A Mayor and His Money

The setting was the Pierre, and the crowd a freshly moneyed one. Swaggering bond guys, high-end Hamptons contractors, doctors and lawyers filled the third annual Kite Dance recently. Bronzed men wore big white smiles as their taut wives clung close, platinum jewelry winking in the night. Donald Trump, a member of the board for the Child Development Center of the Hamptons (the benefit’s reason for being), was on hand to bestow Michael Bloomberg with its Reach for the Stars Award. The mayor arrived punctually and stag, dressed in his familiar dark suit. The hint of an amused smile played around his thin lips as he took in the fawning swirl.

This wasn’t the Brooke Astor crowd. Those gathered under the Pierre’s glittering chandelier were the mayor’s own people, a generous swell of the city’s self-made. And who was the most self-made of them all? Why, the mayor himself, of course. In a little over twenty years, he’d spun a $10 million Wall Street severance payment into a $5 billion fortune. That’s all that Trump and the crowd needed to know. To a vociferous roar, the mayor accepted his abstract Tiffany-glass trophy. “You know, Donald and I have a lot in common. I’ve got Bloomberg TV; he’s got Trump Tower,” he said. “And I’m all for corporate sponsorship, but even I said it was too much when he suggested that Central Park should have a Donald Trump Lawn!”

The audience, familiar with the desire to slap a name on a hospital wing, chuckled appreciatively. But those hoping for a private audience – however brief – with the new mayor were disappointed; he didn’t linger. Trump, however, accompanied by his girlfriend, Melania Knauss, managed to corral him. “You’re the key, Mike, the key!” cried Trump.

“Let’s get together soon for dinner,” said Bloomberg.

“Mike, we would love it,” grinned Trump, towering above him.

Stopping only to shake the quickest of hands, he headed for the exit.

The mayor has taken some pains to tie an old-money ribbon around the shiny gift of his newly earned wealth. Witness the Paul Stuart suits, the Bermuda weekends, the tasteful brownstone on the Upper East Side, the horses in Westchester, and the enthusiastic cultivation of his younger daughter’s riding career. His most old-money move is to insist that one thing a real gentleman does not do is talk about the details of his stupendous wealth. But every now and then he slips, and one gets a refreshing glimpse of the real Bloomberg, who, despite his better nature, is not above a little flaunting. When questioned last year about why it took him longer than the other candidates to release his tax returns, he was blunt. “They don’t make anything,” he was quoted as saying in the New York Times.

Exactly how much Bloomberg does make a year is treated as a matter of national security by his team. But a close reading of his 2000 financial disclosure reveals two primary sources of Bloomberg’s cash: his 72 percent stake in Bloomberg LP and his substantial interest and dividend income. Analysts estimate that Bloomberg LP, a private company, had revenue of around $2.4 billion. Assuming a pretax profit margin of around 18 percent, a number Bloomberg has generally corroborated in the past, pretax profits should be around $430 million. Bloomberg’s share: $300 million. There is, however, a partnership agreement at Bloomberg that requires each partner to funnel 40 percent right back into the company. So 60 percent of $300 million comes out to around $180 million. Subtract taxes. Add back interest and dividend income (most of which comes from his large municipal-bond holdings), and you arrive at $125 million – at the very least – in after-tax cash!

It’s an enormous number, and one that leaves Bloomberg’s own set a bit cowed. “Mike is held somewhere between high regard and awe on the Street because of his accomplishments,” says buyout star Steve Rattner. Even after the countless gadgets, houses around the world, and millions given to charity each year, there’s still a lot leftover.

Which raises the next question: Who manages this ever-accumulating stash?

Since money defines the mayor, it’s not surprising, perhaps, that the guardians of his fortune are much like the mayor himself: self-made millionaires who stepped off the conventional Wall Street escalator to get filthy rich on the strength of their own names. Take Morris Offit. On the mayor’s financial-disclosure form, Offitbank, a New York–based trust bank catering to high-net-worth individuals, appears as one of several institutions paying interest and dividends to Bloomberg in the year 2000. Offit, 65, is one of Bloomberg’s closest business friends. They were both partners at Salomon Brothers in the seventies and made millions for themselves on the sales desk there before moving on. Bloomberg, with his famous severance package, started Bloomberg LP in 1981; two years later, Offit started Offit Associates, a wealth-management concern, which in 1990 was converted into a trust bank. In 1999, he sold the bank for $200 million to Wachovia Corporation, the holding company of the North Carolina–based Wachovia Bank. Like Bloomberg a graduate of Johns Hopkins University, he chaired the board there and was instrumental in getting Bloomberg interested in donating to the institution. Since then, the mayor has given Hopkins more than $100 million. Which explains, of course, the Johns Hopkins Bloomberg School of Public Health.

Offitbank has a decent enough reputation but lacks, perhaps, the cachet of a JP Morgan or a Bessemer Trust. Which is fine by Bloomberg. Offit is a pal. With its heavy bond specialization (Offitbank manages about $11 billion), Offitbank has been the steward for Bloomberg’s fixed-income holdings. Presiding over his equity portfolio is Scott Black, who runs Boston-based Delphi Management and knows the mayor through Johns Hopkins – he endowed an economics chair at the university – but who is better-known as an iconoclastic value-based stock picker. Black manages some $1.5 billion for institutions, pension funds, and endowments, and has a sterling record – 19 percent a year since Delphi’s 1980 inception. Loud and brash, Black does no marketing, nor does he cater to high-net-worth individuals (Bloomberg is obviously an exception), though he’s become a celebrity of sorts to the CNBC crowd. He is constantly talking up his portfolio of stocks – a good number of which appear on the mayor’s disclosure form of stocks sold in 2000 – which range from the well-known Washington Post Company and Polo Ralph Lauren to the obscure; a great majority are small-cap companies like Kulicke & Soffa Industries and Teledyne Technologies.

Outside of the superior performance numbers Black has posted, it’s easy to see why Bloomberg inclines toward him. The 55-year-old Black has a middle-class upbringing. His father was a grocer in Portland, Maine, while the mayor’s was a bookkeeper for a local dairy company in Medford, Massachusetts. After Hopkins, both took on some gloss at Harvard Business School and did their service on Wall Street. (Black was a corporate-finance executive at Merrill Lynch before going into business for himself.) Indeed, one defining characteristic of Bloomberg’s investment portfolio is the virtual absence of any speculative fare. Among the 47 stocks that he sold in 2000, hardly any were high-flying Internet or telecom stocks. When you remember that he holds at least $40 million in municipal bonds, the mayor comes off as the most conservative of investors.

That’s no surprise. Guys with $5 billion and counting don’t need to take punts on Yahoo and Priceline. “Michael took $10 million and turned it into $5 billion. You can’t do that trading stocks,” says Michael Holland, a New York money manager and former Salomon Brothers managing director. “He took wealth creation on Wall Street to an entirely new level. You will never hear anyone on the Street say, ‘That S.O.B. Bloomberg is lucky.’ It’s an enormous badge of respect that he wears.”

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A Mayor and His Money