Taking on - Sheelah Kolhatkar

Taking on
1 4 8 Condé Nast Po r t f o l i o . O c t o b e r. 0 8
PHOTOGRAPH by SUZY ALLMAN
T H E H E D G E F U N D F O RT U N E T H AT ’S
T H R E AT E N I N G T H E N E W S PA P E R
OF R E C ORD C OM E S F ROM A MOST
U N L I K E LY P L A C E . A LOOK AT T H E
E LU S I V E A L A B A M A F A M I LY B E H I N D
T H E S H A R E H O L D E R A SSAU LT ON
T H E N E W YO R K T I M E S C O.
by S h e e l a h K o l h a t k a r
Gunning for
the Gray Lady
LEFT: The New
York Times building
in Manhattan on
July 30. INSET: Portrait
of John Harbert III,
painted by Everett
Raymond Kinstler.
the TIMES
I
T ’S A
bright morning in April when Arthur
Ochs Sulzberger Jr. takes the stage in
a crowded auditorium in midtown
Manhattan. “This company is not for
sale,” he says, his voice sounding heavy.
He wears a charcoal suit with a red tie,
and his shoulders sag slightly, as if the
ghosts of three generations of OchsSulzbergers, publishers of the New York
Times, are pressing down on them.
Several hundred New York Times Co.
stockholders are gathered at the paper’s
sleek new headquarters, in an amphitheater overlooking a garden of birch trees.
All eyes are on Sulzberger. Like most
newspaper concerns today, his company
has routinely been described as embattled, but this particular meeting seethes
with even more tension than usual. Two
hedge funds have amassed a 20 percent
stake in Times Co. stock, so Sulzberger,
57, the company chairman and the publisher of its flagship daily, needs to make
a determined stand. “Every member of
the family deeply cares about this company and its mission,” he says.
As he speaks, his eyes dart toward a
corner of the room, where his father and
predecessor as publisher, Arthur Ochs
“Punch” Sulzberger, 82, sits frozen in
an electric wheelchair in the front row,
wearing a crisp checkered shirt with
a yellow silk pocket square. A young
woman hovers beside him, spooning
what looks like yogurt into his mouth.
For a moment, the son stares at the father. “This company will continue to
have the ownership that it has today,”
Sulzberger says.
That same day, some 850 miles to the
south, Raymond Harbert is preparing
for a round at the Mountain Brook
Club, according to a golf-shop employee. The club is an oasis where the
1 5 0 Condé Nast Po r t f o l i o . O c t o b e r. 0 8
elite of Birmingham, Alabama, go for
golf, tennis, lunch, and gossip. Harbert,
49, is an heir to the largest private fortune in the state and, almost by chance,
a key figure in this latest assault on the
venerable old newspaper.
Harbinger Capital Partners, a hedge
fund founded seven years ago with Harbert family money, is currently the largest Times Co. shareholder outside of the
Sulzberger family. In the spring, the
fund, along with a partner, forced two
representatives onto the Times Co.’s
board of directors with the stated aim
of pushing management to improve the
stock price—although some fear they
are after much more. It is an understandable worry. The move comes soon
after Rupert Murdoch bought the Wall
Street Journal from the Bancroft family,
proving—once again—that blood ties
and family tradition are no match for
determined billionaires.
And so the fate of the country’s (and
perhaps the world’s) most esteemed
journalistic institution will be determined, in part, by a fortune that was
made a half-century ago in the coal
mines of Kentucky and on the highways
of Alabama by a man who carried a side-
arm into union drives and never met a
Republican he didn’t like. It’s an irony
fit for the pages of the New York Times.
AFTER ATLANTA, Birmingham is the
No. 2 financial hub in the South, a
small city whose downtown, crowded
with undistinguished office buildings, is
home to corporations such as Regions
Financial and HealthSouth. The area,
prone to summer thunderstorms of biblical proportions, is no longer known by
its old nickname, Bombingham, which
stems from an incident in which four
black girls were killed by the Ku Klux
Klan in a 1963 church blast. The city
was built by industrialist owners of
steel mills and coal mines, and the Red
Mountain Expressway leads south from
town toward the homes of many of their
heirs in the neighborhood of Mountain
Brook, where rich people live in pretty
mansions in the hills.
Raymond Harbert is one of them.
Described as street-smart and astute by
those who know him, Harbert, in 1990,
at the age of 31, took over Harbert
Corp., the $500 million conglomerate
his father, John Harbert III, created just
after World War II. Since then, Harbert
DY L A N PA R K E R ( A E R I A L ) ; L A R RY PAT R I C K ( FA M I LY ) ; C R O S BY T H O M L E Y ( R AY M O N D A N D J O H N H A R B E R T )
who this secretive Southern mogul was,
where his money came from, and what
he was doing mucking with the Times.
He lives in an enormous brick house
near where he grew up, in Mountain
Brook Estates, the most exclusive of Birmingham’s suburbs. He doesn’t have an
engineering degree, like his father. He
studied business at Auburn University—
a respectable state school—and went
straight to work for the family firm. It is
difficult to pinpoint his net worth, but it
is safe to say that he has done very well.
Alabama Getaway
LEFT: The Harbert family home in
Birmingham. CENTER: The Harbert
family at their Georgia plantation,
Thanksgiving 1994. BOTTOM: Raymond
Harbert and his father, John, in 1990.
has transformed it from a company that
built power plants, pipelines, and highways around the world into a passive
investment firm, Harbert Management
Corp., which manages $25 billion for
the Harbert family and many outside
clients. Through it all, he has been living a mostly quiet life with his wife and
three kids. But when H.M.C. took an
aggressive stake in the New York Times
Co. in January, people started to wonder
Harbert tries hard not to draw attention to himself or his money. He rarely
talks to reporters and declined to be
interviewed for this article. But his
money has spoken for him. He donated
$5 million to his alma mater, just as his
father did (although Raymond’s application to join the school’s board of
trustees was sidelined by the Alabama
state senate). His political contributions
suggest that he’s a devoted Republican,
and a report by the watchdog organization Public Citizen has identified him as
a low-profile contributor of funds to a
group lobbying to permanently eliminate the estate tax—which makes sense
if he’s to inherit a chunk of the estimated
$1.6 billion fortune his mother, Marguerite “Wita” Jones Harbert, now 85, will
someday bequeath her children. (Accord-
ing to Harbert’s spokesman, he is no longer involved with the estate-tax group.)
When I ask people about Harbert, they
don’t have much more to add, although
they all seem to remember his father. It’s
impossible to understand Raymond and
the way he operates, they say, without
first knowing John. One close watcher
of the Harbert family remarks that “it’s
difficult to follow a very strong-willed,
successful, and dynamic father and become very successful in your own way,
and that’s what Raymond’s done.”
John Harbert III was born in Greenville,
Mississippi, and made his life in Birmingham. His legacy looms—literally—over
the city. He built one of its tallest buildings and blasted his way through a mountain to lay a highway that runs through
town. He was the kind of man who
always carried a pocketknife to cut his
apples with. “They don’t make ’em like
that anymore,” says William Powers, who
worked with John from 1968 to 1990.
Referring to John’s legendary powers of
persuasion, Powers says, “He could sit
you down and talk with you, and you’d
whip your weight in wildcats.”
After returning home from W.W. II,
John started Harbert Construction using cash from his war bonds and winnings from shooting craps, according
to a biography commissioned by Wita
after his death in 1995. His first project
was building a bridge over a creek in Autauga County, Alabama. The company
soon expanded across the South and
then to South America and the Middle
East. In 1969, John began buying leases
for about 240,000 acres of coal mines in
Kentucky, eventually spending a total of
$150 million, according to Forbes. The
venture didn’t come without challenges:
He was vehemently antiunion, and during a United Mine Workers strike in
1971 he led an armed convoy of trucks
across the picket line to prevent the
union from organizing his men.
In 1981 came a watershed event in the
life of the company, now called Harbert
Corp.: John sold the firm’s Kentucky
coal mines to Standard Oil. Three years
later, he was named to the Forbes 400
list for the first time, with an estimated
net worth of $500 million.
In a 1975 address at Birmingham’s
Samford University, John shed some
light on his attitude toward home life.
“In many cases, a man’s wife and children must take second place in receivWrite to [email protected].
O c t o b e r. 0 8 . Condé Nast Po r t f o l i o 1 5 1
Paper Pushers
RIGHT: Scott Galloway at N.Y.U.’s
Stern School of Business in July.
BELOW: Philip Falcone with his wife,
Lisa, at a benefit in June.
farm in St. Clair County, Alabama; a
mountain retreat in North Carolina; and
Pinebloom, a 10,000-acre hunting plantation in Georgia where he and Wita shot
quail, which was the inspiration for the
plantation in Tom Wolfe’s A Man in Full.
The three Harbert children were
known as the little princes and princess of Mountain Brook, members of
Birmingham’s first family. When I ask
Margie what it was like growing up
privileged in the civil-rights-era South,
Family Feud: THE SULZBERGERS VS. THE HARBERTS
Seat of Power
sulzbergers
New York City
Humble Origins
harberts
sulzbergers
harberts
Birmingham,
Alabama
Adolph Ochs
bought the
Chattanooga
Times with a
borrowed $250
down payment
in 1878.
John Harbert
III launched
Harbert
Construction
partly with
gambling
winnings in 1947.
1 5 2 Condé Nast Po r t f o l i o . O c t o b e r. 0 8
Namesake Building
sulzbergers
harberts
A chic
52-story
Renzo Piano
skyscraper
in midtown
Manhattan.
A gold granite
32-story
office tower
in downtown
Birmingham.
P H O T O G R A P H b y P E T E R YA N G
SUZ Y ALLMAN (NE W YORK TIMES BUILDING); PAT R I C K M C M U L L A N (P H I L I P A N D L I SA
FALCO N E); TH OS S H O LG ER (BARNARD); J EFF G REEN B ERG (AU B U RN); NAN CY R . SC H IFF
PHOTO CREDIT
(I P H I G E N E S U L Z B E R G E R ); D I C K I A R N ( W I TA H A R B E R T )
ing his attention,” he said. “The life of
a construction man means a sacrifice by
his entire family.”
The family had no shortage of material comforts. They lived on an estate
that covered 13 wooded acres on a
Mountain Brook hill, where there was
plenty of space, even with the staff Wita
employed. The house was so isolated
that Raymond’s sister, Margie, 47, could
remember only one visit from a trickor-treater. John acquired a 2,000-acre
she says she was only vaguely aware of
her family’s status, because money was
never discussed. She remembers asking a
childhood friend to explain what “keeping up with the Joneses” meant. “You
are the Joneses,” her friend replied.
Presiding over the family then and
now is Wita, the matriarch. Since John’s
death from pancreatitis in 1995, his
widow has become a target of gossip
and speculation around town—the rich
old lady sequestered in a mansion on a
hill. She still lives in the family’s Mountain Brook compound with her son Jay,
55, and the staff of attendants—including her beloved Jamaican manservant,
Neville—who look after her.
Contacting Wita is no simple task.
She’s hidden away behind imposing stone
gates, with layers of helpers standing between her and the outside world. But one
evening in June, something unexpected
happens: Wita answers the phone.
“Hellooo…?” she warbles.
It’s after dinner, and Wita seems
happy to talk, especially about John.
dispute that has riven the Harbert clan.
In 2006, Margie filed a lawsuit charging
that her brother Raymond had essentially
robbed her of her share of the family
company. Her attorney asked the court
to compel Raymond to reveal all of his
company’s closely held financial information. Raymond and his lawyers have
vigorously resisted his sister’s efforts.
PEOPLE BEGAN TO WONDER
WHERE HIS MONEY CAME FROM AND
W H AT H E WA S D O I N G M U C K I N G
W I T H T H E N E W Y O R K T I M E S.
During a rambling conversation, she
makes it clear that she’s plenty proud
of her children. But she perks up at the
mention of her husband. “John Harbert
loved construction and was a builder,”
Wita tells me, listing some of his projects. “He was an engineer and built
things all over the world.” She and John
were philanthropists, she explains, and
collected art and antiques together. “I
got him interested in that,” she says.
And what about Raymond? Wita
pauses and says, “I think he’s mighty
hardworking.”
This spring, when Arthur Sulzberger Jr.
was fending off the huns of Wall Street,
a salvo was also being fired in a family
Pet Philanthropic
Project
The suit is wending its way, slowly and
painfully, through Jefferson County
Circuit Court.
Margie and her husband, Sam Gray,
an obstetrician, live with their three
children in a Mountain Brook house of
their own. Her suit relates to events that
date back to 1990, when John decided
to retire at the age of 69 and appoint
Raymond C.E.O. By that time, Raymond had married his college sweetheart, Kathryn, and was serving as a vice
president of Harbert Corp., responsible
for mergers, acquisitions, and the evaluation of venture capital investments.
That year, Harbert Corp. found itself in
dire financial straits. “We had gone into
Matriarch
oil and gas and real estate development,”
William Powers says. “Unfortunately,
we also thought we could finance power
plants.” The company was overextended,
with money tied up all over the country
and no banks willing to lend more.
Part of Raymond’s solution was to
sell the construction business. He then
renegotiated the company’s bank debt,
culled underperforming units, and fired
employees in a way that his father never
would have, according to Powers. But
these moves may have saved the firm.
Margie’s complaint states that Raymond then proposed starting a new
company, to be called Harbert Management Corp., in which he would have a
majority stake and to which he intended
to transfer most of the operations of
Harbert Corp. In order for Raymond
to enact his plan, he needed the written approval of the family shareholders,
according to the lawsuit. Those shareholders consisted of Margie and Jay.
What happened next was either an
act of deception or an example of the
naïveté that develops when someone has
spent her entire life having everything
taken care of by someone else. The original complaint says that Raymond visited
Margie at her home one morning in
1994 “with an air of urgency” and asked
her to sign a
(continued on page 175)
< P O R T F O L I O
C O M
>
READ ABOUT THE PLIGHT OF
T H E N E W Y O R K T I M E S AT
PORTFOLIO.COM/MAG/NYTIMES08.
Family Scandal
sulzbergers
harberts
sulzbergers
harberts
sulzbergers
harberts
Student
housing at
Barnard
College.
The
engineering
department
at Auburn
University.
Iphigene
Ochs
Sulzberger,
1892-1990
Marguerite
“Wita”
Jones
Harbert, 85.
None has
made the
papers...yet.
Scathing
sibling
lawsuit.
O c t o b e r. 0 8 . Condé Nast Po r t f o l i o 1 5 3