Teddy Forstmann Was a Giver Till the End

Written by: Staff on 21st November 2011

Teddy Forstmann Was a Giver Till the End

epa000368936 Vijay Singh of Fiji (L) embraces his amateur partner Teddy Forstmann on the 18th green of Pebble Beach Golf Links during the third round of the Pebble Beach National Pro-Am in Pebble Beach, California, Saturday 12 February 2005. The world's number one ranked golfer shot a 1-over 73 and will miss the cut. EPA/MICHAEL FIALA |

(Above: Vijay Singh and Teddy Forstmann)

Longtime Wall Street financier Theodore J. Forstmann, the chairman and chief executive officer of IMG, passed away on Sunday at the age of 71. He was a giver till the end, signing “The Giving Pledge” earlier this year, where America’s wealthiest people pledge to give away at least half of their fortunes.

While Forstmann may be remembered for lots of things, including being a major player during the wave of corporate takeovers in the 1980s, including the battle for RJR Nabisco in 1988, he will be recalled by those in the tennis industry as someone connected to betting on Roger Federer matches.

In 2010 the New York Times reported that Forstmann was being sued in Los Angeles County Superior Court by Agate Printing, Inc. for fraud, interference with contract and breach of contract. In the complaint, Jim Agate, the head of Agate Printing, is seeking extensive damages for lost business that he claims Forstmann promised him. Agate also contends that he served as a conduit for hundreds of bets totaling millions of dollars that Forstmann placed on sporting events, including the 2007 French Open final, which Federer lost to Rafael Nadal.

Forstmann acknowledged betting on Federer to win the 2007 final and of gambling on sports in general. But he has rejected the claims in the lawsuit, questioned Jim Agate’s credibility and denied receiving inside information from Federer.

“I might have called Roger before the match in 2007,” Forstmann told the Web site The Daily Beast. “But Roger is a buddy of mine, and all I would be doing is wishing him luck.”

Agate’s suit also charges that Forstmann bet $5,000 on Federer to win the 2006 French Open final, a match he also lost to Nadal. The suit says that in 2007, Forstmann placed bets of $22,000 and $11,000 on Federer to win on June 9, the day before the men’s final.

In 2007, the Grand Slam tennis tournaments had rules against players gambling on matches but no rule expressly prohibiting agents or other members of player entourages from gambling on tennis. The Grand Slams also had no rule in 2007 barring a player from giving “inside information” to a gambler, although there was a more general Grand Slam rule against conduct contrary to the integrity of the game.

The cause was brain cancer, according to a statement from sports marketing giant IMG, where Forstmann served as chairman and CEO. He was the senior founding partner of the investment firm Forstmann Little & Co.

Forstmann Little, which was founded in 1978, completed leveraged buyouts of companies including Dr. Pepper, Yankee Candle, the cable TV technology company General Instrument and Community Health Systems.

In the 1980s, the firm had become one of Wall Street’s most successful specialists in leveraged buyouts. The firm’s deals generated lofty returns for its partners and outside investors, which included many corporate pension funds.

According to the Associated Press obituary, Forstmann Little used bank loans and its own funds to finance acquisitions. It eschewed the high-yield “junk bonds” many other firms used to supplement their own money.

In a leveraged buyout, a company is purchased with mostly borrowed money, with the remaining cost representing the equity contributed by the buyers. The debt is then repaid with funds generated from the company’s cash flow or sales of assets.

Once the debt is reduced, the value of the investors’ equity can soar. And the investors can realize that gain if the company is resold or sells new stock to the public.

In 1988, Forstmann made clear his distaste for deal making greased by junk bonds, which he considered to be too risky. The AP quoted him as saying “Today’s financial age has become a period of unbridled excess with accepted risk soaring out of proportion to possible reward.”

“Every week, with ever-increasing levels of irresponsibility, many billions of dollars in American assets are being saddled with debt that has virtually no chance of being repaid,” he said.