
While the bankruptcy was being finalized, Lloyd went shopping. Shopping had become one of Lloyd’s favorite pastimes, as though he’d made it his mission to keep River Valley Mall open. He almost never walked out of the mall without purchasing something, whether he needed it or not. “I ain’t never had nice things,” he explained to me.
The Kentucky Fried Chicken Christmas Dinner was Lloyd Romine’s Rosebud. He was ten, maybe, in 1987. His mother had remarried, to a fellow who sometimes worked construction during the day and always drank at night. She was employed at a small auto parts fabrication plant on the outskirts of Lancaster and didn’t make much money. The family survived okay, though—until she broke one of her legs in a work accident. It was a bad break; she couldn’t return to her job. What money there was dried up or trickled down his stepfather’s throat.
She tried. She wanted her Lloyd and his older half-brother to have the kind of life other kids in Lancaster had, and Lloyd loved her for that intention, but somehow she just couldn’t manage to fulfill it. On the Christmas when she picked up a bucket of Kentucky Fried Chicken, Lloyd wanted to cry.
Lloyd attended East School, near Mark Kraft’s house, during most of his boyhood. But then his mother and stepfather moved out to the country, and he started high school in one of the county schools, Fairfield Union. He dropped out in his sophomore year.
Lloyd and his older half-brother fought a lot—with Lloyd on the receiving end. One day, he and his half-brother got into another fight. Lloyd picked up a two-by-four with a nail sticking out of it and shouted, “If you don’t stop beatin’ on me, I’m gonna hit you with this!” The threat didn’t work, so Lloyd smacked the nail into his half-brother’s thigh and ran as fast as he could over to his uncle’s house, with his stepfather following close behind. The uncle confronted the stepfather. There was a lot of yelling, and a fist or two. Lloyd didn’t stick around to see the rest. He started running again.
Lloyd ran and walked and jogged for miles through woods and fields, all the way into town. He never lived full-time at home again. He fended for himself mostly. He slept on the floors of friends. He broke into cars to sleep in them and steal the loose change out of the ashtrays. About the third car he broke into happened to belong to Sheriff Jim Peck—an unfortunate choice that proved to be a pretty accurate early indicator of the course of Lloyd’s criminal career.
When younger men on Lancaster’s streets ran into Lloyd, they’d shout, “Hey, Unc!”—partly out of deference to Lloyd’s age and partly out of respect for his jail experience. Uncle Lloyd had an awful lot of experience.
Drugs were never a discrete part of Lloyd’s life; they blended in as naturally as stealing, working at Lancaster Glass, beating up a guy who tried to cheat him, applying for a job at Anchor Hocking, falling in love, selling vacuum cleaners, fathering a child. His gig as the door thug of a trap house wasn’t really any different from any other line of work for him.
The job involved standing just inside the front door and looking through the peephole at who might be coming up the steps to buy some dope or weed or meth. Lloyd would slide a mask down over his face, open the door, pat down the customer, and maybe ask a few questions. If the customer turned out to be a cop, and Lloyd couldn’t run fast enough, he would have to become the sacrificial lamb to protect whoever worked in back. If the customer was there to steal drugs or money, Lloyd would have to be the enforcer.
So Lloyd didn’t hesitate back in January when Jason called him and suggested working together. He saw an opportunity to become a partner and finally make some real money.
When Jason dialed the number the Cheese supplied and arranged to drive north up 33, he was skittish, because he wasn’t sure how the deal would go down or who he’d find at the address. They could be cartel dudes, crazy fuckers who might cut off people’s heads or break your arms or some shit. Having Lloyd with him eased his mind. Lloyd never seemed afraid of anything.
In the Columbus suburb of Whitehall, they found a street called Country Club and pulled up to a house. The neighborhood was part of a 1950s subdivision of once-tidy ranch-style homes that had frayed over the past two decades. The greenish house where Jason and Lloyd parked had been foreclosed on during the housing collapse. Now it was a rental.
While stalling for a few moments, they watched a guy walk out. Then they walked in.
The encounter was nothing like a cartel meet-up in a movie—there were no scowling faces, no scary dudes with dark shades. A friendly-seeming Mexican woman greeted Jason, and the conversation turned cordial right away, as if Lloyd and Jason had popped over from next door to borrow a cup of sugar. They didn’t have to leave any money or anything. Just as the Cheese promised, the Mexicans were happy to front the dope, and just as the Cheese said, the Mexicans were willing to give them serious weight—about ten ounces, maybe fifteen. Lloyd wasn’t sure, but anyway it was a shit ton of dope—283 grams if it was ten ounces, or, put another way, 566 doses at a hefty half a gram per hit, which was enough to supply an addict like Carly for almost five months. All Jason had to do was promise to bring back $1,000 per ounce, a price so cheap it left lots of room for them to impose the Lancaster tax and keep the margin. They’d discovered the Sam’s Club of heroin connects.
They walked out of the house, returned to the car, and looked back at the front door just in time to watch another guy walk in. That place was like a fuckin’ drive-through beer store.
Jason supplied a couple of other people in Lancaster, too, who would sell, keep a little for themselves—both cash and dope—and pay off Jason, who, in turn, paid off the Mexicans what he owed, then picked up another load: ten ounces, sometimes five. Jason drove the round-trip once a week.
Lloyd joined him only one more time. On that trip, the Mexican woman asked Jason if he could get rid of some ice—the pure crystal form of meth. She had so much ice, she was offering clearance sale prices, $700 per ounce. An ounce used to cost about two grand, but she was overloaded with ice. She was practically giving the shit away, begging Jason to take some. Jason didn’t know much about ice, so he asked Lloyd if he could sell it. “Hell, yeah,” Lloyd said.
Jason gave Lloyd half of it. Some confusion arose about how much money Lloyd was supposed to return to Jason after selling the ice. Jason thought Lloyd fucked up the deal.
Incidents like that cooled the partnership a little. Jessica didn’t help, either. She and Jason had resumed their relationship, and by April she seemed to have taken over the operation. That was how Lloyd saw it. He could feel himself being nudged out, and was a little resentful, but he didn’t see much point in making a big deal out of his diminished role. Besides, he’d already supplemented the dope he was getting from Jason with moon rocks from his own Columbus connect, some white dude.
Moon rocks were supposed to be almost pure MDMA, or Molly. They were manufactured
on an industrial scale, often in Mexican or Chinese labs, another blessing of globalization. But some moon rocks were cut with meth. Some moon rocks seemed to be only meth. Lloyd didn’t really know what the hell they were. The white guy in Columbus described them as “like meth on steroids or some shit.” When Lloyd took them, he’d stay awake for two days, so spun out his forty-year-old body would feel “real tore up.”
Lloyd and Jason still called each other “brother,” but their trust was conditional. Jason thought Lloyd might screw up at any time, and Lloyd regarded Jason as slippery: He’d say one thing, then another, so you could never tell what was true.
Lloyd lived by a motto of his own creation: “You can trust your enemies more than your friends, because your enemies need to do what they say they’ll do.” By that he meant that he didn’t beat up his friends, so they lost their fear of him. His enemies, though, understood Lloyd had no reason at all to restrain himself for their sake. Bashing a guy was a form of public relations, a powerful message meant to influence concentric circles of others. Lloyd didn’t have to be particularly angry to do it—it was business—though once his blood was up, he could be so implacable that he thanked God he never carried a gun.
Between the moon rocks and Jason’s dope, Lloyd made more money than he’d ever earned in his life: more than four grand a month, an amount he’d never imagined. So two or three days every week, he’d drive out to River Valley and buy new sneakers—the good kind, like Nikes, not the off-brand ones—or new shirts, pants, and dress-up shoes. He bought for himself. He bought for his girlfriend. He bought for the improvised family of eight or nine people who wandered in and out of the gray-box house across the street from Plant 1.
Glass House Page 20
