United Press International's labor union hired Brian M. Freeman as its investment adviser because it wanted a "heavyweight" to help it shape the sale of the troubled wire service.
Ironically, UPI's management responded to that news with delight, despite Freeman's reputation as a tough, tenacious and abrasive representative of labor's financial interests. UPI's Chairman Luis Nogales commended the Wire Service Guild for hiring Freeman, hailing it as a "positive move" to bring in someone with Freeman's expertise.
And aggressiveness. "I sort of bully people around to get the stuff done," Freeman said.
Freeman brings more to the table than a distinctive personality and a knowledge of corporate finance, some say. "He has an extremely creative mind," said James Burnley, a deputy secretary of Transportation who worked with Freeman during the government's efforts to sell Conrail. "He helps his clients and others see ways through problems that seem unsolvable. He can think the outrageous."
At this juncture, simply ensuring UPI's survival presents a tough enough problem. The job for Freeman is even more complicated: to make sure the sale of UPI guarantees the company's long-run survival on the best terms for labor.
To do so, he is using the same strategy he has employed on behalf of unions at Conrail, Trans World Airlines, Eastern Airlines and Republic Airlines. He argues that wage and benefit concessions made by employes "constitute an investment," and that "constitutes leverage" -- or power that transforms the relationship of boss and worker.
Labor can be a "significant player" in a company restructuring or sale rather than the passive victim by trading on its role as a provider of capital, said Freeman, who has created a niche and a name for himself as labor's investment banker.
Troubled companies frequently have tried to cut costs by seeking union concessions. Freeman's twist is to insist that labor get a return on its investment in forms such as stock, stock options and profit-sharing.
"Why should unions give it away for free, without getting something in return?" said Freeman, 40, the president of Freeman & Co., a Washington-based financial advisory firm.
UPI's union has clout because it has claims of between $2 million and $10 million against the company which any buyer will inherit and because half the wire service's costs relate to labor, Freeman said.
The Guild turned to Freeman to help them exercise that leverage because "he was clearly the most experienced, most heavyweight and had a track record of success," said Dan Carmichael, secretary-treasurer of the Guild. Since then, the Guild has submitted its own proposal to buy UPI "either by the employes alone or in a joint venture with one or more purchasers."
To Freeman, the negotiation process is "like a chess game. You have to understand the motivations on the other side, play to those and understand your own leverage."
Freeman's firm, working with Lazard Freres & Co., recently helped TWA's unions cut a deal with corporate financier Carl Icahn that enabled him to buy the airline. TWA's machinists, pilots and flight attendants agreed with the airline to concessions, or "wage investments," worth about $300 million a year in return for up to 20 percent of TWA's common stock; up to 20 percent of profits for three years; $300 million of a special class of preferred stock; a portion of any profits on a sale by Icahn of his stock; and certain protections against asset and stock sales.
"Freeman was instrumental in getting me to believe that a deal could be made," Icahn said. "I always felt that labor concessions would make the company valuable, and he helped me to believe you could get the concessions. Sometimes I felt like it would be impossible . . . but he is very tenacious."
A workaholic who puts in 18-hour days and thinks "vacations are a waste of time," Freeman -- who has been told that he resembles tennis star John McEnroe -- holds a law degree and a master of arts degree in business administration from Harvard University, where he once held a research appointment. He also earned a master of arts degree in tax law from New York University.
But Freeman's manner belies the pinstriped exterior, according to his clients. "He is a very earthy, streetwise fellow," said John Peterpaul, vice president of the International Association of Machinists and Aerospace Workers, who has worked with Freeman on Conrail, TWA, Eastern and Republic transactions. "He's brash and brazen . . . one of the brightest minds around."
Conrail's unions, which had clashed with Freeman during his days at the Treasury Department, "knew he would be a street fighter," said James Burke, former vice president of the United Transportation Union, the government-owned railroad's largest union. "He is very astute, very abrasive . . . we knew no one would buffalo him."
Which is not to say that all Freeman's ideas work. "Sometimes an idea will be rejected as off the wall, and sometimes it's like someone threw on a light switch," said DOT's Burnley.
Freeman calls himself as "a problem-solver" and "a risk-taker." He began taking on that role for himself in 1976 when he joined the Treasury Department to manage the Lockheed Corp. loan guarantee program.
He stayed on at the department, becoming the Treasury's deputy for corporate finance and special projects. Among those projects was Conrail, which was created by the government out of the ruins of seven failed northeastern railroads. Often representing Treasury on the board appointed to oversee Conrail, Freeman pressed the unions for concessions. "I was their adversary," he said.
Later he served as executive director of the department's Chrysler Corp. loan guarantee program, and was among those who hammered out the deal that forced Chrysler to give stock warrants to the government in return for the loan guarantees. After Chrysler's turnaround, the stock warrants added about $300 million to the Treasury's coffers. His argument then was like his theory about labor today: If the government, or any source of capital, takes the risks during a downturn, why should it not benefit during an upturn?
"These are just deals, not a social program, not an ideology," said Freeman , who insists his is the most capitalistic, free-market approach to solving corporate problems. "Labor is acting as a capitalist for its members."
Freeman has some unhappy former clients. Four of five unions at Frontier Airlines say he failed early this year to help them buy the carrier. "He lied to us . . . he made a lot of promises and was unable to do the deal," said Billy Walker, master chairman of the Frontier pilots union. "He mucked things up real good here."
"He led us to believe he had the resources to do it, although he has never put a buyout together before," said Lorraine Loflan, head of the Frontier flight attendants union.
Freeman says he never lied to the Frontier unions. "There was a deal there. The problem was the unions fighting among themselves for allocation of ownership," he said. He is supported by Donald R. Kendall, a managing director at Drexel Burnham Lambert Inc., the firm retained by Freeman to arrange financing for the buyout. Frontier's unions and management were unable to put together "a cohesive business plan . . . if that was done, we had the investors," Kendall said.