Hall of Fame - Jack Curtis

Interviewer: Was Jack in the movement from the beginning? Where did he come in?

Greg Brown: I would say he came in to the mid to late 1970s when he was the Senate Finance Committee council working for Senator Long, who was then in touch with Louis Kelso.

Interviewer: Okay. So I assume then that he was pretty heavily involved in ERISA in ‘74 and then the fight to preserve it in ‘77.

Greg Brown: Yes. As well as the 1978 Revenue Act, which included section 409 of the code, which still has many of the ESOP provisions.

Interviewer: Right. How long was he with Senator long?

Greg Brown: I think two, maybe three years working up on the hill. And then he went back out to the West Coast and he was working together with Ron Ludwig.

Ken Serwinski: Yeah. If I recall too, Greg, didn't he go to law school at University of Virginia?

Greg Brown: Yes, he did.

Ken Serwinski: That’s how he got to D.C.

Interviewer: Did he share any stories of his time on the hill that you guys can relate to us?

Greg Brown: Yeah, he said they went through round, and round, and round of drafts, trying to get everything right. There was an investment-based tax credit ESOP, and trying to preserve that, as well as get these statutory provisions and to get them to work, to conform to practice, that took a lot of work. And then not that long after all that got done, a non-ESOP bill came up that was very controversial, and that was the 1980 Multiemployer Pension Act, which he had to review and explain to Senator Long. In exchange for some enhancements to ESOP provisions, Senator Long agreed to vote for that bill, even though many of his constituents were not happy with the Multiemployer Act Amendment. We don't need to go into that, but yeah, that's as much as I know. Ken?

Ken Serwinski: See, I don't really pick up with Jack until almost 1988. So I hear a lot of the stories and, I think what Greg had suggested is then he made his way back out to the West Coast and joined up with Ron Ludwig. And quite frankly – I don't know what you think, Greg – but the combination of Ron and Jack was a very powerful combination. They were two very, very smart people, very smart people. Ron liked to challenge you, whereas Jack was much more congenial. Did I put that the right way, Greg?

Greg Brown: Yeah, Jack was the marketer. Ron was the indoor technician and Jack was the marketer. Yeah, he was out with the referral sources and clients, and Ron was working with people back in the office to take care of things.

Interviewer: So, I guess that leads into my next question. How did specialization affect his career over the years?

Greg Brown: I think it helped him, it helped him with all the marketing efforts. He and Ron were complimentary. He needed someone like Ron, who was a technician, and Ron, as a technician, needed somebody who was out there relating to the referral sources and clients on a daily basis.

Interviewer: Our next question, when we think about his accomplishments over the years, what would he say are his favorite ones or proudest moments?

Greg Brown: I think he was very proud of his service to the Senate Finance Committee and his contributions there. And that he and Ron were the first real boutique ESOP firm. No one else had done that before. You know, there were boutique investment banks, particularly Kelso and Company, but for a law firm to be specialized in ESOPs, that was unheard of at the time. ESOPs might be done at mid to large size firms, but it would be part of the employee benefits group, or tax group, or corporate group, but it would not be a standalone law firm like they had.

Ken Serwinski: You could find a lot of ERISA attorneys, but you can't find a whole lot of people that specialize in ESOPs. Even today, some of the larger law firms that you would think would have good knowledge of it, do not. And so even today ESOPs still tend to be, and I hate to use the term boutique, but they're almost a unique set of skills with – and I'm not an attorney, so I could say this, and Greg can’t – but I think it's a unique set of skills that help people understand nuances when it comes to installation or termination. The success that everybody had in the mid-eighties was the ability to do the 1042 tax deferred transactions. So, if you were going to start a boutique firm in ESOPs, 1986 through 1998 really where a time where ESOPs really started to begin to get the recognition. Not thrive yet, but certainly in ‘86 through the mid ‘90s people were very aware of the 1042 characteristics, because you could only do ESOPs with C corporations, and everyone was pushing to try to get ESOPs, at least to a 30% ownership level, in order to get that tax deferral.

Greg Brown: I would agree with that.

Interviewer: So if the boutique ESOP law firm really hadn't been tried before, what made Ron and Jack decide this was a good idea?

Greg Brown: I think that they had the connection to Kelso, they had a number of solid referral sources, so I think they were able to project out that they could make it and make a good living at it.

Ken Serwinski: Yeah, and I think Kelso’s investment banking firm really had been a group that really sort of kicked this off, right? Followed by a number of others on the West Coast that were doing more investment banking and plan administration. So you had Kelso's investment bank, and then you had some others out there – and I'm just thinking off the top of my head, Greg – the old Benefit Capital was all the way back to the early ‘80s with Smiley, and Acheson, and a number of others.

Greg Brown: Right, right.

Ken Serwinski: So that was really the West Coast, Jason. So the interesting thing is, I'm sure that Ludwig and Curtis got a lot of work heading east, but they were just so busy taking care of all the deals that were being generated on the West Coast, I think they were definitely the dominant firm.

Greg Brown: Yeah, they clearly were.

Interviewer: So most of their business was centered in the West Coast then?

Ken Serwinski: Initially.

Greg Brown: Initially, but they had a national practice. They were doing deals in Cleveland, and they were doing deals in Chicago. Jerry Kaplan and I got together in 1984 and we were bank council, lender council, on a number of deals, and Chicago lenders quickly jumped on this opportunity, and oftentimes Ron and/or Jack would be representing the company, or the selling shareholders, or in some cases the trustee or trustees of the deal. So, we got a quick exposure to them.

Interviewer: All right. Do you have any stories that exemplify his skill as an advisor?

Greg Brown: Go ahead if you have something, I'm thinking about this.

Ken Serwinski: While he's thinking, let me tell you why and how we got together. So, Greg's been doing this a few years longer than I have. Not many more, but a few years longer. And I got to meet Jack in either ‘88 or ‘89, I think it was ‘88. It was when Merrill Lynch bought a company that I was with, and one of the people that worked for me started to develop more ESOP work. I had done my first ESOP valuation in 1984, but I didn't know what the hell I was doing, so I really don't count that until about 1988 when we started putting together a plan. When I was at Merrill Lynch, I spent a lot of my time on the West Coast. I started heading out there and I met a few people at a workshop, and one of the two or three people that I met was Jack. Jack understood what Merrill wanted to do on a nationwide basis and that I was probably a good contact, but he wanted me to understand not only good things, but the bad things about ESOPs. And even though he was a good salesperson, I would tell you that technically he was very, very competent. He took me under his wing almost to an excessive amount because he never sent me a bill, and taught me an awful lot about ESOPs along with and another guy named Dick Acheson. So, ironically, about a third of my education, maybe even 40-45% of my education on ESOP came from the West Coast, and I'm comfortably sitting in Chicago, and it was these two guys that taught me an awful lot.

And you asked about stories, I remember one very distinctly. Sitting in a country club down in West Covina, in Southern California, and Jack had flown down from San Francisco and he had met somebody who might be interested in an ESOP. It was an odd company, because this guy we were talking to ran a road building construction company in Southern California and also owned a vineyard up in Mendocino County. So, it was two family businesses that had nothing to do with one another. He wanted to put a 30% ESOP inside the construction company so he could take the money out and put it into the vineyard. It was such a unique situation, and it was not unusual. For some reason, Jack would come across a number of complex deals, not simple deals. So I was fortunate enough to be able to see what he was able to do and how to construct those deals. But more importantly – and this goes back to Greg's comment about a marketer and a salesperson – He was very, very persistent. And so was I, so we partnered up pretty well because he couldn't move a deal forward without understanding the valuation, and I couldn't move the deal forward because I was sitting in Chicago. I could do what I could, but it all depended on both of us being fairly aggressive. He was very good about wanting to spread the gospel of ESOPs and making sure you did at least a 30% deal to take advantage of the tax deferral. So that's how I got started with Jack, just from a background standpoint, much different than Greg's. And of course the other half of my education came from a number of Chicago-based ESOP attorneys, including this guy on the phone here. I remember one deal that we did together, Greg, where I think we closed the transaction at two or three in the morning.

Greg Brown: Oh yeah, there were a few of those.

Ken Serwinski: You know, the old days. Today you would never do that. First, I think we've gotten too old to do that, I don't think we could stay up that late, but you know, back in the day, in the ‘80s and early ‘90s, you did that. And a lot of people did that, because ESOPs were still so new to so many bankers, and really to some attorneys, that it was a challenge to get things done. So smart attorneys like Jack, like Greg, they could get things done all you had to do was sit and listen, and learn a lot. And that's exactly what I did to get into the ESOP world.

Greg Brown: You know, one of my earliest remembrances of Jack was at the 1984 National Center for Employee Ownership meetings in Washington, D.C., which were held up in classrooms at American University. Jack was doing an ESOP presentation, and there was a person in the audience who was a union lawyer, and he started attacking Jack personally and saying that ESOPs weren't really a good deal for union employees and on, and on, and on. And they said, “well, look at this deal you did, the union wasn't part of this deal.” And Jack said, “well, that's correct. We could not extend, by law, the ESOP to the union without their consent. We tried to bargain with them and they didn't want in. we would've welcomed them in because it would've made the ESOP a little more feasible.” And then he went through this litany of why they could be a good deal. And they said, “well, shouldn't the union employees have a person on the board?” He said, “that's possible. Maybe that's what you negotiate. But, in that deal, the non-union people did not have a person on the board, so why should the union people have a specific person on the board representing them?” And he just went through it very calmly. And I remember going up to him and said, “wow, I don't know where that personalized attack came, but you handled that really well.” And after that, we were colleagues. He was very good – and I'm not going to name any names – about telling me which trustees on ESOPs were worth dealing with, and who knew what they were doing, and who didn't. Same way with lenders, with appraisers, and other attorneys. And as I discovered, he was right. And that was very valuable advice for me, because I was learning the legal substance and I didn't have a problem with that, but I was still trying to get into the landscape and realize where I needed to be wary and where I didn't. So that was very valuable.

Interviewer: Had either of you had any conversations with him about what advice he'd give to young or new advisors?

Ken Serwinski: Oh, I would say. I was a young advisor back then, so going back 30 plus years; it kind of mirrors what Greg said. He taught you what to do, but the biggest takeaway is he taught what not to do. Right? Everybody wanted to know what to do and how to do a deal. And I was working at Merrill Lynch, and one of the issues that I always had in trying to push them forward was they were very much into risk management. So I would also have to tell them how they might be at risk for putting an ESOP together if they don't follow certain things, so telling me what not to do was critical. This is a good Jack story. I laugh at this because Merrill Lynch had started up a trust company and had large 401(k)s that they were the trustee. Legal counsel for the trust company called me and said, “Hey, by the way, I thought I'd let you know” – I was running the ESOP practice at that point – “Hey, I thought I'd let you know that we're going acting as trustee for three or four ESOPs.” And I said, “Why? Why would you do that?” “Well, what do you mean?” They completely didn't understand the risk associated with an ESOP. They thought it was completely simple, like it would be a 401(k) or a profit sharing plan. I said, “okay, let's put a conference call together.” And I said, “get all the people that are appropriate, I'll get mine.” So I call Jack, and I said, “Jack, Merrill Lynch wants to be trustees for ESOPs.” He goes, “why the hell would they wanna do that?” I go, “exactly.” So he helped me put together a very brief presentation of about six bullet points as to why you wouldn't want to do that. After the call, which had about four people from Merrill on it, after the call, about two weeks later, I got a phone call from the guy who had called me originally saying, “yeah, we've decided not to be a trustee.” They thought that – and this is funny, Greg – they thought that being a discretionary trustee was not where they wanted to be, they were going to be directed, and they thought being directed alleviated any responsibility for being at risk. Jack was very helpful. I think that was probably one of the quickest businesses that Merrill was in to and out of, in several months. They took on some ESOP Trust work, thought they were going to be safe from a risk standpoint, learned it was full of risk and got out of it just as quickly.

Greg Brown: That's a good story. You know, one of the things that I saw with Jack is that, back in the mid ‘80s the deals were done with very, very short form documentation. The stock purchase agreement might be 10 pages or less, the loan documentation was a little on the light side, you know, barely had the provisions that ERISA required and people weren't doing that much due diligence before the trustee would agree to buy, and the reps and warranties were really pretty light. And, you know, one of the things that we agreed to with Jack was, we've gotta up the performance here.


Interviewer: We talked a little bit about Kelso. Other than him, who were Jack's influences?

Ken Serwinski: Greg, you can expand on that because you were personally involved with both of them. From the outside looking in, Jack ends up leaving Ron Ludwig and going to Keck, Mahin, and Cate. Keck was a wonderful firm. I think one of the reasons Jack went there was their support staff. Keck had people like Greg, who were so technically proficient that they could certainly help in getting transactions done. But I think the real interesting thing is the relationship that Jerry Kaplan had with Jack, and they kind of split up the country. For the most part, Jerry was in the Midwest and the East, and basically, Jack took the West. I think it was an interesting and profitable partnership because there was a high degree of respect for one another. And in some ways they were both very good marketers, but they're also very smart and truly respected each other at a very high level Greg, I'm certain that you can elaborate on that much more because you saw it daily.

Greg Brown: Well, another real positive influence on Jack were the people at Houlihan Lokey. He trusted them implicitly, he learned a lot from them; he learned what the ESOP trustee and sellers needed to know, particularly when it came to repurchase liability and how that might affect the valuations. But he kept in close contact with them. I think he also had good contacts with people at Duff & Phelps at the time. He understood the record keeping and technical parts of it because of Dick Acheson, and Bob Smiley, and other relationships that he had there, but I think his relationship with Houlihan Lokey was key for him.

Ken Serwinski: Yeah. Especially Jack Berka, he was very close with Jack. Yep. This is in the day when Houlihan was a fraction, a small fraction, of what they are today. I think they had a few offices back then, they didn't even have the kind of coverage that they have around the world today. He decided to go with some top people, and they were the top people in the valuation world.

Greg Brown: Yeah, and they recruited a couple of really good people from Duff & Phelps here in Chicago, and that was their second biggest office, was here, and I think they also had some people in New York. But it was really, you know, those were the three key offices, and that small office in Century City was their headquarters.

Ken Serwinski: Yeah.

Interviewer: We talked a fair bit about his influence on you. What other people would say that their careers have been shaped by Jack?

Greg Brown: Good question.

Ken Serwinski: The interesting thing about the West Coast is there wasn’t a whole lot of players out there. I don't know so much shaped, but maybe shaped, because I know, for example, that you have people like Dick Acheson, that was at BSI and now is part of Menke. BSI was purely a plan administrator and consultant, so they would be the record keepers for ESOPs. I don't think Jack ever got into the weeds about benefit administration, but I do believe that Acheson’s practice was enhanced by being involved with Jack on a lot of deals. I know that for certain. So I would think he would say that his business probably wouldn't have been as strong as it was without partnering up with the Ludwigs and Curtis’s of the world.

Greg Brown: I think an easy one is my next call and that's Larry Goldberg, who worked at Ludwig and Curtis.

Ken Serwinski: Absolutely.

Greg Brown: Yeah. Larry's a hybrid between the two of them: he's got Ron's technical skills, but he's also got Jack's big picture perspective and is out there dealing with lenders, the trustees, selling shareholders and companies, and he's out at all the conferences and he's well known and well liked by a lot of people much in the way Jack was. He's not got Jack's persona, but he's adopted, within his own persona, the very things that he observed Jack doing. So I think there's a real imprint there.

Ken Serwinski: Yes, there is.

Interviewer: The next question I would have is, do you guys have anything to say about the earliest ESOP transactions that Jack was involved in? Are there any good stories there?

Greg Brown: When he joined Keck Mahin and we were working together, we did some interesting ones. I was used to dealing with financial institutions, or manufacturing entities, and here I was doing an ESOP for Round Table Pizza out on the West Coast, Rosauers supermarket, and the types of companies that I hadn't really thought that much about adopting ESOPs. And I thought, of course, Jack has really found a lot of different bases for applying ESOPs to different types of companies. And not just technology companies, financial services companies, and Russell companies, which had been most of my prior exposure.

Ken Serwinski: I was not the only one that he took under a wing to teach about ESOPs, there were others as well. Dick Phenniger was a small boutique investment bankers type who also flew for United Airlines, but he would do deals. Again, he was training Phenniger to go after like, Rosauers, up in Spokane, and some others. Another deal I did with him was a company called LA Studios. They did a lot of audio work for commercials and some movies. So They wanted to do an ESOP for 30%. By the time we finished the transaction, I think both of us realized that if we don't have to do another deal in the entertainment world, it's kind of a good thing. They're the most insecure people in the world, and they don't understand the concept of, once you've made up your mind, you can't change it five more times. It took us a long time to get closed for a variety of reasons, but I'll never forget that.

Greg Brown: Oh, I love it.

Ken Serwinski: So, that was one of the funniest deals that we ever worked on, and it was very frustrating because we couldn't get them to agree on anything forever. Even at the closing table we had a surprise. So, you know, it was just very, very amusing. But nobody wants to do business in the entertainment world, they're just too difficult and too hard to deal with.

Greg Brown: Well, too flaky. Another person that Jack had a real imprint on was Marilyn Marchetti. Marilyn, of course, was heavily influenced by Jerry Kaplan, but it was Jack who opened some doors for her in the airline industry, and Marilyn got involved with the United Airlines deal. It's also Jack who got her heavily involved with the National Center for Employee Ownership, and Marilyn ended up doing employee ownership trips to Africa and to China, and Jack was the one that opened those doors for her.

Interviewer: Some great stories there, for sure. Were there any breakthrough ESOP transactions that Jack structured that kind of set the pace for the next level of transactions that would become the norm?

Greg Brown: I would say, you know, back in the mid to late ‘80s, with Jack, we started to see deals where there were multiple classes of stock with management getting maybe different type shares than the ESOP, sort of a predecessor to the warrant that we have today. And that caused a lot of fairness issues that the Department of Labor woke up to real quickly, and that's when we started seeing firms like Ken's not only rendering a fair market value opinion, but if we had these management shares, and management investment, and so forth, we also had to have fairness opinions, that the ESOP was being treated fairly within the deal. And that's something that's still with us. You know, the transactions are structured a little bit differently but still, with a lot of these deals we need fairness as well as fair market value.

Ken Serwinski: Yeah. And you know, back in the day, remember that only C Corporations were able to do ESOPS, S Corporations were not. So, to Greg's point, a number of deals were done with convertible preferred securities rather than common securities, or they would be done with super common. We'd create a different class of stock in order to create dividend cash flow to the ESOP to be able to pay down the debt quicker. Now, in retrospect, some of that was great, because we were able to move 30% of the company, usually to the employees, over a five to seven year period of time, that entire block of stock moved quickly. So though it was a very imaginative way of doing it, and a lot of the business owners, and at the time, we loved those deals because you're able to pretty much do another deal four or five years down the road, or less. The challenge was, we allocated too much stock to employees accounts in the ‘80s and early ‘90s, and then realized, we had one of those “oh, shit” moments where we created repurchase obligation as a real issue back then, and that was something that everybody had to jump on as well. It was one of those unintended consequences of getting a transaction to be appealing to a seller, at the same time being able to accelerate the share allocation to the employees. Then the follow on of that, the ultimate result, was increasing the repurchase obligation and moving that forward as well. So yeah, Greg's right, it was a time of some very creative structuring, and Jack was certainly a part of that, along with Jerry Kaplan. But again, you know what you know, and just like every industry evolves over time, the deals that – and Greg said this earlier – the deals that you did in the late ‘80s and early ‘90s are not the deals you're doing today. It's much more detail oriented with a lot of diligence by banks, by trustees, always keeping in mind that the Department of Labor is going be looking over our shoulder.

Greg Brown: As well as plaintiffs lawyers, who have now discovered that this is profitable space for them to bring lawsuits, whether meritless or valid.

Ken Serwinski: Yeah. That's another two hour discussion that you and I don't want to have because it's so frustrating.

Greg Brown: No, we don't. Especially with a tape recorder on.

Interviewer: Yes. Let's move on to what I think is my last question. Are there any personal anecdotes that you can share that shed light on Jack's character and who he was?

Ken Serwinski: Well, I could say that, besides being just a very smart guy and a great legal mind, he was a complete workaholic, and I think he thrived off that, like so many people do. I remember when he was dying from cancer. I returned a phone call to his hospital bed. “What are you doing, Jack?” “Well, I'm working on finishing up this deal.” “Why?” He goes, “well, what else am I going to do?” And I'll just never forget that, “what else am I going to do?” And a week later he had passed away. But we were working on a transaction up until the time he passed and that was just who he was, he just loved doing the work, he had such great passion for the work. He got out of bed being excited about putting another ESOP together, and that'll always be my last impression of him.

Greg Brown: Yeah. And I have a similar impression but it's, he was well liked and respected because he always had time for people. When he would talk to them, he would talk to them and they would feel like they were the only person to whom he was speaking. And you know, he shared that with Jerry Kaplan and that's a very special skill and trait to have, because that's not in abundant supply.

Ken Serwinski: It's a great, great point that you make, Greg, but I think it also goes beyond that because he would give them that attention and then say, “whatever I can do to help you.” Which means he abided by this servant leadership idea of, how can I make you successful. And I think he understood that if I can make this person successful, I will be successful. And I don't know whether the term servant leadership was even around back then, but he would be somebody that I would refer back to as being sort of a servant leader to people that he thought asked good questions and wanted to be successful in the ESOP world.

Greg Brown: Right. I agree with that completely.

Interviewer: All right. Well, that finishes up my questions. Was there anything else you guys wanted to add to this before we're done?

Greg Brown: No, I think that's it.

Ken Serwinski: He just passed away way too early, Jason.

Greg Brown: He sure did.

Ken Serwinski: He was 53 years old when he passed away, and I remember flying out to LA for his memorial service and it was very sad, because he had a young family and he had a lot of friends. And though he was not a religious man, I remember it being at a Presbyterian church, and I don't know, it probably came from his wife, I'm not exactly sure, but I do remember him not being very religious. A story that came to me third hand, so I don't know if it's true, but one in which he pursued the idea of whether or not he truly believed in God before he passed away, and I think in the end he was trying to appease family members by agreeing to have a memorial service in a church. But he was a great guy, very well liked, and I'll tell you that church was completely filled. And I wasn't the only one who got on a plane to go to his memorial service, there were a lot of people there from outside Southern California. Great man, great man.

Interviewer: Certainly a testament to his influence over the years.

Ken Serwinski: Yeah.

Greg Brown: Right.

Interviewer: Yep. All right, gentlemen, I think that's everything I have. Thank you, both.