All 4 of my grandparents came to America as penniless immigrants from Eastern Europe, making my parents first generation Americans. Growing up, I lived in the same Brooklyn neighborhood as Bernie. On Friday evening, I saw him speak a couple of miles from my home in L.A. He talked about how the media assiduously avoids using the term “working class.” We’re all middle class or we’re all living in a classless paradise, right? Growing up, I never thought about it, but some of my friends’ lived in bigger homes than the apartments my parents rented. One friend’s parents had a full-time servant. I never felt poor, but I was. I went to a state university which was, basically next to free. After college I spent a couple of years living in a VW van in Europe and Asia. I didn’t feel homeless; I felt I was in a great adventure.
Eventually I washed up in San Francisco. The Blue Oyster Cult put down their credit card and told the Miyako Hotel that they would pay for my room for as long as I needed it. I found a job and then a studio apartment south of Market, long before anyone imagined the neighborhood would become gentrified. I built a loft to sleep on with a darkroom underneath so I could work as a photographer beyond my day job at a p.r. firm. A week never went by that I didn’t hear gunshots.
On Friday, Bernie described how millions Americans, living paycheck to paycheck, had to choose between gas frothier car and food for their table. That was my story in San Francisco for years. But I never felt poor. I felt rich; I was on top of the world. I was just scraping by but I had never had anything so it felt normal. And food stamps helped me make it all work.
At one point, one of my friends, Susan Berman, actually was rich. Her father, “Davie the Jew” Berman, had been a Las Vegas Mafia kingpin and when he— and her mother— were murdered, she inherited a great deal of money. She was my first wealthy friend. She had a mansion in Pacific Heights and an apartment on Beekman Place in Manhattan. When she was in Manhattan I would mansion-sit. And when I went to New York, I would stay on Beekman Place in the Sutton Place neighborhood. The neighbors were Vanderbilts, Kennedys, I.M. Pei, Joan Crawford, Bill Blass, Lillian Gish, Maureen O’Hara… and lots of Wall Street billionaires. One of those Wall Street billionaires was Thomas H. Lee who committed suicide in his office bathroom by shooting himself in the head a couple weeks ago.
Lee, born into wealth, was 78 when he pulled the trigger and I have no insights as to why he killed himself. Like me, his grandfather came from the Pale (a swath of eastern Europe stretching from Lithuania through Ukraine and Moldova)— the Jewish part of the Russian Empire. I never ran into him in Susan’s neighborhood. And I never ran into him when, a pioneer of the private equities leverage buy out model, he engineered the destruction of the world’s greatest record company, Warner Music, in 2003, soon after I had retired. The model is fairly simple: borrow a bunch of money from other wealthy predators, buy a company with their money and with debt, gut it to drive down costs (primarily personnel costs) for short term profitability and sell it for a huge profit before it goes under.
Thomas Lee and Bain Capital were behind the $2.6 billion leveraged sale by Time Warner of the Warner Music Group, which included Warner Bros Records. $1.6 billion out of that sale price came from the issuance of bonds backed by the future cash flow of the company. I signed a non-disclosure agreement about those bonds so I have to be careful about what I write about it, but a huge European bank with a somewhat sketchy reputation was part of the bond deal. In order to sell those bonds in the U.S. they had to do their due diligence in investigating the future profitability of the company. They made the mistake of hiring me as one of their experts. They paid me a great deal of money to write a report and certainly didn’t expect me to tell them that the deal was a Ponzi scheme and recommending they not offer the bonds to their clients. The attorney that brokered the deal between me and the bank said I would never one hired for another deal like that again and would be giving up hundreds of thousands of dollars in income if I didn’t withdraw the report. I didn’t; I laughed in his face instead.
Warners cost-cutting included “reducing bureaucracy and eliminating duplication,” which means firing people, lots of people— “headcount reduction,” including everything that made the company special. Example, Warner Bros Records pretty much invented the idea of an artist development department. Those were the folks that would help bring to fruition an A&R guy’s vision and it usually took several albums and many years.That would be a real investment in an artist. Many bands don’t become profitable on the first or second album. Today, those artists get dropped but it took 6 albums before Depeche Mode broke, 6 albums before Barenaked Ladies broke. Both of those groups went on to make millions of dollars in profits for the company— including selling back catalogue after the big hit albums— but none of that could have happened under the new regime’s cost-cutting policies. Long term investment is verboten; it’s all about the quarterly earnings. Marketing and promotion staffs and budgets were cut so that extent that it hardly makes any sense to sign with a major label any longer since they have almost nothing to offer.
After the IPO, the company went public and Thomas Lee and Bain bailed, selling their shares for huge profits, leaving Edgar Bronfman Jr. holding the bag. By 2011 it was on the skids in a big way and was sold to— basically— the Russian mafia (Kremlin oligarch Leonid Blavatnik’s company, Access Industries, part of a money laundering operation), for $3.3 billion. He took it private and later took it public again with another IPO (2020). A company that was once all about music and artists has become a company strictly about anything but— just like SONY and Universal. I always blamed Thomas Lee.
His carefully-crafted reputation is that of the “kinder, gentler” side of the corporate raider and, of course, the philanthropist and art collector. “As the family grieves and Wall Street ruminates on Lee’s legacy, some of the implications of his passing have already started to radiate into the museum world and art market. A longtime museum trustee, Lee assembled an art trove replete with paintings by Mark Rothko, Roy Lichtenstein, Jackson Pollock, and Francis Bacon.” Bacon is my favorite contemporary artist and I love Rothko and Lichtenstein as well.
Lee began buying postwar and contemporary art in the 1990s, a significant decade in his professional and personal life. In 1992 his Boston-based firm Thomas H. Lee Partners famously acquired Snapple for about $135 million, took it public, and then resold to Quaker Oats two years later for $1.7 billion. (Lee’s brilliant flip turned out to be a giant flop for Quaker Oats, which resold the beverage company for just $300 million less than three years later, inspiring headlines like “Quaker-Snapple: $1.4 Billion Is Down the Drain”).
Armed with about $927 million from that sale, Lee jumped into the art world as a collector and philanthropist. In 1994, he joined the board of the Whitney, where he would go on to play an important role, serving on the executive committee as well as the committees overseeing the modern painting and sculpture department and nominations for the board. At the Breuer building, the Whitney’s old home, Lee commemorated galleries on the second floor in honor of his parents Mildred and Herbert Lee.
“He brought the attitude of a businessman and an entrepreneur to a sector that, as you well know, is much less focused on that than on the present moment,” said Maxwell Anderson, the Whitney director from 1998 to 2003, noting that, as the chair of the nominating committee, Lee was “critical to charting the future of the institution in recruiting new talent, support, and ideas.”
