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Of course, this reaction might be interpreted as the indignation of a billionaire who found himself standing before a jury composed of citizens who could be construed as his peers only under the broadest Jeffersonian construction of the democratic ideal. But there he was spending his nights on a cheap mattress under a synthetic bedspread at a Marriott Residence Inn in the company of his legal team (“I can’t sleep,” he complained to me) while his business languished and his adopted children waited with the hired help in the company of Vijay Singh, who was bunking at Forstmann’s Southampton home while he prepared for the U.S. Open. But more than that, more than the discomfort and the inconvenience and the injured pride, was the wounded bewilderment of a moral absolutist and a devout Catholic who believed that he had walked almost alone along the path of righteousness, only to find himself inexplicably accused by craven and self-seeking political hacks.

Forstmann’s defense was handled by Fred Bartlit, a former Army Ranger who represented President Bush in the Florida-recount battle—a fact that seems to underline the political dimensions of the case. Bartlit, 71, is an imposing, athletic Reaganesque figure who, even when seated, towered over most of the observers in a thronelike ergonomic chair he’d had sent ahead from his Chicago office. His air of midwestern rectitude is softened by a courtly manner and a folksy vocabulary, and he sounded truly contrite when apologizing to opposing counsel for blocking their view.

Forstmann Little reported to its limited partners that it was budgeting $20 million for the case, which named not only the firm but Forstmann himself, along with his partners Thomas Lister, Sandra Horbach, and Erskine Bowles, President Clinton’s former chief of staff, who joined the firm in 1999, to the surprise of many who knew Forstmann as an activist Republican. Much was made of the fact that when the suit was first announced by Nappier, Bowles’s name was omitted, particularly since Bowles, who was involved in the drafting of the Telecommunications Act of 1996, was hired to help the firm with the very kinds of telecom investments at the heart of the suit. (One Forstmann Little insider told me that Bowles insisted the firm was “missing chances to score goals” if they ignored the industry.) Bowles’s name was quietly added to the suit, although he has since left the firm.

The trial, with all its technical longueurs, was enlivened by the style and personality clashes of Bartlit and Connecticut lead counsel Gerald J. Fields, who seemed at times to genuinely dislike each other. The elegant welterweight Fields has an urbane manner that frequently turns sarcastic. He fires off objections almost before a witness has opened his mouth. Counterbalancing his fighting-cock mien, playing the good cop, was co-counsel Charles Lee, a former captain of the debating team at Andover, who grew up in Forstmann’s hometown of Greenwich.

“I usually represent big corporations,” one of the plaintiff’s lawyers told me as we walked to the Pizza Palace, “and it kind of feels good to be representing the people, the average citizens who lost their pension money.” This populist view of the case was the one that scared the defense, who argued in front of a six-person jury composed of carpenters and housewives at a moment in history when anyone associated with high finance was laboring under a presumption of guilt. Though the case was supposed to be decided on its merits, inevitably the decision must also have been influenced by the jury’s opinion of Forstmann, who has had a hard enough time charming his fellow members at Shinnecock.

More than the injured pride was the wounded bewilderment of a moral absolutist.

Anyone seeking to impugn the motives behind the state’s case points out that Nappier, who in the end was never called to testify, came into office in 1999 on a platform of reform. Her immediate predecessor, Paul Silvester, whose brief tenure was clouded by scandal, eventually went to jail on racketeering charges. The attorney general, reelected on the same ticket as Nappier, was Blumenthal, a Kennedy friend from Greenwich. Although neither was responsible for hiring Forstmann Little, the telecom investments were made during Nappier’s tenure, and, the defense argued, with her acquiescence and approval. Hartford political watchers suggest that the massive losses to the pension fund, which were announced in 2001 and 2002, might have presented a political embarrassment, while suing the firm could only be a popular move in the post-Enron environment.

To the untutored eye, it certainly looks as if Forstmann departed from his usual strategy of securing a controlling interest in established companies like Gulfstream and General Instruments, and of taking over the management of those companies. (For several years, he served as the CEO of Gulfstream, which eventually netted his partnerships a $3 billion profit.) XO and McLeod had fractional market shares of an industry that in 1999 included hundreds of aspiring players. Forstmann’s prospectus, the Prospective Partnership Memorandum, which serves as a kind of brochure for potential investors, specifically lists four necessary components in target companies, including dominant market position and significant barriers to entry.

Central to the state’s case was the notion that Forstmann Little was a buyout firm that took control of target companies by buying up outstanding securities, whereas the XO and McLeod investments were minority investments that initially represented an 8 percent and a 12 percent stake respectively—far from the kind of majority position that would give them control of the company. Much of the defense strategy was taken up with the strange exercise of proving a counterfactual: that XO and McLeod were promising and sound investments that fulfilled the conditions set forth in the various agreements and were only wiped out as a result what Forstmann called a “perfect storm” of coinciding and unforeseeable disasters—a kind of force majeure argument. In this perfect-storm scenario, the general economy began to slow in early 2000; the dot-com sector, which was to provide so much of the business for the telecoms, foundered; then, just at the wrong moment, 9/11 threw a pall over the capital markets.

The perfect-storm concept could also plausibly be applied to Forstmann’s personal life and to the internal workings of his firm during the crucial year of 1999, as he contemplated the approach of his 60th birthday. He was despondent over the end of his seven-year relationship with Deborah Hagerty. Founding partner Brian Little died of a heart attack while jogging in Central Park. And, after serving as CEO of Gulfstream for several years, which he has called the best experience of his life, Forstmann found himself at loose ends after selling the company. Longtime partner Steve Klinsky left to start his own fund. Meanwhile, the business that Forstmann and the other aging cowboys pioneered had become increasingly institutionalized. Literally hundreds of firms had sprung up, seeking capital from the same huge institutional pension funds while scanning the balance sheets of the same potential target companies. Though some of his competitors had hundreds of employees, Forstmann was running a tiny boutique with three or four partners, including Nicky. He began to think about expansion, even as he contemplated the unthinkable—his eventual retirement. He hired Nicky’s friend Erskine Bowles, who had just left the Clinton White House, to explore new areas of investment, including telecom. And the notorious control freak sought to devolve some of his responsibilities to his brother and to longtime partners Horbach and Lister.


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