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Pershing Square Has An Official Rule About Kicking People In The Nuts

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As you're likely aware, one of the most important skills to master when you're in this money making game is to be able to regulate your emotions. You can't freak out every time you lose a little cash, and on the flip side, it's probably a good idea to avoid doing an end-zone dance on the days you make it rain. Many of Wall Street's most successful investors have perfected the art of staying cool and calm, with the best of the best being basically dead inside. Then you have Bill Ackman.

The Dead Inside model is not the one he's chosen to follow over the course of his career. On the contrary, Bill is stuffed to the gills with emotion, and often feels compelled to let them out. No, scratch that. Letting his salty tears flow is not a choice, just like Ackman's passion for standing up to institutions like MBIA and saying "J'accuse!" wasn't a choice, it was his duty.

Obviously these raw and uncut displays of what Bill's feeling haven't prevented him from doing pretty well for himself. They have, however, caused a certain amount of agita for those around him. Bill's visible tears at last year's Target shareholder meeting were deeply distressing to Joe Nocera, who hasn't yet evolved to the point where he's comfortable seeing a grown man cry. And in Christine Richard's Confidence Game: How A Hedge Fund Manager Called Wall Street Bluff, we learn of a couple other instances in which Bill's inability to keep it locked up-- one the adorable quirks we love most about him and probably the source of his success!-- resulted in some minor and major fallout (making an employee uneasy and the enacting of the aforementioned Nut Kicking Rule, respectively). Richard writes:

During the summer of 2006, Ackman returned to the Securities and Exchange Commission's office in lower Manhattan to meet with the attorneys involved in the MBIA investigation. Roy Katzovicz, a former Wachtell Lipton attorney who had been hired as Pershing Square's chief legal officer, accompanied Ackman. He was in for a surprise.

The group met in a small conference room. Instead of the usual three SEC attorneys, only two were at that meeting. Gerald Russello, the attorney who had been leading the investigation, had taken a job in the general counsel's office at Bear Stearns. The presentation was going according to plan when Katzovicz noticed that Ackman was getting agitated. "Ive shown you this fraud. I've shown you that fraud," Ackman said. "What do I have to do? What do I have to prove to you before you take some action?" His face was flushed, his eyes misty.

Katzovicz was dumbfounded. Ackman was giving the SEC attorneys what could only be described as a tongue-lashing. In all his experience as an attorney, had never seen an SEC lawyer treated with anything but deference. Katzovicz broke out in a cold sweat. He reached out and put his hand on Ackman's shoulder, hoping to send a message that things might be getting a bit too intense.


On a Sunday evening [in November 2007], just after 11PM, Roy Katzovicz got an e-mail from Ackman. He'd been copied on a long message that Ackman sent to the SEC. Katzovicz read the subject line-- "The SEC's Enforcement Failures with the Bond Insurers and Other Issues"-- and scanned the addresses in the To column: SEC Chairman Christopher Cox; SEC Commissioners Annette Nazareth, Paul Atkins, and Kathleen Casey; the SEC's director of enforcement, Linda Thomsen; Brian Cartwright, the SEC's general counsel; John Nester, the SEC's director of communications; and Mark Schonfeld, director of the SEC's New York regional office.

Without reading any further, Katzovicz told his wife, "I may have to quit my job tomorrow." His boss's habit of writing long, emotional, late-night missives without having him vet them was one of the aggravations of Katzovicz's job. But this was the worst yet. There was no point now in reading the message and spending the entire night tossing and turning over all the points that might have been made with less fractious wording or-- better yet-- deleted altogether before the message was sent. He let it wait 'til morning.


The real barbs were directed to the higher ups at the SEC. "My sense is that it's more likely that the responsibility for the lack of pursuit of these issues lies at the highest levels of the SEC, including Chairman Cox," Ackman wrote. He concluded by offering to meet with the SEC again to further explain how losses might yet be prevented for policyholders. "It is an incredible embarrassment to the SEC and to the quality of our country's regulatory oversight for you to have dropped the ball here," Ackman concluded.

When he got into the office that morning, Katzovicz walked into Ackman's office to confront him about the e-mail. "Why shouldn't I just quit?" Katzovicz demanded. "This is the kind of thing you send off to our principal regulator without running by me?"

Ackman told him it would have been a mistake to show him the e-mail. Katzovicz would have stopped him from ending it, and everything in the e-mail needed to be said, Ackman insisted.

Katzovicz said he would not have stopped him, but he might have suggested some changes, some omissions. Perhaps the letter wouldn't have been such a personal attack on Cox. Sometimes Ackman needed to be protected from himself, and that had to be part of Katzovicz's job. If Katzovicz was going to stay with the firm, they needed a new rule. Katzovicz spelled it out: "You cannot kick our chief regulator in the nuts without consulting me first." Ackman agreed, and Katzovicz stayed.