Following is a letter regarding what we view as a striking contradiction between the work of the Jerome Levy Economics Institute at Bard College and the private business affairs of its founder, Leon Levy, and two other Institute Board members who are also partners at Odyssey Partners, Levy's investment firm.

We would like to receive your comments concerning this situation. Please E-mail them to us at and we will forward them to the appropriate people. Thank you.

Hotel Employees and Restaurant Employees Union, Local 100

760 Eighth Avenue, 2nd floor

New York, NY 10036 (212) 719-4630

September 1, 1995

Dimitri Papadimitriou Executive Director

Jerome Levy Economics Institute at Bard College

P.O. Box 5000 Annandale-on-Hudson, NY 12504

Dear Dr. Papadimitriou

We are writing to express our concern about what we perceive to be a striking contradiction between the goals and work of the Jerome Levy Institute of Economics and the private business affairs of its founder and chief supporter, Leon Levy, who also serves as a Trustee of Bard College.

Over the past several years, the Jerome Levy Institute - Bard College's first post-graduate institution - has become a respected outlet for academics and policy analysts concerned with growing income inequality and crisis-prone financial markets. As a union of low wage, mostly immigrant and minority restaurant workers, Local 100 is very familiar with the growing inequality in the American labor market. Many of our members and their families have also seen firsthand how financial market developments, such as the leveraged buyout frenzy of the 1980s, can have a profoundly negative impact on the quality of their lives.

The Levy Institute describes itself as "... the embodiment of Jerome Levy's belief in the potential of economics to make a positive contribution to society and to improve the human condition." The bylaws of the Jerome Levy Institute explicitly state its purpose: "To pursue knowledge of economics that will enable nations to enlarge personal freedom, promote justice, and maintain stable economies with full employment and rising standards of living." More recently, its Chairman has stated that "[a]s we count the unemployed and measure the growing cohorts with declining standards of living in the United States..., we resolve to intensify the pursuit of our goals."

While we support the Levy Institute's goals and purpose, we cannot remain silent about the actions of Odyssey Partners, the company founded and run by Leon Levy and Jack Nash. In fact, a close examination of Odyssey's leverage buyouts (LBOs) and other investments reveals a pattern of slash-and-burn management and financial opportunism that we believe epitomizes the worst aspects of the go-go 1980s. And with Stephen Berger's return to Odyssey Partners in July of 1993, the firm has been reinvigorating its LBO investing business.

For example, in June of this year, just one month after the Jerome Levy Institute marked the fiftieth anniversary of the Full Employment Act with a conference on Jobs in the New Economy, Odyssey Partners teamed up with Paxar Corporation to purchase Monarch Marking Systems, an Ohio-based manufacturer of bar code tracking systems. In July, the company announced plans to lay off one fourth of workforce, replace the defined benefit pension plan with an employee-funded 401(k) plan, and eliminate medical coverage for future retirees in the process. According to the Dayton Daily News (6/11/95), these moves did not surprise analysts who had "expected job cuts and other changes at Monarch following its acquisition in June by Odyssey Partners, L.P. and Paxar Corp."

Ironically, even as the Monarch cuts were being announced, a company associated with Odyssey Partners, retailer Caldor Corporation, was reaping valuable local and state tax abatements under Ohio's Job Creation Tax Credit (JCTC) program. Caldor, which was sixty percent owned by Odyssey Partners following a 1989 leveraged buyout, received the tax abatements after agreeing to relocate more than 200 jobs from its Connecticut headquarters to North Ridgefield, Ohio in May 1994. On August 24, 1995, the Wall Street Journal focused attention on Caldor. After describing some of Caldor's recent problems, the Journal reported that "none of these developments should come as a huge surprise to investors who were watching what company insiders were up to during the last year or so. ... [D]on't forget that Odyssey Partners, which acquired a 60% stake in Caldor in the course of leading a leveraged buyout with management in 1989, unloaded 2.8 million shares, about half its original stake, in a secondary offering in October 1994."

As you may be aware, Odyssey Partners is also a named defendant in shareholder litigation that arose in the aftermath of the infamous accounting scandal at apparel-maker Leslie Fay. In the early 1980s, Leslie Fay underwent two management-led leveraged buyouts. The second LBO, in 1984, involved Odyssey Partners, Merrill Lynch, and Goldome Savings Bank. In June of 1991, the company underwent its third initial public offering, raising $40.6 million after expenses, all of which went to Odyssey Partners and/or to Steven M. Friedman, a former Odyssey general partner. In 1993, Leslie Fay's accountants discovered accounting "discrepancies" and contended in a subsequent lawsuit that Leslie Fay's senior management conspired to conceal the true financial health of the company prior to and during the three public offerings. Odyssey Partners is a defendant in this lawsuit. Last year, Leslie Fay endured a 40 day strike over its proposal to close most of its domestic manufacturing operations (and to eliminate 1200 jobs), despite wage and benefit concessions workers had made to help return the company to profitability. Leslie Fay is now a sad shadow of its former self. Sales and profits are down sharply, and, according to Women's Wear Daily, the company "now sits on the edge of oblivion."

Odyssey's largest single investment in a public company (13-F SEC filing, available from us upon request) is its $101 million stake in Black Box Corporation, a direct marketer of computer supplies based in Lawrence, PA. Odyssey acquired its stake in Black Box as part of a 1988 leveraged buyout. In 1991, the company entered Chapter 11 bankruptcy. Recently, the company's steady earnings and cost containment program have earned it plaudits from financial analysts. But according to Catalog Age, "former and current staffers say that inside the company things aren't so pretty. Layoffs and resignations have hit the marketing and creative/production departments hard, and many people who are still in those departments are reportedly looking to get out." The article concludes that "endorsements from these stock analysts underscore the irony inherent in Black Box. On the surface, everything is right for the company, but beneath the veneer lies a catalog with disgruntled employees and bitter ex-management."

Closer to home, Leon Levy and his partner Jack Nash each own about 9% of Smith and Wollensky's Steakhouse in New York City. The 170 employees there, who are members of Local 100, Hotel Employees and Restaurant Employees Union, AFL-CIO, have been working without a contract for a year. During this time, the Federal Government has found that the company violated labor laws by threatening employees. Other alleged violations are currently being investigated, including the company's refusal to bargain in good faith and threatening or disciplining employees for union activity.

We bring these matters to your attention because we believe that the associates and employees of the Jerome Levy Institute and Bard College have a right to know about the business affairs of a man so publicly associated with the Institute. But we also believe Mr. Levy's myriad business relationships have a potential for seriously compromising the Institute's claim of independence. For example, the Institute has provided forums for debates on reforming the nation's financial regulatory structure. However these policy debates are ultimately decided, it is undeniable that Mr. Levy, whose Odyssey Partners has more than $600 million in investments in 36 banks and thrifts, has a powerful financial interest in the outcome.

Moreover, the relationship between the two institutions seems to be deepening. Last year, Leon Levy's partner at Odyssey, Jack Nash, joined the Board of Governors of the Jerome Levy Institute, and on September 11, 1995, Brian Wruble, a member of the Institute's Board of Governors, will become a general partner at Odyssey.

We do not mean to imply that respected academics such as Institute Distinguished Scholar Hyman Minsky are directly compromised by the financial interests of the Institute's founder and two of its other Board members. Rather, it is the forum itself that we believe risks appearing compromised. When equipped with the facts of Odyssey's business practices, the participants in the Institute's upcoming conference on "American Prosperity in a Hazardous Economy" might well wonder on which side of the equation the Institute stands: on the side of independent scholars interested in recovering the American Prosperity or on the side of men like Leon Levy and his Odyssey Partners whose handiwork many would argue has helped create a Hazardous Economy.

We intend to keep you informed about our continuing research on Odyssey Partners and the companies it controls or in which it invests. Meanwhile, if you have any questions, please don't hesitate to call us.

Sincerely,

Brooks Bitterman Research Director