FOR O&Y’S DEEPLY RELIGIOUS CHIEF EXECUTIVE; THE COLLAPSE OF AN EMPIRE IS A PASSING SETBACK
A PATRIARCH AT BAY
But when I turned myself to look on all my works that my hands had wrought, and on the toil that I had toiled to accomplish, then, behold, all was vanity and a torture of the spirit, and there was no profit under the sun.
—Koheleth (Ecclesiastes 2:11)
The words of the Hebrew Bible may hold particular resonance for Paul Reichmann these days. For the past three months, the devoutly religious 61-year-old developer has endured a public test of both his personal faith and his business judgment. From the seclusion of his office in Toronto’s Exchange Tower and his relatively modest home in a predominantly Jewish neighborhood of the city, Reichmann has been forced to look on as courts in Canada and Britain took much of what he and his family have wrought over a lifetime out of their hands. In the struggle to repay $13.5 billion to international creditors, the family’s profitless Olympia & York Developments Ltd. has reluctantly opened its books to a legion of unfamiliar accountants, lawyers, advisers and court-appointed monitors. On one matter, though, Reichmann and his brothers, Albert and Ralph, have been unwavering: despite intense pressure to meet the mounting demands of their creditors and the courts, no one working for O&Y may work during the sabbath—from sundown on Friday until sundown on Saturday.
That strict observance of the Reichmann family’s Orthodox faith is one of the few things that has not changed dramatically at O&Y since reports of its financial distress first became public in March. The courts have forced the company, once the jealously guarded preserve of the close-knit Reichmanns, to adapt to an unfamiliar new life in a highly visible arena. As part of the debtrestructuring process, court rulings have ordered the brothers to disclose the most intimate details of their formerly confidential business relationships, and business critics have derided their once praised financial acumen. “It is a tough step,” said Frank Bennett, an insolvency specialist with the
FOR O&Y’S DEEPLY RELIGIOUS CHIEF EXECUTIVE; THE COLLAPSE OF AN EMPIRE IS A PASSING SETBACK
legal firm of Bennett Winch & Gassee in Toronto who is advising O&Y, “opening the doors of your sanctuary to strangers.” Amid those gathering difficulties, colleagues say, the family has turned to its faith and its traditions for strength.
As teams of accountants and lawyers settled in last week to pick over the real estate and stocks in O&Y’s portfolio, analysts acknowledged that one concern, at least, was behind them. Initially, O&Y’s creditors expressed widespread anxiety over Paul Reichmann’s willingness to make the necessary transition from unquestioned corporate patriarch to willing team player in the effort to restructure his company’s debt. As Raymond Kao, a professor at the faculty of management studies at the University of Toronto, noted, successful entrepreneurs like Reichmann frequently resist sharing authority. “They create their company in their own image, and often have trouble trusting others to realize that vision,” Kao said. “They want to do everything their way, down to the last detail.” Concern increased when O&Y rebuffed initial demands for financial disclosure, and heightened further when the first highlevel adviser brought in to help the company weather its crisis, Thomas Johnson, a former banking executive from New York City, departed abruptly after only three weeks. It was widely speculated at the time that Paul Reichmann had been unwilling to delegate any power to Johnson, an outsider.
As recently as late last month, while O&Y pursued an increasingly desperate search for new financing for its $7-billion Canary Wharf development in London, Reichmann insisted on a central role. His efforts proved fruitless on May 28, when 11 Canary Wharf creditors forced the development into bankruptcy. With that decision, the most prominent Reichmann forfeited the project he had toiled hardest to create. Said one source close to O&Y, speaking on condition of anonymity: “The only way to explain all the marble and the painful attention to detail at Canary Wharf is that it was a bid for immortality.” Even after the British ruling, O&Y spokesmen said that Paul Reichmann would remain “very involved” in the effort to raise new investment capital for Canary Wharf’s financial restructuring and completion. Authorities in London say that he may thereby seek to regain control.
Still, a court-appointed administrator now makes all decisions affecting O&Y’s British properties. In Canada, a team of veteran American restructuring specialists, made up of former Chrysler executives Robert (Steve) Miller and Gerald Greenwald, now consults closely with a court-appointed monitor and representatives of the company’s lenders before making decisions involving the Reichmanns’ Canadian assets.
Sources close to the publicity-shy developer say that Reichmann has weathered the glare of such intense public scrutiny and the diminishing of his corporate leadership well. He continues to regularly attend directors’ meetings of O&Y’s troubled public companies, including Abitibi-Price Inc. of Toronto and Gulf Canada Resources Ltd. of Calgary. There, according to other directors, Reichmann appears stoic about his companies’ many problems. Said one: “Paul is a very selfcontained person who is deeply at peace in his inner core. And like a good hockey coach, he tries to bring out the best from others.” He added: “Only amateurs indulge in mood swings and show their despair.”
Those around him attribute much of Reichmann’s equanimity to a lifelong practice of his Orthodox religious faith. Indeed, he once remarked in an interview that, as a young man, he had aspired to become a learned Talmudic scholar. And, said his fellow director, “if you read Ecclesiastes or the Psalms, you quickly come to the conclusion that a real estate debacle is small potatoes in terms of the big picture. It’s a disappointment or a setback, but it doesn’t affect who you are or what you believe.”
Orthodox Jewish tradition also emphasizes the importance of strong family ties. Those have also helped minimize the trauma to Paul Reichmann from his empire’s collapse. Said an O&Y adviser, also on condition of anonymity: “In many cases
where money and power are amassed in one generation, there is an alienation from roots and family. The Reichmanns are just the opposite: they are all involved in business together and they are entirely supportive.” Indeed, although Paul has emerged as the dominant one of the three brothers, all of them are involved in managing parts of the O&Y empire, as are three of their sons.
There is, however, a limit to how far the Reichmanns’ religious faith penetrates their business affairs. Said one creditor: “They may wear yarmulkes, but between nine and five o’clock on most days, the Reichmanns are the same as any other businessmen. They have the same shortcomings and the same vulnerability as all of us.” He added: “They got wrapped up in building an empire for themselves and they just went too far. End of story.”
Indeed, the family’s rigidly Orthodox code of behavior may have contributed to what creditors have criticized as O&Y’s slowness to acknowledge the extent of its difficulties. The Talmud elevates the role of the patriarch as a wise and spiritual male leader who is seldom challenged or required to explain his decisions. Counsellors, especially those from outside the family, assume a subordinate role which, in business, may diminish the value of their contributions. Directors of the Reichmanns’ public companies describe how Paul Reichmann listens to the opinions of others, nodding his head but offering little comment and limited opportunity for discussion. Conceded one director: “In the end, it’s all up to the patriarch. It’s not exactly a textbook way to make big corporate decisions.”
But many of O&Y’s biggest decisions no longer rest with either Paul Reichmann or his brothers. Indeed, so completely have the doors of the Reichmanns’ corporate sanctuary been thrown open that O&Y managers have established what they call a “data room” at the company’s Toronto headquarters, where creditors can locate and use any financial documents they need to establish their claims against O&Y’s assets. In an equally radical departure, O&Y spokesmen now offer to assist reporters in obtaining bankruptcy court filings and related documents. O&Y is also encouraging its legal counsel to explain and interpret the legal issues for the media.
Still, those accommodations were confined to the business week. As darkness fell last Friday, the Reichmanns undoubtedly once again set aside the worldly struggle to preserve some share in their former commercial empire and, in the company of their families, sought comfort from a faith more enduring than even the longest-lasting material fortunes.
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