"Isaac, are you saying all our previous conclusions were wrong? Isabella Haywood's target was never Marvel? Or rather, all she wants is Marvel's most valuable rights, while leaving the rotten accounts entirely to you?"
December 15, 2007, a Saturday. Inside a mansion in Rhode Island, near New York, a middle-aged white man in his fifties or sixties received Isaac Perlmutter, who had arranged the meeting in advance. The man had stereotypically Jewish features: an enormous hooked nose and curly black hair. When he narrowed his eyes, furrowed his brow, and gave Perlmutter a confused look, Perlmutter immediately nodded. "Yes, Richard. Based on the information I currently have, that does appear to be the case.
"A few days ago, at the start of this month, Isabella sent me a partnership proposal. She wanted to purchase every remaining right Marvel holds over the various IPs in her possession, offering us a share of future profits from projects based on those IPs. That proposal clearly lacked sincerity, didn't it? But because you'd told me we can't provoke her right now, I replied that I was willing to sell her everything, provided Marvel's share was calculated from those future revenues. After all, I'm only Marvel's largest shareholder, not its sole one. If I didn't insist on that and something went wrong later, the other shareholders would tear me apart.
"But her answer was no. Even when I explained Marvel would accept a smaller percentage if the payment came from revenue, she still refused. She said she'd only negotiate the proposal she'd originally offered, and at most discuss the profit share. She even said that if I refused, she'd make the proposal public. And if I still said no after that, she'd sell all her Marvel stock. I genuinely didn't know what to do."
At that, Perlmutter helplessly spread his hands, presenting the middle-aged man with an expression of complete innocence. The sight made the man furrow his brow and lean back. He understood what Perlmutter meant: the man had now attached himself to him. He also understood why. Isabella's actions were indeed rather disgusting.
Isabella was saying that if Perlmutter refused to hand over Marvel's golden geese for nothing, she'd reveal their private negotiations to the public. That was an open threat. Once Isabella publicly revealed her discussions with Marvel, the market would treat the news as unquestionably positive. No one doubted Isabella's ability to make money, so the news would send Marvel's share price surging. Then, to convert those expectations into real gains, Marvel's other investors would pressure Perlmutter.
At that point, Perlmutter would have only two choices: accept Isabella's proposal under pressure, or withstand the threats and keep refusing. The former would be a great victory for Isabella and the other investors, and a crushing defeat for Perlmutter. The logic was easy enough to follow. If Perlmutter accepted the deal exchanging rights for a profit share, Isabella would essentially hollow Marvel out without paying anything: of Marvel's three billion dollars in assets, two billion would land directly in her pocket. Where would the remaining billion go? Into Sony's hands—Spider Man.
The other investors weren't idiots, either. Once the share price surged, they'd sell. And once they moved to secure their profits, Perlmutter would be left alone with the wreckage, because the bomb in his hands was guaranteed to explode. When it did, the trapped investors would stab him to death.
The latter option was a complete victory for Isabella and total defeat for Perlmutter. There was no avoiding it: Isabella had said that if he dared reject her, she'd sell every Marvel share she held. And if she first drove the share price up and then sold, wasn't that deliberately triggering an avalanche? Was she trying to bury every current Marvel shareholder alive? Isabella owned 10% of Marvel's shares. If she dumped all of it at once, Marvel might as well delist. Perlmutter, having triggered the avalanche, would be torn apart by every investor.
Why would the other investors blame Perlmutter rather than Isabella, who was actually selling? Simple: many players in insider trading aren't spared arrest because they obeyed the law, but because they are the law. Anyone powerful enough to learn that Isabella intended to destroy Marvel would think Perlmutter was an idiot, because if he simply took the blame, everyone else stood to profit enormously. So: why wouldn't he take the blame? Why couldn't he just die so the rest of them could make money?
"So Isabella can directly sell her Marvel shares?" After rapidly reviewing the situation, the man Perlmutter called Richard spoke again. Perlmutter nodded immediately, knowing what Richard wanted to ask. "Yes. Isabella never consolidated the shares under her own name. Even her authority within Marvel is exercised on her behalf by Disney's CEO and future chairman, Robert Iger."
The middle-aged man shook his head. "All right. That girl is rather ruthless."
Although every player at the pinnacle could claim to represent the law, if each side had its own law, then neither truly had one. So had Isabella directly controlled all her Marvel shares herself, she couldn't have recklessly crashed the price; as a major shareholder holding 10%, she'd have had to notify the SEC before reducing her position. Once that notice became public, she could no longer crash the stock by selling; the market would crash first. But because she'd never independently held all her shares, and no public report had ever claimed she controlled Marvel, she could attack the share price without restraint.
Of course, Lehman could report her. But when the SEC couldn't even bring down Take-Two's founder, what use would it be for Lehman to report Isabella? The SEC was the sword bearer, but who had given it the sword? Those who possessed power had to kneel before power itself. (And don't bring up Enron—anyone who does should first examine how much blame Enron absorbed for that family in Texas.)
"So, Isaac, what exactly do you want from me today?" Richard asked, after a moment's thought. "Are you unable to accept Isabella's proposal?"
"I can accept her proposal, but I don't want to die," Perlmutter answered directly, sitting opposite him. "If she only wants Marvel's most valuable assets and has me bear all the responsibility for her, fine, I can accept that. But if she takes everything and walks away, then she's asking for my life, isn't she? And I—Richard, you know me. When I met you in Jordan all those years ago, I told you: the thing I fear most in this life is death."
As he spoke, Perlmutter looked directly into Richard's eyes. The intensity of his gaze made the middle-aged man nod slightly, his fingers tapping unconsciously on the armrest. Richard understood: Perlmutter wanted him to step in as mediator, smooth things over with Isabella, and end the matter. It was difficult to refuse—not because he wanted to oppose Isabella, but because Perlmutter had already made his position clear. If Richard refused to save a man who had bowed his head to Isabella and asked only to survive, who would ever work for Richard again?
The middle-aged man named Richard was Perlmutter's backer. His full name was Richard Severin Fuld Jr., and he had served as chairman and CEO of Lehman Brothers since April 1, 1994. The connection between the two men dated back more than thirty years.
Fuld joined Lehman in 1969, the same year Robert Lehman, the third-generation head of the Lehman family, passed away. As the Lehman family shifted its attention toward Washington, the company entered a period of endless turmoil. At first none of that had anything to do with Fuld; he was only twenty-three and had no standing to join the struggle for control. Everyone who stepped forward to fight for power after the patriarch's death was a major figure.
The most famous was Peter Peterson, founder of the present-day Blackstone Group, whose patron was John D. Rockefeller III—the elder brother of Laurence Rockefeller, who had invested in Warner Bros. The Rockefeller family held shares in Blackstone, or rather, the investment had come from the eldest son's branch of the family, while Venrock, which invested in Apple, Intel, and 3Com, belonged to the younger son's branch.
The second most famous figure was Lewis Glucksman, who came from an old-money Jewish family on Manhattan's Upper West Side and chaired the financial company Primerica. Besides those two, many other heavenly nobles joined the struggle for control—there was no possibility a company like Lehman Brothers would ever fall into the hands of an ordinary person; for one even to covet it would have been an act of usurpation.
Because those nobles fought so viciously, they nearly destroyed Lehman themselves. The company lost hundreds of millions each year and was forced to merge with Kuhn, Loeb—all a result of the internal struggle. Once they realized the fighting had crippled Lehman, they lost interest in a company that no longer seemed valuable. In 1984, they withdrew and sold Lehman to American Express.
Fuld, who had remained at Lehman, began entertaining ideas of his own. He, too, had a powerful background: his father, Richard Severin Fuld Sr., served as a U.S. Army officer in the Pacific during World War II, under Harry H. Vaughan—the same major general who later served as President Truman's military aide. When Vaughan returned to Washington, Fuld Sr. went on to serve under Douglas MacArthur, the five-star general. Though Fuld wasn't one of the heavenly nobles, his background was still considerable; he called MacArthur "Uncle." His family also held influence in New Hampshire: his cousin served as dean of the College of Liberal Arts at the University of New Hampshire (still documented on the university's website), and his cousin's wife was a New Hampshire state senator.
Compared with Peterson, who had the Rockefellers behind him, Fuld's background didn't amount to much. But what if all he wanted was a crippled Lehman? That, he could obtain. So in the early 1980s, believing the Lehman name still held value, he began maneuvering for control, eliminating everyone who shared the same ambition. In 1994, he successfully extracted Lehman from American Express.
This was, in fact, the true reason Perlmutter had officially "retired" in the mid-1990s. During the 1970s and 1980s, he'd been able to run rampant across the United States mainly because Fuld wanted his hands—and his methods—to send enemies into the afterlife. By the mid-1990s, once Fuld had taken full control of Lehman Brothers, it was time to put down the butcher's knife and become a Buddha: everyone who needed to die was already dead, so the knife could finally be put away. And precisely because the two men had colluded on so much, when Perlmutter made clear he wanted to live, Fuld had to help him settle everything—especially since Perlmutter had followed his earlier instructions.
"Okay, I have two possible solutions," Fuld said, thinking it through. "The first is for me to contact Michael Bloomberg and ask Warner Bros. to step in, telling Isabella you're willing to hand Marvel over to her. I believe that would be enough to make her stop pressuring you. The second is for me to approach Edgar Bronfman Jr. He has a grudge against Isabella, but when she took down Rupert Murdoch, she used a foundation affiliated with the World Jewish Congress—so if we use those connections, Isabella should let you go too. Think it over, then tell me which path you want."
Fuld and Bloomberg were friends, both members of Kappa Beta Phi, a relatively old organization founded in 1893, originally meant to gather financiers together for insider trading. Today, it's where capital predators gather to divide up the world. None of that mattered much here—what mattered was that Fuld could speak to Bloomberg, and since Bloomberg had access to Warner's Ross family, that connection should be enough to end the conflict. If Perlmutter didn't want that route, his only remaining option was to approach Edgar Bronfman Jr.
As for how Fuld knew Bronfman: Bronfman's mother was Ann Loeb, who belonged to both the Loeb and Lehman families. Though the Lehman family had withdrawn from Lehman Brothers beginning in 1969, its capital eventually flowed into American Express, which acquired Lehman Brothers in 1984 and didn't sell it to Fuld until 1994. The world, it turned out, was very small—there were genuinely only a handful of players at the very top.
"Which path do you recommend?" Perlmutter asked.
"I'm not you. I can't choose for you."
"What would you choose, if you were me?"
"Edgar Bronfman Jr."
"Why?"
"Because he's one of us. Bloomberg is one of them."
"Okay. Then we'll choose him."
"Are you certain?"
"I'm certain."
At that, Perlmutter and Fuld looked directly at each other. The seriousness in his expression made Fuld nod.