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Special master Kenneth Feinberg is a mediator's mediator

By Liza Mundy
Thursday, January 14, 2010; C01

The special master is sitting in a chair in his Pennsylvania Avenue law office, periodically crossing one leg over the other, relaxed if somewhat restless. Bespectacled, a fringe of hair surrounding his bare crown of head, he does not cut the Olympian figure you might expect of a man engaged in seemingly every modern American crisis.

But that's what he is. Partly through his volition and partly as an accident of history, Washington lawyer Kenneth Feinberg has become a ubiquitous personage when it comes to national emergency. Beginning in 2001, Feinberg was the U.S. government's special master tasked with setting compensation for injured victims and the families of those who died in the Sept. 11 attacks, a job he describes as "the most harrowing experience of my professional life."

In 2007 he distributed the money donated to victims of the mass shooting at Virginia Tech and to bereaved families.

And just now, in response to the nation's worst economic crisis since the Great Depression, Feinberg is the Obama administration's special master for executive compensation -- the pay czar -- charged with capping salaries at firms receiving the biggest chunks of bailout money under the Troubled Asset Relief Program, or TARP.

In his career, he has had a role in resolving controversies involving the JFK assassination, the Vietnam War, Hurricane Katrina, the Catholic Church's sexual abuse scandal. Where there is death and suffering, or merely bankruptcy and financial ruin, there, oddly enough, is Kenneth R. Feinberg. Calamity Jane comes to mind. So does Zelig, recurrent in a striking number of American dramas.

"That's cute," the special master says, when this notion is introduced. "If you mean by Zelig quality, like if there's a national challenge and a national crisis, bring in Feinberg, and he'll put on whatever veneer is needed for that crisis, I guess I wear that as a badge of honor."

In his 64 years, the special master has confronted human nature in its most extreme conditions, had every sort of existential question put to him. "Mr. Feinberg, why don't you bring these companies down to a level of compensation that's more commensurate with their value to society?" offers the special master for example, echoing a question he hears a lot these days.

Or: "My wife, she was an angel, Mr. Feinberg. Why her? Why not me?" he recalls being asked after 9/11.

Or, from the parent of a Virginia Tech victim: "Mr. Feinberg, I sent my daughter to school in Blacksburg, Virginia, not New York City. My daughter died in Blacksburg, Virginia, at the hands of a deranged gunman. Where is the justice in this, Mr. Feinberg?"

Emotionally, the questions are easier this time around. Angry bankers and outraged citizens are nothing compared with the spiritual devastation of families struggling against sudden, violent loss.

"Both communities are emotional," he says, asked to parse the difference between the grieving families he confronted then and the irritated executives he is engaged with now. "But it's different. Nine-eleven and Virginia Tech, my goodness, the human tragedy, the horror and pathos of those incidents, and their impact on American history -- there's no comparison. . . . In my job that I'm doing now, I have to be an accountant, I have to be a Treasury official. Nine-eleven and Virginia Tech you had to be a rabbi and a priest. It was altogether different."

* * *

The special master did some acting in college, thought for a while about pursuing a career in theater. But his dad, who owned a tire store in working-class Brockton, Mass., suggested he apply his dramatic flair to the more lucrative venue of the courtroom. After graduating from the University of Massachusetts, Feinberg went to law school at NYU.

But he retains a histrionic streak. The special master still has the trial lawyer's knack of modulating his voice to hold a courtroom's interest, and the raconteur's affinity for reenacting conversations. He has also cultivated a lifelong interest in opera and classical music, inculcated at age 9 by a cantor at his synagogue. Asked if he was unusual among Brockton boys in his eagerness to attend opera performances, Feinberg -- who is now president of the Washington National Opera and has a massive music collection -- laughs. You think?

After law school Feinberg clerked for the chief judge of the state of New York, Stanley H. Fuld, then worked as a federal prosecutor and later as chief of staff for Sen. Edward M. Kennedy. Married, by then, to his wife, Dede, with whom Feinberg has three children, he found that starting a family prompted "considerations of financial security." He left public service for private practice, where he did well but -- as he would write in a 2005 book, "What Is Life Worth?" -- he felt "restless."

Enter injury and suffering.

In 1984, Jack Weinstein, a federal district judge in Brooklyn, invited Feinberg to help settle a long-standing dispute between thousands of Vietnam War veterans claiming injury from exposure to Agent Orange, and chemical companies that were involved with manufacturing the herbicide. Weinstein says he was impressed by Feinberg's ability to grasp "how people acted and why they did what they did." Feinberg, who had no mediating experience, worked with both sides and a settlement of $180 million was reached. It was then that he discovered the peculiar satisfaction of mediation: mastering the material, finding the middle ground, getting two antagonistic parties "to yes."

"That one case, Agent Orange, changed my entire professional career," says Feinberg, who found himself negotiating claims involving asbestos, breast implants, heart valves and other products. He launched a firm devoted to dispute resolution, work that was challenging and lucrative.

In 1999, he was called to rule on the value of the original film that captured the assassination of John F. Kennedy. "Abe Zapruder was there. And he caught it. By accident! So the government seized it as a historical treasure. . . . What's it worth?" says the special master animatedly, doing a vivid imitation of the whirring noise of an old 8mm projector. Feinberg was part of an arbitration panel that ruled the Zapruder heirs should be compensated $16 million, thereby giving him a role in even that 20th-century tragedy, albeit years afterward.

* * *

On the day of the 2001 terrorist attacks, Feinberg was at the University of Pennsylvania law school, teaching a class. His older son was in law school at NYU and his daughter at Georgetown, so his first concern was to make sure the two were safe, which they were. A week or so later, he came across an article describing the idea of a victim compensation fund. Moved, as many Americans were, to service, he called a Capitol Hill contact and volunteered to administer it, and to work without pay. He felt it would be wrong -- and would detract from his credibility -- if he were paid.

Once appointed, Feinberg embarked on town-hall-type meetings with families stunned and paralyzed by loss, approaching them head on, brisk and direct. "The communication style I'd developed over the years proved less than ideal for this new challenge," he would later acknowledge in his memoir. He was criticized as cold, unfeeling, arrogant and worse. "Verbally he would get abused: 'Who are you? Get the hell out of here,' " recalls his law partner, Michael Rozen, saying that Feinberg was "completely unfazed."

"There's nobody I've ever come across who is as truly unflappable as he is."

The criticism did hurt, though -- Feinberg acknowledges this in his book -- and he learned to moderate his approach. "What happened through this whole process was a sensitizing and softening," says Dede Feinberg. He changed minds as he knocked on doors, "begging" survivors to apply for the money.

Then, as now, he was charged with enforcing a law hastily passed by Congress in response to crisis. The purpose of the victim compensation fund was twofold: assuage the financial needs of families, and forestall lawsuits against the airlines. To satisfy the second purpose, Feinberg had to assign a compensation amount based on the victim's likely lifetime earnings, meaning that families of bankers and traders typically got more than families of busboys and cooks, an inequity he disliked enforcing.

In the course of setting dollar figures for lives, Feinberg also met privately with survivors. If they wanted to replay the last phone call their loved one had placed, he listened. If they wanted to reminisce or rage, he listened.

During these encounters -- he would sometimes walk around the block to clear his head -- he was struck by how people react to tragedy in varied ways, some losing faith in God, some gaining it. He was also struck that a predominant emotion expressed -- along with anger and grief -- was love.

After 33 months of meeting with families, securing 98 percent participation in the fund, Feinberg writes that he is still reluctant to probe how the experience altered him, because revisiting it is so painful. Dede Feinberg says it was not his nature to talk about what he was hearing and seeing. "He certainly did not come home and just unburden to me," but would "sit in his chair and just listen to his music."

Feinberg will say that he has become skeptical about planning for the future, aware, now, that life's vagaries -- a casual decision to get to work late, or hurry in early -- can change everything. He felt he could not continue practicing law in the same way; giving employees and colleagues a lot of notice, he and Rozen downsized the firm. He wasn't taking a vow of poverty, but he wanted to focus on cases with some public service component.

Then in April 2007, when a deranged gunman killed 32 students and faculty members, then himself, at Virginia Tech, Feinberg was asked to set up a system to dispense the money pouring in for the families of those victims. "There's no way you immunize yourself from the emotional trauma" of meeting with people who have lost children and spouses to violent attack, says Feinberg, who found himself doing it all again: travel, grief, meetings, money. Catherine Read, whose stepdaughter, Mary, was killed, attended a meeting with Feinberg and felt he was "very good about letting people say their piece." She recalls that he made a point of explaining that each life would be valued equally, that "everybody counted the same." To Feinberg, it was a great relief that he "didn't have to explain why somebody was worth more than their next-door neighbor."

* * *

When he was asked by the Obama administration to set executive pay at bailed-out companies, Feinberg once again faced a constricting and even conflicting legal mandate. Once again he was tasked with estimating the value of an individual, though in this case, "I'm not deciding the value of a work life -- of a work life -- I'm deciding the value of one person's compensation for one year."

The statute requires him to rein in pay and avoid short-term rewards that encourage risk-taking, while making sure that companies can compete in the hiring marketplace. This is why he cannot slash executive pay to, say, nothing, or even to levels commensurate with what most Americans earn. The fear is that if pay is cut too drastically, executives will go "across the street" to a competitor, and the taxpayer-supported firms will founder.

Assuming his duties last June, Feinberg asked companies to submit proposed pay structures. In virtually all cases, according to a report he released in October, companies came in with figures higher than he was willing to accept. "What surprised me most is the gap between perceptions on Wall Street and perceptions on Main Street," Feinberg says. "It's not a gap. It's a chasm."

What followed were still more meetings: with government officials, with firms. Feinberg reduced cash salaries and further compensated many execs with stock that could only be redeemed, in three annual installments, beginning two years after it was awarded, ensuring a more long-term stake in company performance.

His cuts drew varying reactions. He says the public is supportive and often would like to see them go deeper: He hears from citizens "constantly," getting letters and e-mails saying things like, "I'm unemployed, my whole community is devastated by the economy and they're asking for millions." Some commentators have pointed out that cutting salaries at a handful of bailed-out firms isn't going to alter the bonus culture on Wall Street, and that even with pay restrictions, many executives will still receive millions.

Alternately, employees at AIG accused him of hurting company morale; Vice President and General Counsel Anastasia Kelly quit in response to pay reduction. When Feinberg talked outgoing Bank of America chief executive Ken Lewis into forgoing his salary for 2009, a spokesman said Lewis thought it wasn't in the best interest of Bank of America to get into "a dispute with the paymaster," a word that carried a whiff of derision. Two of the seven, Bank of America and Citigroup, scrambled to pay back TARP and escape the pay limits in 2010.

Feinberg, as before, is not taking any pay for his work. A framed opinion piece in his office pointedly notes that financiers have not been nearly so willing to forgo income while working to fix the economic mess. Feinberg himself is reluctant to criticize the executives whose worth he is assessing (he now must look at 2010 pay): "Do not underestimate the emotions associated with arguments over pay. It is not greed alone. Maybe there's some greed. I don't deny that. But there is a much deeper argument about a person looking in the mirror and saying to herself: What am I worth?" To him, compensation, in our country, is a "surrogate for worth." That was true during 9/11 and it's true now.

Asked whether negotiations have been congenial, he hesitates.

"I wouldn't say congenial. They've been cooperative. Congenial, no. They've been cooperative. There's a good deal of internal unhappiness . . . but I think everybody agrees we've got to get by this and move on."

Move on to what? One hesitates to ask. One shudders to think. Please, let the special master move on to routine paid work; let the special master have plenty of time with his family. Let nothing else happen, please, that would require the special master to occupy yet another public role in yet another crisis. "I agree with that!" exclaims the special master. "I keep saying that. I hope this is the last emergency."

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