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Throughout the year, he was heavily involved in promoting the Children’s Scholarship Fund, which he had started the previous year. The firm was sitting on billions in two new funds from institutional investors but hadn’t made a big deal in almost three years. This, according to Forstmann Little observers and insiders, was the background of the big plays in XO and McLeod. Forstmann still believes that McLeod, which he has now jumped in to manage, will eventually show a profit for his investors, including Connecticut. (In the meantime, the third investment made with the funds, a chain of radio stations called Citadel Broadcasting, has already proved highly profitable.) But while cynics suggest the telecom investments were acts of reckless hubris, I can’t help thinking that Forstmann wasn’t as fully and obsessively focused on the details as he might have been during this period, that his judgment might easily have been clouded by a sort of situational depression, particularly after Nicky walked into his office one January morning in 2000 to say he had cancer.

As the telecom sector began to melt down, Nicky’s illness, which the family kept secret from even close friends until that fall, preoccupied his brother, who became intimately involved with Nicky’s medical problems. In February 2001, after Nicky’s doctor told the family that they had exhausted all options, the devoutly Catholic Teddy flew his brother to Lourdes in his Gulfstream V, seeking divine intervention. Over the Atlantic, the brothers drank a bottle of 1961 Mouton Rothschild. Nicky took the waters. A few days later, his funeral filled St. Patrick’s cathedral with 3,000 mourners. In March, a memo from partner Thomas Lister about the dire condition of XO seems to have rudely curtailed Teddy’s mourning.

In his folksy closing statement, Bartlit dropped the perfect-storm argument and focused primarily on the events of September 11 as a way of explaining the XO meltdown, perhaps because the other calamitous economic trends were already well under way when a third investment of $250 million, including $6 million of Forstmann’s own, was made. “Nine-eleven is the only thing that happened,” he said. “And if 9/11 caused this,” he counseled the jury, “then there are no damages.” In his rebuttal, Fields, a New Yorker, expressed outrage. “Shame on him for raising the specter of the horrific events of 9/11,” he thundered. Shame, indeed. Fields cited a paragraph of a December 2001 letter Forstmann sent to investors that Fields said made no mention of 9/11. At this point, Bartlit leaped to his feet, red-faced, to insist that a previous paragraph had indeed mentioned the tragedy as a factor in the demise of XO. Having concluded his own closing, however, he was not permitted to read it to the court.

“Can you believe this?” he muttered. “It’s like being in a Kafka novel.”

After the judge finished instructing the jury, Forstmann was still seething about Fields’s remarks. (The charge of 9/11 insensitivity must have been particularly upsetting; Forstmann’s close friend and former employee Karen Hagerty, Debbie’s sister, whose framed picture sits on his desk, was killed in the Twin Towers.) At the door to the courthouse, Fields greeted Stephen Fraidin, Forstmann’s personal lawyer, who had driven up from New York to hear the closing arguments. Fields shook hands with Fraidin, his old Yale classmate. “Better wash your hand,” Forstmann advised Fraidin, glaring at Fields. After a month of controlling his temper, he was losing it. “Do you even have any conception of the difference between truth and falsehood?” he asked Fields, who ignored him. As the two groups continued to make their way toward the door, Fields directed some parting words at Fraidin. Forstmann turned back to look at Fields, who was walking behind him. “Are you talking to me?” he asked, sounding like De Niro in Taxi Driver. “Because if you want to talk to me, we can take it outside.”

After such closing-day theatrics, the verdict itself, which came down 48 hours after Forstmann had decamped for Manhattan in a pearl-gray Town Car, was something of an anticlimax. The jury found against Forstmann Little on all counts—two counts of breach of contract and one count of breach of fiduciary duty—and also concluded that the firm had acted with bad faith, willful misconduct, and gross negligence. But the jury awarded no monetary damages, finding that the state had acquiesced to, and ratified, the investments in question, and that Forstmann had made them under advice of counsel. It was a strangely mixed and even contradictory verdict—if Forstmann acted on advice of counsel, then it’s hard to see how the company could be guilty of willful misconduct. Quite possibly it represented a compromise among jurors who wanted to get home for the long weekend.

“Everybody lost,” Connecticut counsel Lee told me a few minutes after the verdict. “The treasurer did establish that fund managers are not above the law,” he continued, claiming a moral victory for his side. “There will be more of these suits.”

In a typically robust press release issued after the verdict, Forstmann called the decision “a complete victory.” Given the series of losses, financial and personal, that he has suffered in the past few years, he may indeed choose to count this as a win, although for a man so deeply conscious of his honor, so thoroughly convinced of his own decency and rectitude, phrases like “willful misconduct” and “gross negligence” must be particularly galling. I can’t help wondering if he wouldn’t have preferred to have been cleared of all charges and just pony up the $120 mil—an outcome not much less absurd than the actual one.

The damage was already done before the verdict. At the end of the trial, just before his confrontation with Fields, I asked Teddy if the suit was the worst thing that had ever happened to him. He considered this with a sad expression. “No,” he said, finally. “Nicky’s death was the worst. I’m just glad he’s not around to see this.”


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