The Last Tycoon

The grass had to go. If two former presidents, a mayor, a speaker of the state assembly and Walter Shorenstein, whose idea thi sehole thing was – if they were going to be rolling up in their cars, big carnauba-waxed antique convertibles, the kind that are high enough off the ground to allow someone to peruse the pavement in passing and note, with an eye practiced from many hours on the greens, the presence of bermuda between the sun-bright squares of sidewalk concret, then the grass had to fgo. It didn't matter that there was going to be a carpet on top of it, or that there would be standing along the edge of the carpet, or that in fact the greenery in question was scarcely a quarter-inch tall, roots included – this was a 50-year celebration of the founding of the United Nations, a party Walter Shorenstein proposed and gave $1 million to stage, a party that Walter Shorenstein thought the city should have in the way, perhaps, that other people want to take strangers aside and tell them how to raise their children, and the grass, at the moment, was not appropriate. And so there were city workers in front of the building on Van Ness where the big cars would be arriving, needling the offending chlorophyll up and out into neat piles, sweeping it into bins, carrying it off.

Perhaps it seems like a lonely job, flossing sidewalks on the city's dime. In other circumstances, it might well be. But outside the Herbst Theatre on the last Tuesday in April, the public works people had plenty of other city employees around to keep them company. After all, there were a lot of other things to be done. There was the bus stop, for one, which was to be wrapped like a police exhibit with yellow caution tape. There was the Van Ness traffic – diverted for blocks in both directions by a phalanx of police. There were the parking meters: patrolled, with tickets and low trucks in equal measure. Gutters: swept. Rooftops: secured, sharpshooters above and across the street, rifles bristling like polished proboscises in the late-morning sun.

In fact, so complete were the city's preparations for Walter Shorenstein's United Nations anniversary party that by the time the first of the vintage cars plump with politicians touched the tongue of red Astroturf running atop the dental-fresh sidewalk from curb to door, only one thing was missing: the public.

Now, it' s not that the public wasn't invited. The public was invited. It was perfectly welcome to make its way to curbside, to stand there and to cheer as the ex-presidents popped from car to carpet. But the public declined the invitation. It party pooped. Outside the Herbst, at Walter Shorenstein's UN50 kickoff celebration, there were more participants, city employees and news people than actial, authentic celebrants. Apparently, the pull of a politician-packed Packard isn't over-powering, no matter how expensive the festivities are. Which brings us to our question: Who is this Walter Shorenstein, anyway? Why do ex-presidents sing his praises? Why do progressives hate his guts? Why doesn't the public appear at his parties? And how much, exactly, does his money buy?

It could be that the best place to start this story is inside the theater, where Walter Shorenstein is at the podium. For a man worth an estimated $300 million, a man who earned all that money himself, Walter Shorenstein is not standing tall. He's pretty much keeping his eyes pasted on the paper in front of him, peeking only periodically up over the rims of his glasses at the people, the ex-presidents, the press and the empty red seats in front of him. As he introduces Jimmy Carter, Shorenstein seems unaware that he's smacking his lips, a popcorn sound into the microphone, a counterpoint of sorts to the slow roll of his speaking voice, which contains inflections of a borough just east of Manhattan. Geralf Fowd, he says, introducing the man who pardoned Richard Nixon. I'm awhnuhued, Walter Shorenstein says, introducing Carter. On this particular day, Walter Shorenstein is wearing a blue suit, a white shirt, a yellow-and-blue tie with a lacy stained-glass pattern on it, and his skin, as it rises into view out of his shirt collar up and across the top of his head, is the warm blush color of rossa Verona marble. Those things are not what he's known for, however. It might be better to start with the things that Walter Shorenstein is known for. The San Francisco Giants, for one. Two years ago, Walter Shorenstein saved the Giants. Without Walter Shorenstein, the Giants would probably be in St. Petersburg as we speak, playing in a warm indoor stadium bursting with beery retirees. There's his charity work, too: Walter Shorenstein is the single largest donor in the U.S. to the United Way. He gave money for the Vietnam Orhpans Airlift at the end of the war; these days he forks it out for art museums, for earthquake relief, for conferences that he's entused over. He has had a center at Harvard University named after a daughter who died of cancer. He is a major fundraiser – and donator of his own money – to the Democratic Party. So much so that three Democratic presidential candidates have called him “Mr. Democrat.” And he has his famous friends: Teddy Kennedy, for example, and Diane Sawyer, who have been knownn to peer moist-eyed into video cameras on his behalf. But actually, that's not it either. The best – the only- place to start is where Walter Shorenstein himself started: San Francisco real estate. Walter Shorenstein owns one-quarter of downtown San Francisco. Chances are, if you're standing on a street corner in the Financial District, you are literally in his shadow.

Think, for a minute, of the places in and outside the city where you can see what Walter Shorenstein built or owns. Twin Peaks, for one. From there, the spires of downtown look palm-size, as if you could pick them up, shake them upside down and watch the snow fall. From the two bridges, as well – east and north, the buildings greet you as you come into town. There's the flatlands, down south by the railroad tracks, where in the late afternoon the skyscrapers look like they're on TV, almost, shining with reflected light. From right underneath, the buidlings blot out the sky, seeming to spin and fall as the clouds move overhead. It wasn't always this way. Not, at least, in 1945, the year the United Nations was formed here, the year before Walter Shorenstein got discharged from the Air Force and came to the city to sell real estate. [page]

“San Francisco after the war was kind od uniquely suited for commercial real estate penetration,” says Clavin Welch, director of the Council of Community Housing Organizations, an affordable housing group. “Walter Shorenstein was kind of the pioneer in terms of San Francisco developers. He was the major San Francisco player.”

“He had a vision,” says state Rep. John Burton. “Some people wouldn't like the vision – I'm not the world's greatest fan of high-rises – but I think Walter's the guy who saw we could be a commercial center, and that he could make a ton of money.”

From a $500 commission on a sale of a vacant building in 1946, Walter Shorenstein built a company that now owns or operates 10 million square feet of class-A commercial office space in San Francisco. That's more square feet than anyone else, and more than anyone else is ever likely to acquire, thanks to a bit of government intervention called growth control. By curtailing the height, width and depth of future developments, the growth control movement of the '80s cemented the real estate hegemony of Walter Shorenstein. His skyline of glass and steel may be sold, may even collapse in an earthquake; still, the explosion of construction he participated in – which made him San Francisco's buidling baron – will never happen again.

But wheter Walter Shorenstein's vision for – and grip on – downtwon San Francisco has been a good thing for the city as a whole is another question.

Consider Muni, for a moment. In San Francisco, there's wide agreement that Muni could use more money. The thing that people tend to disagree on is where the money should come from. Political progressives – the people who fought the high-rises in the '80s – finger downtown. Downtown gives the finger right back.

An example: Last fall, there was a proposition on the ballot that would have created a downtown tax district to raise more money for Muni. It was a logic-based agrument: The area that Muni serves most should pay more. Tax, however, is not a popular word in business circles – unless they're levying it themselves. Which, they did. To crush the ballot measure, the big commercial landlords sent a letter around asking their tenants for cash donations. The request: a voluntary “tax” of 2.5 cetns per square foot of office space occupied, payable to the Committee Against Proposition O. Tenants were very exact in their remittances: $1,712.35, $4,767.46, $836.88, according to records filed with the city's Registrar of Voters. The math alone makes the mind boggle. Shorenstein and his affiliated companies contributed more than $97,000. Thanks to this real estate blitz, the measure went down to defeat.

“It's very shortsighted for the business community to cut the money off for the operations of the city,” says attorney Sue Hestor, an opponent of high-rises. “It's basic greed. Without transit service their property isn't valuable because people can't get to it.”

“It has to do, eve, with the meaning of the city,” says Richard de Leon, a San Francisco State University political science professor and the author of Left Coast City, a book on S.F.'s development politics. “Is it just a place to build tall buildings? Or is it a place where people live a communal life?”

Well, maybe the city could be both: home to skyscrapers, home to people. That's the argument, in any case, at the center of another tax debate concerning downtown in general and, given his holdings, Shorenstein in particular. Put another way, the issue is this: Do the big buidlings pay enough in property taxes?

Opening this debate is like peering into a can of worms and realizing all of them are armed to the teeth. Nobody's neutral – people think either that downtown is sluicing service money out of the economy or that ant-downtown politics are forcing corporate jobs to flee. The debate's rancor is fueled by a general anxiety over finances, because San Francisco is $100 million in the hole. That's a lot of cash, especially now that the real estate market is down, which makes people think they're paying too much in property taxes. Property tax is the city's prime source of revenue, financing everything from police to firefighters to public works. But as we've seen, commercial property owners aren't keen on paying taxes unless they're exacting them. In 1993, more than 7,000 people requested new assessments from the city, asking for permission to pay less tax. Most of those people were homeowners, but there were plenty of commercial landlords in the mix. Walter Shorenstein was one of them. Among the buildings he wanted reassessed: the Bank of America tower, at 555 California.

You know which one that is. The big brown behemoth at the corner of Kearny and Pine, 53 stories of glass and granite, as in sync with the San Francsico aesthic as Victorian grill-work would be in a Japanese rock garden. In 1985, Walter Shorenstein bought the buidling from the bank, which was going through hard times. He paid $660 million for it, at the time the highest price ever paid in a U.S. real estate transaction – and about $100 million than the bank itself thought the building was worth, according to Dan Costello, the executive vice president who handled the sale for BofA. The bank had resisted putting an asking price on the building, figuring that a savvy investor or a big ego would be willing to pay extra for the pleasure of owning San Francisco's top tower, Costello says, adding: “Which is what happened.” [page]

The sale was good for the bank, and it was good for Walter Shorenstein, imagewise at least. The '80s, if you recall, swamped San Francisco in an ocean of out-of-town development cash, threatening to sink Walter Shorenstein's hometown show. Buying the biggest building for the highest price re-established Shorenstein as the city's pre-eminent real estate figure. But the sale was not as immediately beneficial for San Francisco itself.

After buying the building and the bragging rights, reports at the time state, Shorenstein argued with the city whether he would have to pay increased taxes on the property under Prop. 13. The law, which amended the state constitution, holds tax increases on real estate down to 2.5 percent a year. If a piece of property changes hands, the tax jumps to the current assessed value of the property. The city – which wanted more money – prevailed after a court fight.

Now Walter Shorenstein is making another attempt to pay less property tax on the Bank of America building, which he currently owns jointly with the bank itself. The Bank of America property is the most prestigious piece of real estate on the West Coast, one of the best business addresses in the country, utterly irreplaceable given current growth restrictions, widely known to be well-managed, and believed to be nearly full. It is assessed at $583 million. Walter Shorenstein has filed an appeal with the city saying the assessment is 20 percent too high. The appeal is slated to be heard in July.

Commercial assessment appeals are handled like this: The city presents one appraisal, the property owners counter with their own appraisal. The final decision is made by a three-member assessment appeals board, one of whose members is Peter Fatooh.

According to Fatooh's disclosure form, he is a Shorenstein employee. Although he does not participate in Shorenstein appeals, as a board member he is privy to the income statements of many of Shorenstein's competitors. Additionally, he makes assessment decisions affecting the finances of other city landlords and developers. The Assessor's Office has viewed this arrangement as a conflict of interest in the past, and at one point asked the board to remove him from a case, but was unsuccessful.

But the presence of a Shorenstein employee on the influential city board isn't the only thing about the property-tax appeals process that irks Calvin Welch. The housing advocate finds fault with the fact that in San Francisco, a commercial landlord can ask for a lower property tax assessment based on a complaint that rents are down. Oddly, renters can't appeal to landlords for a reduction in rent if their income is down, Welch says, using the example to illustrate how Shorenstein and other big commercial landlords get a break from the city.

“It's an incredible riggin of the tax system,” Welch says. “These guys are classic takers. Classic takers. [Shorenstein] makes money on infrastructure that he does everything in the world to avoid paying for. He and his son are in my estimation exactly what is wrong with the San Francisco business community.”

Strangely enough, Giovanni and Cosimo de Medici, father and son, might have agreed with that opinion.

The Medicis, you may remember, were a fabulously wealthy family in 15th-century Florence. Giovanni was the dynast – he wasn't the first wealthy Medici, but he was the formitive one. A banker by trade,he was also a politician, a builder, a churchgoer, a patron of artists and a friend to the poor. Kind of an all-around guy in his city-state, and favorably viewed as such. British author Christopher Hibbert, in his book The House of Medici: Its Rise and Fall, presents Giovanni's philosophy this way: live in a modest house, work behind the scenes, be discreet in exercising power, never display any pride and don't forget to build lots of buildings.

There came a time in Florence when the city needed money for its war with Milan. Giovanni and Cosimo – discreetly – took the opportunity to work out a new taxation system, one that was based, for a change, on people's ability to pay. No sense forcing the poor to pay for the rich, in other words.

“In these circumstances,” James Cleugh writes in his book The Medici, “the action of the Medici in themselves paying up the arrears of taxation owed by their friends, in persuading families associated with them also to contribute, and in forcing the nobility to pay its own share, further enhanced Medicean popularity.”

The Medicis, like other ruling families in other cities, had their code of honor. Indeed, the idea of linking power and ethics is an old one. In The Care of the Self, volume three of his The History of Sexuality, Michael Foucault writes:

It was one of the most constant themes of Greek political thought that a city could be happy and well-governed only if its leaders were virtuous, and inversely, that a good constitution and wise laws were decisive factors for the right conduct of magistrates and citizens…

We are aware of the importance assumed by the problem of the emperors' virtue, of their private life, and of their ability to control their passions, which is seen as the guarantee that they will themselves be able to set a limit on the exercise of their political power. But this principle applies to anyone who governs: he must attent to himself, guide his own soul, establish his own ethos.

Pharse it another way, and it's a familiar idea: Pretty is as pretty does. Think of the way a skyscraper is built. The glass curtain wall can be seen from the street, but it's literally window dressing. The steel interior, hidden from view, holds the building together. Prominent people know the value of a clean facade. It's why they have always tried to control the flow of information about themselves. They have to care what the masses think. [page]

Walter Shorenstein, the person, is 80 years old. When he's in the city, he lives in Sea Cliff. The house is modest, as millionaires' mansions go. It is tan, stuccoed and shuttered on the street side. Of course, Walter Shorenstein doesn't need a fancy home. He can point out all the tall buildings he owns – even better, he can ride the elevators up into them and literally look down on everyone else in the city.

At his house, he's at the ground level. The entrance is protected: an iron gate, greenery, the warning sign posted by an alarm company. Turn your head as you pass his residence, however, and you can see from the street through the gate through the front door through the house out the window to the sea, where bare glass gives out onto the waves of the Pacific, smashing to shore. Well-protected, in other words, but somehow exposed.

When I called Walter Shorenstein's office, in the Bank of America building, his assistant Tess Martin said she would pass along my request for an interview. “He makes all his own appointments,” she told me.

The next day, she called back. “He said he will not be giving out interviews anymore,” she said.

“Period?” I said.
“Period,” she said.
“Why is that?” I said.

“I don't ask for explanations,” she said. “I just pass along what he tells me to.”

His son, Douglas, and his daughter, Carole, don't return our phone calls. His friends and business colleagues, for the most part, decline comment, as well, or talk only in the most general and generous terms. There are things that people will say about Walter Shorenstein: that he's very smart. That he is secure, ego-wise. That he drives his own car. That he's been seen about town in a sporty Mercedes. That he has a sense of humor that could remind you of Mel Brooks. That he isn't always honey and cream. One of his employees does confide that in almost four decades, he hasn't stayed home for two weeks in a row. That he possesses drive, that he strives, and if he sees you on the street, he'll stop to talk. That if you didn't already know that he had $300 million to call his own, you probably wouldn't guess it just by looking at him.

Oh, and that the Nancy Novack lawsuit was very surprising.
From 1981 to 1991, Nancy Novack was Walter Shorenstein's executive assistant. In 1992, she filed suit against the Shorenstein Company, charging the organization as a whole and Walter Shorenstein individually with, among other things, sexual discrimination and sexual harassment. Eventually, Novack and Shorenstein settled the case out of court with the stipualtion that there will be penalities involved if Novack or her attorneys talk about it, even if all they talk about is nor bein gable to talk about it. These penalties seem to be taken quite seriously by the former plaintiff and her lawyers; they're altogether mum. Novack's psychiatrist, Felix Polk, also slammed the door on an interview request, leaving this voice-mail message: “We talked earlier about your request for me to comment on Nancy Novack's suit against Shorenstein. She would like me not to do that and I also am reluctant to do that so let's not do that.” It was Bob Lieber, Shorenstein's attorney in the case, in fact, who openly mentioned the penalties: “If you have gotten talk from Nancy Novack about this, if we found out that such talk tok place,: he said instantaneously as I introduced myself, then Walter Shorenstein would be entitled to invoke the fines.

But although no one is talking, and most of the record is sealed, the 700-odd pages of the Novack v. Shorenstein court filed shed some light on Novack's allegations.

Nancy Novack claims in a deposition and documents on file at the San Francisco Superior Court that while she was employed at the Shorenstein Company, she received money from Walter Shorenstein for her son'e college education and to help her son recover from a violent sexual assault.

In total, the amount of money paid was $12,000, she said: $5,000 for her son's education, $7,000 for the aftermath of the assault.

Nancy Novack was deposed for seven days by Bob Lieber. Novack's attorney at the deposition was Barbara Lawless. Walter Shorenstein was not deposed, and there is no public account of his version of events, except press reports at the time, containing his denials. According to available deposition transcripts, this is what Novack says happened:

Attorney Lieber: Did you have any other dialogue with Mr. Shorenstein on these occasions about the loan, about other matters in association with the loan?

Novack: He would come back and he would hand me the check and I would say “thank you.” And then he would say, “you don't show very much appreciation. I expect more appreciation than that.”

Attorney Lieber: Yes? Then what did you do?
Novack: And what did I do? I said, “thank you very much,” and I tried to leave the room and. This would set up a predictable sequence of evetns of him trying to grab me and fondle me.

Attorney Lieber: How would he try to grab you?
Novack: We would probably both be standing. I mean, the scenario is the same each time. We would both be standing. He would take his glasses off, put them down on the desk. He would hand me the check. I would say, “thank you very much. Steve and I appreciate this. I understand how this is set up.” And I would start to leave the room and he would say, “you're not showing very much appreciation for what I'm doing. Come here. Can't you come here and show me some appreciation? [page]

And I would say, you know, that I said, “I appreciate it” or something like that – and try to kiss me. And I would say, “Okay, okay,” and start to push him away. And he would grab my breast. And I would say, “okay, that's enough. Please stop.” And he would grab my hand and put it on his penis and I would say, “Okay, I have got to get out of here. I don't want this in my life. Please let me go.” And I would try to get out of there as fast as I can.

And different times it was different, but usually he would block the door so I couldn't get out and stand in front of the door. He would push me up against the wall. Sometimes he would try to put his hand up my blouse or up my sweater. At other times he tried to put his hands up my skirt. He grabbed my hand and tried to make me rub his penis. I would get upset. Sometimes I cried. I begged him to stop this. That is was very unacceptable to me and not okay in my life. And I sometimes would run out the other door. Sometimes I would run out the regular door.

Attorney Lieber: On how many occasions did this occur between the fall of 1985 and the summer of 1991?

Attorney Lawless: I have to object there. Are you taling about the sexual touching or are you talking about the money-related transaction? Just so we're clear.

Attorney Lieber: The combination of the money-related transaction and the sexual touching.

Novack: The sexual touching would happen not only related to money. It would happen very predictably. Whenever I asked for anything from a day off, from a vacation, from late Friday afternoons when he wanted me to stay late and work and I didn't want to and anyone else had left the office, and Stan Berger and other people had left it would happen.

Continued…

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