Things looked grim. And then an avuncular Wolf Block lawyer with a shiny bald head went out into the credit market and, miraculously, found another bank.
IN JANUARY, THE leadership of Wolf Block, including Alderman, started meeting on Saturday mornings to come up with a plan to make the tough decisions that had been avoided for so long. The group of 15 contained some of the firm’s biggest revenue producers—a whole cold front’s worth of rainmakers — who together accounted for the core of Wolf Block’s business. If even a few of them left, Wolf Block would be fatally hobbled. Conversely, if they all stuck around, the firm had a good chance of surviving. Over coffee and bagels at 1650 Arch, the group discussed “right-sizing,” bonuses, pensions. They bonded. They committed and recommitted to each other that they were all going to stay. “We liked each other,” says John Fanburg, a health law specialist from the Roseland office. They even came up with a cheeky name for themselves: “The Breakfast Club.”
The Breakfast Club produced a turnaround plan. It existed first as a PowerPoint presentation, delivered to the partnership in February by David Gitlin. It outlined additional cost-cutting measures, including layoffs; a cut in the number of “equity partners” with ownership stakes in the firm; and, later, a reduction in the pensions of retired partners. There was also a strategy to deal with the thorny issue of bonuses. Only steep cuts would do, and the Breakfast Club was prepared to make them. But before it could distribute even the slashed bonuses — or implement the rest of its plan — the Club needed to find a new bank loan to replace Wachovia.
Luckily, one of the Breakfast Clubbers, Hersh Kozlov, a lawyer from Cherry Hill and a perennial Republican fund-raiser, had connections to several area banks. Kozlov found a potential $30 million credit line for Wolf Block from a new bank, on terms more favorable than Wachovia was offering—i.e., no personal guarantees from partners. “Hersh was heroic,” says Alderman. “He was absolutely heroic. He took it as far as a human being could take it. And it may have been viable. It may have been.”
Other partners have since learned of the Kozlov loan and have felt betrayed—if there was a potential offer of another loan, why didn’t the firm work it out? It seemed like an easy choice. But inside the Club, the easy choice was to turn it down.
The issue wasn’t money. It was trust.