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When The Russians Wouldn't Play
Monday, March 5, 1984
Reese and I met for breakfast at .We had a open and had to talk.I, with my usual misfortune, was second banana.But Reese was leaving in a week to let me present this one alone, so I was going to do the talking today.The client was a publishing house. In terms of management talent and expertise, publishing houses are about on a par with banks.Banks are just above government.Government is just above … no, I think that’s it.
These geniuses published religious textbooks, technical manuals and history books.Occasionally they sold some.Their big buyer, naturally, was the archdiocese.That meant every Catholic school in Chicago and the "burbs" had their religion texts.
Reese and I did the opening meeting together.The opening meeting is with the buyer, or, to be more correct, the potential buyer of our services.The salesman is supposed to figure out who this is before we come in.Reese and I were Analysts.We were the ones who sold the money jobs.The salesmen sold the analysis, the fee for which barely covered their cost.Reese and I sold the actual job where we made huge money with an enormous margin.It was a slick operation.
This supposed buyer was a nice kid by the name of Tony Alimodante, as pudgy and clueless as they come.Nice professional manicure, though.But painted on polish always gave me the woogies.He was short, maybe five-six. Short clients were always a problem.Napoleon complex.It meant I always had to sit when I talked to him, not stare down from 6’ 1”.I had to give him the false impression he’s my equal.
Chubby cheeks and kinky hair, balding.Big phony smile, nice teeth. Nice suit, subdued glen plaid.I like conservative suits.From Davenport west, to just before Denver, the checks and plaids seemed to get larger and more bizarre.By the time you got to the Colorado border, suit coats were just four big blocks of color, like clown outfits.Tony wore his suit coat, probably to disguise the pot.It didn’t work.
Office décor was Reese's conversation gambit.God I hate that!I double clutched and accelerated around Reese and asked our chubby midget what our salesman, pardon me, Executive Field Representative, had told him.
As usual, I got a bizarre and twisted version of the gibberish and insane lies our sales guys spout.
I tried another tack.“Tony, what do you want to accomplish in this three week analysis?”
The dark wood paneled office looked like it came out of the ‘forties. This twerp perched behind the mahogany desk was the third Alimodante to hold the job as CEO.His uncle was before him.Now Uncle Joe was in Boca.Before the uncle was the father, John, also now in Boca.Before him it was the late Salvatore Contina, the father-in-law of John and also The Founder.The Founder became The Founder by borrowing some racket money at ten percent a month to buy a bookbindery.He started publishing Catholic textbooks and the Mob got the Archbishop to buy them for the schools.St. Anthony’s Press was born.
What would have made the scam perfect, of course, would be if the Bishop then got a kickback for the buy.When you grow up in Youngstown, Ohio, you’re educated to expect a certain symmetry, a classic elegance in larcenous matters.
The current Archbishop, Cardinal Cody, was known for a little creative artistry, himself.Maybe it was like Zen art, sand raking.Only instead of sand it would be raking, say, five points.
The books weren’t very good, but what does a ten-year-old kid know?They had a lot of mediocre paintings of Jesus by artists nobody ever heard of.That was good.The loan got paid off by 1949, even with the healthy vig. An annual gift to the church, by check, thank you, to satisfy the IRS and catch a deduction, kept the school contracts coming in.
In the ‘sixties they branched off into technical manuals and professional journals in molecular biology.Those didn’t do nearly as well.I don’t think you can find anybody to pay off to get “Viral Invasions of the Pancreas” published, let alone sold.Let alone carted to the dumpster.
Tony told us Uncle Joe had read back in ’73 there was more being published in the field of molecular biology than any one human being could read and he figured that was so dumb you had to make money off it.They did.For a while.Later Uncle Joe read, again, this situation was common for most sciences, including nuclear physics, not just molecular biology, and kicked himself for not realizing the molecular biology thing was an example, not a unique occurrence.Joe, apparently, was ot-nay oo-tayight-bray.
Now Tony didn’t tell me all of this verbatim, and certainly not in answer to my question of what he wanted out of the analysis. This is shit I found out from our vaguely mobbed up salesman.I’m only telling you this because my answer is a hell of a lot more interesting than what Tony invented. His answer was pretty lame.I’m sorry; I’m embarrassed by how stupid my clients are.
Not only did Tony not tell me all this but he didn’t even answer my question.Instead, he told me the company was making money; it was a well respected organization in the industry; there were no family squabbles over how the business was being run; the staff was loyal to the family; there were no labor problems; and, year to year, the company ran more and more efficiently with a higher and higher level of customer service and quality.
This, of course, was a lie.Everything he told me was a lie.And they say consistency is a virtue?
Tony also told me he had the power to make a decision to hire us for a project.So when I heard that, I knew that was a lie.I asked for the numbers of Joe and John and told Tony I wanted them on a conference call.
When we finally got them on the phone I could tell they were a couple of geezers.But getting them on the phone was the problem. Reese and I sat in green leather chairs at the conference table in a corner of Tony’s office.Tony’s (previously John’s) secretary, an older babe who must have been a looker in her time, tried futilely to show him how to use the speakerphone.Finally, she made Tony sit with finger poised over a button while she went back and placed the call from her desk.In a minute she yelled and Tony pushed the button and we had the father and the uncle on the phone.
After ten seconds of polite inquiries about the weather in Boca, I asked the father what he wanted out of this analysis.
“Yeah,” he said.“Your salesman ast me da same question.What kind of question is dat?”
Hmm.The dad was street smart.He figured out right away our salesman was a salesman and not an Executive Technical Something … or whatever we were calling those bozos this week.He was also asking, in a polite way, just what the fuck was I selling.
“You want to find out why sales are down?” I tried.
“You bet I do.”
“You want to find out why you got a hundred people out there in cubicles pullin’ their puds instead of making you money?”Reese winced but I have an affinity for shifty mopes.Call us soul brothers.
“You bet I do.”
“Okay,” I said.“Uncle Joe?You in agreement?”
Joe kind of belched.I think he may have been on the Bloody Marys a little early down there in Boca.“Joe?”
“Well … I don’t think it’s as bad as John thinks it is, sales are down a little.But, yeah, if you can give us some tips,” he rasped, “I’m all for it.”
That was pretty much all I needed to hear to understand the place was totally screwed up and Uncle Joe, as well as Tony, were probably part of the cause of it.
“John, do I have your full authorization to be given any information I need while I’m here?”
“Tony, are you going to give me everything I ask for?”
“Within reason, yes,” said young Tony.
“Tony … Tony …” came over the speaker from John.“You give dem anyt’ing they want.”Uncle Joe just kept his cannoli hole shut.That marked Uncle Joe as the thief.Well, Tony, too, is my guess.
“John,” I said.“Can I call you every day?Just fifteen minutes.Let you know what I’m finding?When I’m finished, I’ll jump on a plane and come down to Boca and give you a five-hour presentation of what’s wrong with your company.Okay?”
“Okay … while I got you two on the line and Tony’s here, I’d like to take just a minute to tell you what I’m going to be doing.You guys got a few minutes?”
There was a gloomy chorus of grunts I took for an enthusiastic “Yes”.
“Okay …”I took a deep breath.This was where I normally sell it or lose it.
“You haven’t paid us a dime yet and we’re not going to submit our invoice until we’re done.That’s going to take about three weeks.The price of the analysis is twenty seven thousand dollars.That’s nine thousand a week.During the first week we’re going to tear this place apart.We’re going to look at your financial performance records.We’re not going to look at your personal finances, though.That’s your business, not ours.We’re going to draw the information line at equity distribution.”I paused to let them breathe a collective sigh.
“What is the equity distribution, by the way?You’re not publicly traded.”
I got a guilty look from Tony.John’s voice came out of the speakerphone.“I own seventy percent of the company.Tony’s down for ten, so’s Joe.My secretary’s got another ten but it’s not permanent.It goes back to the company on her death.”
Silence.Oh, boy.So John was banging the secretary maybe back in the fifties.There’s probably a kid out there.Cheap way to do child support.I could be wrong.The secretary could be a managerial whiz.I already knew she was smarter than Tony.She knew how to use the phone.
“Okay,” I started again.“Okay, also during the first week, we’re going to be interviewing your managers and supervisors.We’re going to be doing some specialized studies in the work place.Don’t worry about that.After an hour we’re going to be like the wallpaper out there.We’re going to be looking at whatever historical operations data you got and we’re gonna pass out some confidential questionnaires.”
“About what?” popped up Uncle Joe from Boca.
“Nothing about you or the family. We just want to know how your managers and supervisors think. I’ll fax you both a copy of it.Anything you don’t like we’ll toss out.We want to be able to meet with Tony every day at the end of the day for maybe fifteen minutes.Just kind of pop in.That might be at five, or six or seven.That okay, Tony?”
“Yeah, fine,” said Tony, frowning.I could hear John chuckle in the background.
“I’ll make this fast, John, since we’ll be talking every day.”I also wanted to hurry over the fact I would not, thank you, God, be talking to Uncle Joe.“If at the end of the first week, if what we’re saying isn’t interesting and important to you, we’re going to part company and I’ll give you an invoice for nine thousand dollars.If you think we did an especially shitty job, don’t pay us.”I could see Reese cringe at this.“Is that fair?”
I got a chorus of, “Yeah, sure” and moved off briskly.
“In the second week we’re going to be doing more of the same, mostly fact checking and trying to figure out what all this is costing you and whether we can recover it or not.If there isn’t a significant amount of potential, say two million dollars, we can add to the bottom line for…”I paused slightly.“equity distribution, then we’ll part company.Same guarantee goes for the second week. In the third week we’ll lay out line-by-line what has to be done to recover your costs, raise sales, whatever.Okay so far?”
A chorus of okays, somewhat more enthusiastic than before and I was off again.
“Wednesday of the third week, I’ll give you the exact figures for what you can recover in terms of cost or what the new margins should be on higher sales.I’ll tell you in exactly what the costs of us would be if you should hire us.Give us a couple of days to do the final fact check and type up the proposal and on Friday of that week we’ll formally submit our proposal and you will give us an answer, yes or no.If you tell us 'I'll think about it', it, for us, it means no.
“I’ll tell you now there will be a lot you can do yourselves without hiring some high powered management consultants.We’re going to encourage you to do that.If there is any part of what we propose you think you can do yourself, we’ll take it out of the proposal and reduce our fee accordingly.
“Now at this point in time, I obviously don’t know if we can save you any money or not.And also obviously, I don’t know what the costs of corrective action would be.I can tell you what our track record is, though.In the last twenty years we typically save companies like yours over two million dollars a year.That’s not one year.That’s per year, forever.Typically your costs would be a third of what you would save in one year.Everybody understand what I’ve said?Any questions?
There were none.
“Okay, John, we’re going to work.Let me have your private number.”
He gave it and we signed off.I spent a few minutes making nice-nice with Tony to see how far his nose was out of joint.I think he may have been too dumb to realize what had just happened.
Reece went off to make phone calls to set up his next week.I took out my questionnaire for Tony, asked him if he had two hours and went to work.My “helper” was already in the bird room with rosters, organization charts and a list of expenses for 1983.He was going to run numbers while I grilled the stooge.
“So what does Uncle Joe do?” I asked pleasantly and with a smile.
“Joe is our Executive Vice President,” said Tony with a smile as pleasant as mine.
“And what does that mean?” I asked, smile gone.
Over the next two hours I learned Uncle Joe pretty much does nothing but play golf, give shitty advice over the phone and sign checks over twenty grand.On the other hand, he gets a great salary.So does Tony.So does, I finally learned her name, Annie the Secretary.Tony made more money than I did.So did Joe.So did Annie the Secretary, for that matter.It looked like John got what was left over, or should I say, seventy percent of what was left over.From the first numbers I had been given by Tony, that looked like about a quarter of a million bucks.
A quarter of a million a year would be a heck of a salary in Omaha.It’s not so rosy a picture if you’ve got a house in the Chicago suburbs and another in Boca along with a fifty-foot boat and several golf memberships.
I also learned the company had a big bank loan, a covenant with the bank and they were an inch away from being transferred to what is euphemistically called the “Work Out” department.
I closed an analysis once on the first day when the dim boob across from me said he had no bank problems because his company’s accounts were being transferred to the “Work Out” department.Like most banking stuff, “work out” means exactly the opposite of what you think it does.
When you go to “Work Out” you’ll meet the whole department on the first meeting.Except it won’t be the big corporate sit down at the board table on the top floor you might imagine.Instead, it’ll be a very short meeting in a shabby cubicle with one, only one, corporate goon, the guy who’s holding your paper in one hand and your balls in the other.“Work out” means you, just you, have got two hours to work out how you are going to come up with the rest of the money by the end of the day.It’s that or handcuffs.That’s the “Work Out” department.
The company had two hundred employees and a seven million dollar payroll, which included benefits.
It was kind of hard to believe a fifty million dollar company was only putting only three hundred thousand dollars on the bottom line.That was less than a percent of sales.With no union, secure church contacts, contractual manufacturing costs and a bunch of low paid drones and geezers outside in the squad bays, they ought to be knocking down fifteen points.At least ten.It was difficult to manage at that level of incompetence.So …Vegas calls it skimming.Well, everybody gets a finger in the butter now and then.
Large businesses send invoices and receive income in the form of checks or transfers.They are harder to steal from but it’s not impossible.Cash businesses, of course, are tax dodger heaven.Corporations can be skimmed but it’s harder.You have to account for cash transactions.Double entry bookkeeping is the curse of the entrepreneurial class.One of the ways corporate officers skim is kickbacks on contracts.Another is to set up a dummy corporation and invoice for some service like pest control or landscaping.Whores, booze and gambling losses somehow never seem to pass those pesky IRS tests.
In a closely held corporation, one not publicly owned – meaning its stock is not publicly traded – it’s not hard to set up deals like this.Cash businesses are something else entirely.It’s not if they’re skimming, it’s how much.I had one small client last year who we turned down, a restaurant, he wasn’t skimming enough so, over several drinks he bought, I told him how.Just another service.Shit, I’m not a friend of the IRS either.
So, my bet as the thief was Uncle Joe or Tony, probably both.Their salaries were too low at only a hundred K a year apiece.I’d bet they were splitting another four hundred K between them.That would put it about right. They weren’t good enough or smart enough to run a company at a level of efficiency where they could steal big money.
I could work out a plan to give Daddy John three million a year.That’s enough to scrape by in Boca, maybe even get him a better boat and a new golf membership.And I could work out a way to give Joe and Tony each a little more than what they were stealing now.I could even boost old Annie to a hundred K a year for what looked like her last couple of years of bumbling around in the outer office letting the cute one with the big tits do all the work.And everybody would be happy.