Ross and Me
It is good to have Ross Perot as my business partner-most days.
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He is anything but the stereotypical hypertensive Type A executive. Perot is feisty but unflappable, never out of control—or out of touch. The 1984 Oldsmobile that he is so attached to has three antennas; his Gulfstream jet is a fully equipped office—fax, phones, dictating machine. The corporate Lear jet that his employees use—only when, at $1 a mile, it is cheaper than flying commercial airlines—has phones at each of its passenger seats. Even the Dallas hangar where he stores his aircraft doubles as an office. One of the most striking things about Perot is his inability to treat money casually. Nothing is so certain to arouse his ire as the intimation that, to a man of his means, what is $100 here, $1,000 there? When I called Perot to tell him I had found a products-liability insurance policy for us that would cost $2,000, his terse response was “Steve, that’s a lot of money.” I bit my tongue.
ADVERSARIES
Wednesday, April 11
Steve Blasnik called today and asked me to meet with him tomorrow. He didn’t say about what, but that is not unusual. I frequently run over to Perot’s offices on short notice—sometimes two to three times or more a week.
Thursday, April 12
When I arrived at Blasnik’s office, T.J. was there with him. They both seemed a little nervous. Blasnik wasted little time telling me why he had called me over. He wanted to become CEO or president of Total Top. “Well, Ross is my partner,” I replied, trying to cover my shock. “Does he know about this?” Blasnik assured me that he did. He made it very clear that he was hoping to get me to sign on the dotted line right then and there.
Blasnik was someone I had never felt extremely comfortable with—he had always seemed so stiff and strictly business and annoyingly eager to interpose himself between me and Perot—but he was Perot’s golden boy, his right-hand man on the venture capital projects. Perot had hired Blasnik away from Hughes and Luce when he was a young associate, so he must have distinguished himself in a big way. Blasnik, now in his early thirties, was clearly competent, but why, after such a vigorous inspection of so many outside candidates, would we suddenly, and without prior consultation, turn around and install an insider like Blasnik?
I called Perot to find out what was going on. At first, he acted as though he didn’t know: “Did you and Steve work something out?”
“Blasnik tells me he’d like to be the CEO or president of Total Top.”
“Do you have a problem with that?”
“I guess a Harvard lawyer is good enough for me if he’s good enough for you.” My inclination was to defer to Perot’s judgment on this one.
That settled, Perot had another matter to discuss with me. He was going to inject substantial capital into the project, and he thought I should convert my royalty interest (5 percent of gross sales) into an equity interest (stock). “I can’t tell you how strongly I feel that you should do that,” Perot said. “Stock is where real wealth is created.”
He was persuasive. When a man of his billions tells you how to make more money, only a fool would disregard the advice. I agreed to consider the conversion.
“I’ll send over the necessary papers, and you review them. I’d like for you to convert that royalty.”
Monday, April 16
I expected to receive the papers the next day, but I still have not received them. Today at the Perot Group offices, I overheard Perot, standing outside the conference room where I was waiting, conversing impatiently with Tom Luce, his longtime friend, adviser, and lawyer. When I heard my name mentioned, I moved closer to hear more. All I could catch was “I want those papers finished and sent to McElroy, or I’m going to raise some hell!”
MY SUSPICIONS WERE AROUSED.
Tuesday, April 17
I received a stack of papers one inch thick today, entitled “Reorganization Agreement.” After wading through a few pages of dense legalese, I realized that deciphering this very complicated product of Perot’s fine legal team was a job for a legal team of my own.
I selected Katherine Seaborn, a partner in the Dallas firm of Gardere and Wynne, someone I believed to be one of the toughest and brightest business lawyers in the state. A woman in her late thirties, Katherine had lived in Dallas all her life and was quite familiar with Perot’s business empire. She agreed to review the documents and get back to me.
Wednesday, April 18
Katherine called today and, to my surprise, informed me that it would not be in my best interests to agree to the deal that Perot was proposing—I should hold on to my royalty interest.
Perot has been calling two or three times a day to ask when I will discuss the deal. I called him and we scheduled a meeting for tomorrow at Hughes and Luce’s downtown Dallas office.
Thursday, April 19
Katherine and I walked into the Hughes and Luce conference room expecting to meet casually with Perot and, equally casually, decline his proposal—no big deal. Instead, we found ourselves up against five poker-faced lawyers, lined up like tin soldiers on one side of the conference table. Blasnik was there but not Perot.
We sat down and I told Blasnik, the only one I knew in the room, that I did not feel that it would be in my best interests to do what he and Perot were asking me to do. Blasnik stood up and stormed out of the room. A few minutes later, he returned and said that Perot wanted to speak with me. I stood up to walk outside, but Blasnik waved me back into my seat. “No, he wants to talk to you on the speakerphone.”
Perot began to lecture me: “Steve, I’ve known you for a long time, haven’t I?” I concurred. “We’ve covered a lot of miles together, haven’t we? And I’ve helped you a lot.” Yes, yes, couldn’t argue with any of that. “I’ve never steered you wrong, have I?” No. “Well, I’ve thought long and hard about this, and I think you’ll agree I’m pretty good at building a company. Well, in my opinion, this is what we should do.”
I held fast to my refusal. Perot was clearly exasperated by my unwillingness to be swayed by his do-it-just-because-I-say-you-should argument. I asked him why he was now attempting to alter the terms of the deal we had signed in 1988. Well, he parried, businesses change; you have to be flexible.
The royalty was my main source of income from the venture. Sure, it was an advantage over Perot’s interest, in that he owned only stock. But I had invented the lid, and I felt I was entitled to the royalty. (Later it occurred to me that what might have set Perot off on the royalty issue were five-year projections that he had recently seen, which estimated the income from my 5 percent royalty to be a whopping $9 million in the fifth year.)
Perot and I went back and forth on the speakerphone. I was agitated and embarrassed after twenty minutes of verbal fisticuffs with him in front of a roomful of grim-faced lawyers. Mostly, I was feeling increasingly shaky about why any of this was happening in the first place. Perot’s next question dispelled my bewilderment.
“Well, then, what will it take to buy you out of Total Top?”
I had no time to reel from the impact of the question. Luckily, the same survival instinct that had mobilized me at my first meeting with Perot kicked in again. I dug in my heels; Perot was not going to edge me out of Total Top. “With all due respect, I built this company, and it was and continues to be my dream. It is my dream, just like your dream was to build your company, EDS, years ago. Now I would like to buy you out of Total Top.”
A long silence at the other end. I had never known Perot, who is a master at thinking on his feet, to be rendered speechless. Then he said, “Well, we’ve all had a long day, so let’s both think about all of this and talk again tomorrow.” I was relieved. I really did need time to think.
BUYOUT
Friday, April 20
Today I felt more certain than yesterday about my impetuous offer to buy Perot out if he was going to insist that I relinquish my royalty. I called him to resume our conversation. Apparently he had had second thoughts about even considering a sale of his interest in Total Top: “I’ve decided that my interest is not for sale at any price. I didn’t get into this deal with an exit strategy,” he said.
Then he had a third thought: “Well, I’ll tell you what. You come up with a figure for which I can either buy your share or sell my share, and then we will flip a coin. The winner will get the right to buy out the loser. Be careful now, because the price could come back to haunt you,” he added, unable even in an adversarial posture to resist giving advice.
I told Perot I wasn’t interested in that game.
Friday, April 27
Katherine Seaborn and I came up with a figure of $580,000 to offer Perot for his shares. I pitched it to Perot, packaging it with a little guilt: It was my idea, my only business, and with my offer, he would be getting a great return for his original investment of $150,000—without ruining me financially.
“Okay, okay, I’ll sell this damn company back to you,” Perot said. But he added a killer condition: The transaction had to be closed by Tuesday—four days from today. I was certain that he thought the proviso would make me say uncle, especially since he knew that my lawyers were out of town and would be unable to work on the deal over the weekend. Perot then rolled another boulder onto the road. I would have to come up with a $50,000 deposit—have a check in his hands—by noon Monday.
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