by Coll, Steve;
It was a dazzling ride that had carried Martin Lipton to success, and to the East Side apartment where he lived in October 1983. He was born and raised across the Hudson River from Manhattan, in Jersey City, New Jersey, the only son of first-generation Jewish immigrants from Poland. His mother was a housewife, his father an insurance salesman and erstwhile entrepreneur. The elder Lipton had arrived poor in America as a teenager during the First World War, and had saved his money to bring others in his family out of Poland. Those who were left behind perished in the Holocaust; only the Liptons who came to America survived the 1940s. The family emphasized education; though Marty Lipton’s father had no schooling at all, he was remembered by his son as a “brilliant man, very well read, with the typical attitude that the key to success was education.” There was a year or more during the Depression when Lipton’s father did not work, and the family suffered, but during World War II he joined a family business making parachutes and uniforms, and he prospered modestly. Young Martin played stickball and touch football in the streets of Jersey City, and studied assiduously to please his parents. Lipton would do anything to please his father, and since his father wanted him to become an investment banker, he enrolled at the University of Pennsylvania’s Wharton School as an undergraduate. But finance bored him. In the spring of 1952, he decided to apply to law school, took the entrance exam, and was accepted by New York University in Manhattan.
It was in law school, Lipton said later, that he found himself. Looking back, he had been a relatively immature and unsophisticated young man before he began his legal education. His relationship with the law was “love at first sight and it just got better.” He graduated first in his class and was editor in chief of the school’s law review. For six years, he worked for a small Wall Street firm specializing in bankruptcy, securities, and corporate litigation. When the firm dissolved in 1964 because of internal bickering, Lipton and a few young friends decided to go it alone. They started with just a few basic concepts: they would all be equal partners, no matter what, for as long as the firm survived. When they parceled out salaries, they would never pay attention to who got the clients or who did the most work—the only objective was to do superior legal work. The clients would come, and so would the money, they thought. Their egalitarian precepts allowed them to be flexible, to form cooperative client teams. They began to grow, from seven to twenty to thirty-five and finally, by the 1980s, to nearly one hundred lawyers.
The turning point came in 1975, when Lipton represented the Loews Corporation, which was run by Laurence and Robert Tisch, in a contentious, hostile takeover against an insurance company, CNA. Lipton’s side won, and suddenly he and his firm were hot—they were the only ones who stood a chance in a takeover battle against Joe Flom, it was said. Flom’s principal client was Robert Greenhill, the renowned merger specialist at the old Wall Street investment banking firm of Morgan Stanley & Company. Lipton began to represent the other major investment houses opposed to Morgan in takeovers, particularly Goldman, Sachs & Company and Salomon Brothers. By 1982, Lipton was at the vortex of what he called “the hostile-tender-battle period in American finance.”
His success was manifested not only in professional prominence and personal wealth. It was evidenced, too, by his position in Manhattan’s ascendant society of privilege and power during the early 1980s, a society bolstered by an unprecedented bull stock market and the growing influence of Wall Street over mainstream American industry. On weekday mornings, Lipton, a bulky man with an oblong nose and extremely thick tortoise shell spectacles, could be seen at the “Regency power breakfast,” as the magazines called it, which was held at the Regency Hotel on Park Avenue. There lawyers, investment bankers, and corporate takeover specialists discussed greenmail and poison pills over coffee and eggs Benedict. In the evenings, Lipton was in demand as a speaker and fund-raiser at gala benefits for art museums, Jewish philanthropies, universities, and other charities. He was renowned, too, for the annual New Year’s Day party he threw at his apartment, where Wall Street’s leading cognoscenti gathered to celebrate another year of unbridled prosperity. Theirs was a close-knit circle bound not only by the raging takeover wars but by the city of New York. During the 1970s, Lipton had been prominently involved in the Municipal Assistance Corporation, a quasi-governmental agency led by Lazard Frères merger banker Felix Rohatyn and formed to save New York from bankruptcy. Since then, the elite bankers and lawyers had pledged an informal allegiance to New York Mayor Ed Koch, and they occasionally served on special city commissions at his request.
All of this history, its potency and flair, hung over Martin Lipton like a halo. Any deal he touched was imbued with the power of his reputation. He was regarded, to say the least, as a formidable opponent. Getty Oil’s management was bolstered by the energy and skill of young Winokur and Boisi; Gordon could boast about the Lasky firm’s shrewd toughness; but Harold Williams and the museum, well, they had an emerging legend in their corner.
Indeed, it was Lipton’s reputation that exacerbated the fears of Sid Petersen and the others as they flew to London that Sunday night early in October 1983. Harold Williams must be serious about a bid for control of Getty Oil; why else would he hire Marty Lipton? Boisi, at least, had worked on Lipton’s side in a number of deals where both Lipton’s law firm and Goldman, Sachs had been retained to help a company fight off a hostile takeover bid. Boisi trusted Lipton and was not intimidated by him. The two were bound by both friendship and economics; Goldman, Sachs was one of Lipton’s most important clients. Still, there was no question, either, that Marty Lipton was relentless and at times unforgiving in the service of his clients. Getty Oil was a rich prize—one of the largest companies ever put in play by Wall Street. If Harold Williams wanted to take the company, Marty Lipton would be sure to deliver the quarry.
They spent the early hours of Monday morning sleeping off the jet lag in a dumpy motel near Heathrow Airport in London. The rooms were like dungeons. It was as if they had landed in Europe to take the Continent from the Germans and were sleeping on mattresses before shipping out to the front, one of the lawyers on the trip said later. It was an amusing scene: all these high-powered investment bankers and corporate attorneys, as well as the chief executive of one of the world’s largest oil companies, sprawled out in the dimly lit motel rooms, trying to refresh themselves with a nap. They checked out early in the afternoon and took a cab to more appropriate quarters, Claridge’s, a luxury hotel in central London.
It was early evening before they gathered in the basement conference room of Dechert Price & Rhoads’ small London office at 52 Bedford Square. Sid Petersen was asked to remain in an office on the second floor; detailed negotiations would be left to the advisors. For the company, there was Winokur, Copley, Boisi, Galant, Katz, and Dan O’Donnell, a Dechert partner who often worked closely with Winokur. For Gordon, there was Lasky, Cohler, and Woodhouse.
“We’re here to try and come up with an agreement that will forestall Gordon’s presentation to the museum tomorrow,” Winokur said. Lasky concurred. He continued to believe, as he had told Gordon the previous week, that a negotiated stock buy-back plan was preferable to a joint takeover with the museum. For the first time, all of the advisors faced an imminent, concrete deadline. If there was no deal by Tuesday, Gordon would go his own way. He would make an offer to Harold Williams.
Thus, a new, urgent atmosphere of cooperation and compromise pervaded in the basement conference room that evening. There was no time to moralize or play games. They had to make a deal. Winokur and Lasky began by drawing up a list of some ten points where there was disagreement between the company and the trust on a stock buy-back plan. Systematically, methodically, they attacked that list, giving some here, taking some there, searching for the middle ground. When the company had to make a major concession, Winokur and Boisi would walk up to the second floor and consult with Petersen. When it was Gordon who was forced to compromise, Lasky made his own decisions. His client was in London, but L
asky did not want to speak with Gordon about a buy-back deal until there was some final agreement.
The goal of the negotiation was to find a way to put Gordon in a majority position without handing him immediate control of Getty Oil Company. Over the last three months, they had tried a number of formulas. In late July, Winokur had proposed “handcuffs” that would prevent Gordon from voting more than 40 percent of the company’s stock, even if he owned 51 percent. Then at the September meeting in San Francisco, Lasky had suggested his supermajority plan that would have forced Gordon to compromise with other directors once he gained control. At the same time, Winokur had suggested two institutional cotrustees be appointed to restrain Gordon’s power. From there, the two sides had moved into a seemingly unbreakable deadlock. Now they decided to return to the beginning, to the idea of handcuffs.
They introduced a new element: a time limit. The idea was that Getty Oil would buy back 16 million shares of its own stock, raising Gordon and the trust to fifty-one percent. The company would agree never to issue the 9 million treasury shares secretly authorized in Philadelphia on Sunday, thus guaranteeing that Gordon would control a permanent majority. In exchange, Gordon would accept handcuffs for a period of three or four years—Lasky wanted three, Winokur more than that. During that time, Gordon could only vote 40 percent of the company’s stock. The rest would likely be controlled by management. Gordon would be named chairman of the board, and there would be no restrictions on his ability to sell his trust’s shares to outsiders, though Gordon would have to guarantee a fair price to the public in the event of a full outside takeover attempt. Moreover, Gordon would retain the power to launch a stockholders’ proxy fight against management, using his 40 percent as a base to recruit other shareholders to his cause. After two or three years, Gordon would have the right to end unilaterally the handcuffs on his voting power, thus gaining total control of the company, so long as he gave Getty Oil management two years’ notice of his intentions.
This last point was of great significance to Winokur and Petersen, and later it would become the basis of bitter acrimony between the company and the Lasky firm. Winokur referred privately to the two-year notice provision as Getty Oil’s “out.” That is, once Gordon told Getty Oil management that he planned to exercise majority control in two years’ time, Petersen and the board could arrange a sale of the company before Gordon took control. In fact, the board had made it clear at Pebble Beach that it would never serve Gordon Getty or allow him to take the reins of the company. Moreover, the time provisions negotiated that Monday evening in London would allow the company to pursue a family lawsuit challenging Gordon’s control of the Sarah Getty Trust. Gordon would have to wait at least three years before declaring his intention to take majority control, then another two years before the handcuffs would be unlocked. That meant Petersen and Winokur had fully five years to win a family lawsuit seeking the appointment of a bank to serve with Gordon as cotrustee. None of this, of course, was explained to Lasky, who was totally unaware of management’s contacts with the Getty family. Lasky believed that Winokur and Petersen were sincere about letting Gordon eventually gain control of Getty Oil.
And certainly, all of them were nearly bursting with sincerity and good cheer when the meeting ended in London at two-thirty Tuesday morning. They had done it—they had made a deal. Lasky, particularly, was effusive in his praise for Winokur and Boisi, the company advisors he had so angrily attacked two weeks before in that airless conference room in Philadelphia.
“I’m extremely happy with what we’ve accomplished,” Lasky said that night as he prepared to return to his hotel from Bedford Square. “You were true to your word, Winokur, and you did everything you conceivably could have done to try and reach an agreement. I’m elated. You all brought imagination and understanding to the resolution of the problems.
“I am confident—not certain—but confident that Gordon will accept this agreement,” Lasky concluded. “We will call you in the morning as soon as we have spoken with him.”
When Lasky and his partners had departed, Winokur, Petersen, Boisi, and the others congratulated themselves heartily. By skillful negotiation and compromise, they had stopped Gordon’s proposal to the museum. They had averted the loss of Getty Oil Company, they thought. They were exhausted, but also too excited to sleep, so they wandered about London searching for a restaurant that was open all night. They finally found a Chinese place and shared a meal before returning to their hotel.
At ten minutes before ten the next morning, Gordon met with Lasky, Cohler, and Woodhouse in Lasky’s room at the John Howard Hotel, not far from Claridge’s in central London. Lasky began the meeting by handing Gordon a copy of the long letter he had written the previous week, which compared the merits of a joint museum takeover with a compromise buy-back deal with Getty Oil. Lasky described the negotiations that had taken place the night before at Bedford Square, and he listed for his client the provisions of the agreement he had reached with Winokur.
“The provisions granting you the power to terminate the restrictions, or handcuffs, are much better for you than even the possible deal I described in my letter,” Lasky said.
Gordon listened. He looked over Lasky’s letter. And then he flatly rejected his lawyer’s recommendation.
“I’m not willing to make any deal with Getty Oil,” he declared. “I’d rather make my takeover proposal to the museum.”
Lasky told Gordon that if he did so, the company would surely issue its 9 million treasury shares to dilute Gordon’s stock position. Lasky did not know exactly what the directors had done in Philadelphia, but he knew the 9 million treasury shares existed and he assumed the company was smart enough to authorize their issuance.
“If Harold Williams is not interested in my proposal, I’d rather maintain the status quo,” Gordon said.
“You can’t maintain the status quo, because the nine million shares will change everything,” Lasky insisted.
“Well, my idea of the status quo is that I would immediately launch a proxy fight or make a tender offer to take over the company and replace the board of directors,” Gordon answered.
“But, Gordon, if you want to launch a proxy fight, you’d be better off under the deal we negotiated last night. Besides, if you try to start a proxy fight or a tender-offer takeover, the plan will not succeed because management will move immediately to sell the company. Winokur told us that himself last night. In our judgment, you’re better off with the compromise we negotiated. That is the best solution. The alternative can only be litigation, and litigation is both very difficult and very expensive. It could involve millions of dollars in expenses and unquestionably there would be a tax on you personally. If you decide to go to the museum, your decision could result in lawsuits by the beneficiaries to the trust.”
Despite Lasky’s pleading, Gordon would not move. “I am not going to enter into any deal with the company,” he said. “You should tell Winokur that his proposed agreement is unacceptable.”
The lawyers did not yet give up. As Lasky put it in a memo to file he dictated later that afternoon, “In every possible way short of using the word ‘mistake’ we told Gordon that his decision was a mistake.”
Lasky emphasized again that the compromise negotiated at Bedford Square the night before was more favorable than any proposal previously considered by Getty Oil management. It was even more favorable than proposals made by Lasky himself in September.
“Well, I never authorized you to make that supermajority proposal in the first place,” Gordon said ominously.
All three of the lawyers jumped in. They reminded Gordon that at a Saturday meeting at his Broadway mansion, he had “distinctly authorized” Lasky’s supermajority proposal.
They continued to argue, but Gordon became increasingly stubborn. Lasky was even unable to explain all of the details of the agreement he had reached with Winokur at two-thirty that morning because Gordon refused to consider any restrictions on his voting power at all. G
ordon said that after his conversation the previous week with Med-berry, he was not about to make any accomodation with the “snakes” on the Getty Oil board of directors.
“The decision is yours,” Lasky finally said. “We can only give you our opinion. As your attorneys, we will necessarily follow your instructions.”
Gordon then told his lawyers to call Winokur and tell him the deal was off.
Tim Cohler telephoned Claridge’s at 11:41 A.M. Winokur, Boisi, Petersen, Copley, Galant, and the others were in the hotel dining room, eating a late breakfast. Winokur was summoned to a telephone in the hallway.
“We presented the proposal to Mr. Getty, Bart,” Cohler said. “He flatly rejected it. We are proceeding now to make the proposal to the museum.”
Winokur was stunned. “You’re going to do that right now?”
“Yes.”
