Meet Mr. Fixit
Big fees and campaign gifts dog a bankruptcy guru
Cooper's firm has earned more than $3 million in fees and expenses for its Polaroid work, and it is still billing. Cooper says the Polaroid outcome was a success. "We helped save a company that currently employs 3,500 worldwide when the prospect of liquidation was very real," he says. "Secured lenders recovered nearly all of their principal." Not everyone is happy, though: Three days before the bankruptcy filing in October 2001, the company eliminated life and health insurance benefits for more than 12,000 retirees. They had hoped to recover their benefits in bankruptcy court; the sale dashed those hopes. "Cooper may consider this a success," says Steve Morgan, a Polaroid shareholder. "Obviously, we see it differently." He opposes Cooper's continued employment.
Controversy. The Enron bankruptcy, the most complex in history, has been even more difficult. Cooper's appointment as interim CEO has been controversial from the start. Both the SEC and a group of institutional investors objected to his initial employment contract that would have paid him a multimillion-dollar bonus and allowed him to bring on more staff without court approval.
Bankruptcy records show that objections about his ties to secured creditors also were raised. Eight investors in Cooper's Catalyst Equity Partners fund, including J. P. Morgan Chase and Citibank, are also secured creditors in the Enron case. Those creditors "were tremendously exposed in the Enron case," says Andrew Entwistle, attorney for an institutional shareholder in the Enron case. "They wanted to bring in someone who was going to be friendly to them."
After the objections were raised, bankruptcy judge Arthur J. Gonzalez required Cooper to recuse himself from any Enron-related litigation involving the eight Catalyst investors. He allowed him to remain as CEO. Meanwhile, Cooper also revised his contract to satisfy critics, eliminating his success fee and agreeing to work full time for his $1.3 million salary, among other things. Cooper plans to give the court a plan to reorganize Enron by summer.
As a turnaround boss, Cooper is following a well-trod path to riches. At the conclusion of the Drexel Burnham Lambert bankruptcy case, Judge Francis Conrad said: "Whenever we have dealt with investment bankers and financial advisers, we have been left with the strong impression that for them the debtor is the cash cow to be milked." In the 16 months since Enron's collapse, more than $360 million has been paid to lawyers, accountants, investment bankers, and others. Cooper recently added 15 employees from his firm to the Enron account, at a cost of $864,000 each per year.
Conflict of interest?
Turnaround artists work side by side with--and across the table from--major banks. Stephen Cooper runs a venture capital firm, Catalyst Equity Partners, that counts Enron's creditors among its investors. Cooper also serves as Enron's interim chief executive officer.
Kroll Zolfo Cooper
Stephen Cooper, chairman
Catalyst Equity Partners
A venture fund run by Cooper, and an affiliate of Kroll Zolfo Cooper
Enron pays Kroll Zolfo Cooper about $20 million a year.
Enron
Stephen Cooper, interim chief executive
Banks invest in venture fund managed by Cooper.
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