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Target: Spitzer

In his heavily favored bid to be governor, New York’s attorney general now confronts a major obstacle — an extremely angry billionaire bent on revenge.

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Ken Langone is one of the most powerful and well-connected men on Wall Street and among the richest people in America, but you wouldn’t know it from the look of his office. Sure, it’s on Park Avenue, with a fine corner view for him, but the décor is otherwise nondescript, a series of glass-enclosed rooms with nary a Twombly in sight. He’s head of a small investment firm, but he spends most of his time raising money for various charities. His assistant, Pam Goldman, sits near him, and they shout back and forth at each other like they’re in a trading pit.

Lately, the 70-year-old Langone has been doing a lot of shouting. Since the fall of 2003, when he left the board of the New York Stock Exchange in the midst of the Dick Grasso pay controversy, he’s been under siege from Eliot Spitzer, the state attorney general and gubernatorial front-runner, who has made corporate prosecution a cause célèbre and contends that Langone secretly helped his friend Grasso to a lot more money than he deserved.

The usual course of action for a man in Langone’s circumstances is to lie low and let his high-priced lawyers do their job. If he really wanted the case to disappear fast, he could probably settle for far less than the $18 million Spitzer is seeking. The money itself would make an imperceptible dent in his net worth, and what’s a couple days of bad press for a man who owns several homes? He could just get out of town. But that would not be Langone’s style. Gesticulating with his big hands, he looks at me and says pointedly, “One way or another, Spitzer is going to pay for what he’s done to me and the havoc he’s caused in the New York business climate.”

A lot of people say things like that when they’re angry, but most of them are not billionaires. Spitzer’s charges struck a moral chord in Langone. He did not review his actions, search his soul, or try to sort out what he could have done differently to avoid this fate. He believes instinctively, fervently, that he did nothing wrong in rewarding Grasso so lavishly, and it makes him spitting mad to be singled out by Spitzer as another white-collar swindler. So rather than merely defend himself against Spitzer’s civil charges, Langone is launching a counteroffensive that could cost tens of millions. His plan, he says, is “to make sure everyone knows that Eliot Spitzer isn’t fit to be governor of New York State or any other office, for that matter.”

Raised on Long Island, the son of a plumber, Langone arrived on Wall Street in 1962, just in time to ride one of the longest bull markets in modern history. By the end of the decade, the investment banker had amassed a small fortune, much of it for taking Ross Perot’s EDS public.

Like many in the business, though, Langone got smacked around by the seventies bear market. EDS’s stock tanked, and along with it went much of Langone’s wealth. Fortunately, he had enough left over that when his friends Bernie Marcus and Arthur Blank proposed starting a nationwide chain of hardware stores in the late seventies, he could pull together $100,000 to invest in the long-shot venture. That company was called the Home Depot, and after a rocky start, Langone’s investment ballooned into a sum big enough to win him a spot on the Forbes 400. In its 2005 edition, the magazine estimates his net worth at $1.1 billion. “I don’t really know and I don’t care what I’m worth,” he says. “I learned playing poker that you never count your winnings, because that’s when you start to lose.” He and his wife of 49 years live in Sands Point, on Long Island, where she recently threw him an extravagant party for his 70th birthday. Among the 300 guests were Mayor Bloomberg, Perot, hedge-fund wiz Stanley Druckenmiller, and Morgan Stanley chief John Mack.

Langone’s current troubles can be traced to December 2002. Back then, Grasso was still regarded as a hero, the guy who reopened the stock exchange just days after 9/11. In fact, Grasso and Spitzer were allies. Grasso helped the attorney general line up Wall Street executives and get them to sign off on the $1.4 billion settlement over the research-analyst inquiry, one of Spitzer’s first and greatest political achievements.

But Wall Street was not exactly thrilled to be bowing down to Spitzer, and some were resentful of Grasso’s playing the white knight. Whispers circulated about his outsize compensation package. In 2002, he cleared $12 million; the year before that, $30 million. He deferred much of the money into a retirement fund that had swelled to about $140 million. As head of the compensation committee of the NYSE board, Langone was among the key people who approved Grasso’s pay.


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