Gary L. Wilson's 18-year career at Northwest Airlines might have ended quietly had he not unloaded millions of shares of Northwest stock in the four months before the bleeding airline filed for bankruptcy.
As the airline's course turned more inevitably toward Chapter 11 and executives sought ever-deeper cuts from workers, the enigmatic chairman made no public statements.
The 3.66 million shares he sold since May, however, worth about$20 million, spoke volumes. The fallout of those sales turned the spotlight back on the man who some say helped turn Northwest upside down in 1989 with a $3.65 billion leveraged buyout.
Just two years later, with the airline in a financial tailspin and bankruptcy rumors swirling, Wilson helped nail key agreements that allowed Northwest to avoid filing Chapter 11.
Bankruptcy, Wilson said at the time, connotes failure. Avoiding it would clear the way for Northwest to make a prompt and lucrative return to the ranks of publicly held companies.
Fast-forward to 2005. Wilson, now 65, remains at the helm. A similar scenario as in the early '90s has ended in a far different outcome, costing scores of creditors, workers and investors millions of dollars. As the reworking of Northwest Airlines unfolds in a Manhattan bankruptcy court a key question emerges: Did he try as hard to steer clear of failure this time?
Wilson and investment partner Al Checchi's flight plan for Northwest first took shape in 1987, when Wilson joined the airline's board of directors. He quickly spied an investment opportunity in what he saw as an underachieving consumer business rich with untapped assets. Wilson resigned, then quietly began buying Northwest stock, recruiting Checchi and a handful of deep-pocketed pals to join a friendly buyout.
Eventually, they would chip in an estimated $40 million and take Northwest private in a highly leveraged $3.65 billion deal. Checchi and Wilson split the chairman's title, pocketing management fees of about $10 million a year until 1992.
By then, Northwest was foundering under heavy debt from the 1989 deal and bleeding cash amid an industry slump. Wilson, a behind-the-scenes strategist, was perceived as a remote numbers guy not given to wandering the corporate hallways. He was also described as an intense, precise manager.
When management launched a campaign to save Northwest, Wilson led negotiations with the airline's lenders to defer its debt payments -- part of the 1993 rescue package that included nearly $900 million in wage and benefit cuts, canceled airplane orders and a state bailout of more than $750 million. Taking the company public again the following year would get Checchi and Wilson 11.4 million shares each. In early 1998, the share price hit an all-time high of more than $64.
Wilson's supporters insist he remained just as active trying to pilot Northwest clear of bankruptcy in 2005. Others argue Wilson pulled back.
Some critics outside the boardroom suggest he was too distracted by duties on other heavyweight boards such as Yahoo and Walt Disney to properly tend to Northwest.
"For a company as troubled as this one, the board should not permit its chairman to serve on so many other boards, particularly boards such as Disney, which have been very demanding," said Nell Minow, editor of The Corporate Library, a governance research firm based in Portland, Maine.
Union leaders take a particularly dim view of Wilson's recent command.
"They've been gone. They're absent," said Ted Ludwig, referring to Wilson and to Checchi, who resigned as a director in March.
Ludwig, president of Local 33 of the striking Aircraft Mechanics Fraternal Association, described Wilson's low profile as Northwest foundered this time around as "night and day" from the highly public executive campaign to rescue Northwest during its earlier bankruptcy scare.
It didn't help that Northwest directors Checchi and Richard Blum, two of Wilson's key partners in the 1989 buyout, resigned this year.
Wilson's staunch allies disagree. Three current or recent Northwest directors describe Wilson as an active chairman who did not want to take Northwest into Chapter 11. He easily could have cashed out all of his Northwest shares at their peak, in early 1998, they argue, and he did not.
"I got every indication that both he and clearly members of the board wanted to try to avoid bankruptcy to the greatest degree possible," said Rodney Slater, the former U.S. transportation secretary who joined Northwest's board in January as the International Association of Machinists-appointed director.
Northwest director John Engler, the former governor of Michigan, agreed with Slater's assessment, as did Blum, a San Francisco investment banker who resigned as a Northwest director in January.
"Gary is not the kind of guy that ever throws his hands up. He'll be the last guy standing," said Blum, a longtime friend of Wilson's.
Wilson and Checchi have hefty baggage in the Twin Cities, their names still stirring vitriol among some Northwest workers and members of the business community. Many feel the pair personally made millions from buying Northwest and taking it public again -- which they did -- while loading Northwest with debt and mismanaging the airline in a way that resulted in thousands of workers losing their jobs and pensions being put at risk.
Cultural differences only added to the disconnect. Wilson, fraternity brother and tall, lanky star running back from Duke University, was always something of an outsider in the close-knit Twin Cities business community. While friend Checchi lived in Minneapolis for a time, Wilson made his home in Los Angeles.
Wilson declined repeated attempts to be interviewed for this story. Checchi also declined.
When Wilson systematically began cashing in his remaining 5 million or so shares this year, it was a red flag for Wall Street that Northwest was headed to bankruptcy. The timing of his last sale less than a month before Northwest filed for bankruptcy has raised questions of insider trading violations.
Northwest filed for bankruptcy Sept. 14. Wilson sold $1.8 million worth of Northwest stock between Aug. 18 and Aug. 26 under a pre-arranged trading plan, but didn't formally disclose it to the Securities and Exchange Commission until several weeks later. SEC rules require such sales be made within five business days. Wilson attributed the delay to an "administrative error."
Wilson may well have his future at Northwest decided for him. Corporate boards are typically booted and replaced in bankruptcy by whoever refinances the company, although that could take many months.
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