Induction of Harold H. Goldberg
Inducted November, 2000
HAL’S FIASI HALL OF FAME INDUCTION SPEECH Presented by Fred Pastore
Good evening ladies and gentleman. I am pleased and honored to be the one chosen to give the acceptance speech for Harold H. Goldberg’s posthumous entry into FIASI’s hall of fame. On behalf of his wife, carol, and all of Hal’s family members and friends, we thank the FIASI committee for this very prestigious award. A special thanks goes to Loretta Neuhaus who recommended Hal’s induction.
For those of you that knew Hal Goldberg, what I have to say will not be very revealing. Each one of you has your own favorite Hal story to tell.
For those who never knew him, you missed meeting someone very special, as anyone who met him just once will tell you.
In the nearly five years since his death, it is still very difficult for me to speak of Hal in the past tense. This is so not only because he was a close friend but because so much of what he taught me and others about business and people is still pertinent, yes even more so today in a world full of excesses.
Hal started with the dun and Bradstreet organization in 1952 as a credit reporter. While working and raising a family of three girls, he went to Brooklyn law school in the evening. He was on the dean’s list every year, graduated with honors and became a member of the New York bar. He also managed to find time to advance steadily within the ranks of the D&B organization, latterly as director of education in D&B’s general reporting and services division. In 1973, Moody’s president heard of Hal’s reputation as a strong financial analyst and offered Hal a new position with this fast growing D&B subsidiary. Hal was reluctant at first to make the move saying that he knew little about Moody’s rating system and for that matter bond analysis. But move he did. It soon was apparent that Hal had a special talent, a nose for analysis that enabled him to sniff out and separate only the important facts buried in a heap of otherwise trivial information. In quick succession Hal was promoted, first as head of Moody’s bond group and later, in the early 1980s, as Moody’s chairman of the rating committee, a position he held until retirement in 1995.
Now comes the difficult part. How to explain to you what was so very special about Hal.
Yes, he had integrity and was a terrific analyst- but that description fits many people. True, he worked extremely hard and he loved his work and his company - but so do others.
What was it that made him so very special?
I believe it was his unique ability to balance analysis with the very best of human qualities. At meetings, he would listen quietly and attentively, preferring to let his associates ask all the many detailed questions of management. When we thought we had all the answers, Hal would quietly ask the one big picture question we missed and the one management would often say: “I thought you’d never ask”!
Many times, it was a question that stumped management and required further researching on its part.
I believe this knack for asking the one or two right questions endeared him with most management teams, even if the answers resulted in a lower rating. They certainly did not relish the downgrades, but they always knew precisely why their ratings were lowered.
Issuers also would often ask him for his opinions on matters either industry related or company specific and Hal always would provide honest, sometimes painful answers.
I remember sitting in his office awaiting a call from the CFO of a very large company that was going to announce a mega acquisition that day. As soon as Hal heard the name of the to-be-acquired company, he exclaimed: “Tony, Tony, Tony (real name changed), this is the dumbest thing you’ve ever done. You’re buying a failing company!” Four years later, the proclamation came true and that multi billion-dollar acquisition had to be unwound at great expense and embarrassment to management.
On another occasion, I was present at a first time meeting with a very prominent media company. Its president was expounding, ad nauseum, on how superior his company was compared to the rest of the industry. After about an hour of this, Hal interrupted to ask, “if what you say is true, how come your margins are so lousy?” Well you would think that the president was given a jolt from a cattle prod. He sat bolt upright and began fuming and ranting, essentially ready to exit the meeting. However, the company’s chairman quietly told the president to sit down because that was a really good question. The chairman went on to explain that the company’s conservative accounting policies, not easily gleaned from the annual report, were the reasons for the lower margins and he carefully went through each of
the differences versus its peers. That one question was the deciding factor in assigning the first time rating.
Hal had three prime determinants for analysis and ratings. First and foremost was an evaluation of the quality of management and the independence of the board of directors. Second was properly evaluating the industry or industries in which the company operates. And last, was his focus on the footnotes to the financial statements in order to arrive at the true cash flow generating capabilities of a company.
If a new CEO was elected to turn around a troubled company and in Hal’s opinion he was the right choice, it didn’t matter that the company’s numbers suggested a far lower rating. He would argue to hold the rating to give new management an opportunity to fix the problems. And how often he was right!
On the other hand, if Hal believed that management was weak and incapable of damage repair, he would resort to the company’s numbers and industry trends to justify the lower rating.
Hal also had this unique ability to know who was the con artist and who was the straight shooter. The con artist always earned Hal’s “putz” award, which would remain in place until proven otherwise. Yes, Hal was open-minded too.
Hal insisted that we carefully read and analyze footnotes for real and potential liabilities that could affect the measure of true cash flow in the future.
As just one example, in the early 1980s Hal warned that the natural gas pipeline companies were setting themselves up for a disaster by issuing take or pay contracts to well owners without the assurance it had customers to buy the gas.
Pipeline management and financial analysts dismissed the risk, saying it was remote. However, a few years later the contracts became a huge burden, especially for Columbia Gas Systems, which in 1991 filed under chapter 11 of the bankruptcy act.
In another instance, at least 10 years ago Hal noticed that a number of companies were beginning to show large, unidentified “other” positive additions to their cash flow. After requesting a breakdown of the item, Hal learned that it came from two principal sources, pension plan gains and profits from retiree health plans (FASB 106). Both of the items, he felt, masked the true cash generating capabilities of a company because they were unrelated to operations. It is gratifying to see that recent wall street journal exposes have “uncovered” the practice.
The investment banking community also relied on Hal’s opinions. Many proposed financial instruments, particularly hybrids, were first run by Hal because the bankers knew that Hal would uncover all the warts. Hal gladly met with all of them; and would spend hours with the appropriate analysts to formulate a Moody’s opinion of the structure. More often than not, the banker wanted to know: “does the financing receive equity credit from Moody’s?” To which Hal often would reply that “… it walks like a duck and quacks like a duck, and so it’s a duck” which meant that Moody’s would consider it debt.
On other occasions, Hal pointed out risks in a new instrument that could negatively affect the bankers’ clients in the future under certain circumstances.
Sometimes they listened, other times they had to learn the hard way.
Hal was more than just a superb analyst; he really cared about people and gave freely to charities. He also had a sixth sense for knowing when someone had a personal problem. Unexpectedly, he would walk into your office, sit down and ask “how about lunch?” He never pried, but you knew he knew and he was there to listen if you wished him to. His advice was always practical, sound, and welcomed.
Hal also was a great teacher. He went out of his way to help an analyst understand and simplify a particularly complicated issue despite a busy schedule that often had him going to three or more issuer meetings a day.
His teaching methods sometimes were unorthodox but extremely effective. I was present on many an occasion with issuers where the lead analyst for the issuer (sometimes it was I) received a handwritten note from Hal that simply said: “let’s move on!” That meant you were asking too many nit picking, irrelevant questions.
On other occasions, his teaching methods could be quite severe and painful. I was present at an issuer meeting where the lead analyst was asking management questions that showed he did not read the company’s presentation beforehand.
Hal signaled his displeasure with several muted warning groans, but the analyst failed to recognize them and continued on. A few moments later Hal’s swiftly moving foot reached the analyst’s shins. And no, it was not me, -- that time!
Hal also had a great sense of humor and he loved repeating corny jokes that came with frequency from a dear Moody’s friend, Sam Gordon, who is with us tonight. A typical joke would be as follows: “you and I have known each other for many years. There’s nothing I wouldn’t do for you and I know there’s nothing you wouldn’t do for me. So let’s keep it that way. You don’t do anything for me and I won’t do anything for you.”
And then there was the time Hal attended a first time meeting with a newly elected CEO. Years earlier this fellow had sold his business to the company of which he was just elected CEO.
In the years following the sale, the acquired unit went from bad to worse and ultimately it was written off completely. Hal remembered the history and so the very first question he asked the new CEO was: “when are you going to give the money back?” Well, there was a sharp intake of air by everyone at the table and we all feared the worst. But to everyone’s surprise the fellow simply chuckled and said: “no, I’ve no intention of giving it back!” A year later, that same CEO began the company meeting with the comment: “and Hal, I’m still not giving it back!
Only Hal could get away with such an outrageous question and gain a person’s respect.
And it is this kind of respect and love that made it easy for Hal’s friends to raise a substantial amount of cash for the Harold H. Goldberg memorial scholarship fund at NYU’s stern school of business.
You also should know how much Hal loved his family, especially his seven grand children. On any given day, you could get a call from him asking you to come into his office. Always I wondered what did I do wrong this time!
But displayed prominently on his desk would be bundles of pictures of his grand children who just visited him a week or so before. He was so proud of them all; and they clung to him, especially Ariel.
I remember too the first time he learned that his daughter, Michele, was having twins. He was as excited as I ever saw him.
Breaking strict rules on no alcoholic beverages at Moody’s, Hal had a champagne party for us that day and invited Moody’s president.
He also was very proud of his wife, carol, who, like him, spent long, difficult hours
earning two masters degrees and teaching while raising a family of three girls. He loved his sisters, Norma who is here tonight, and Corinne; and he spoke fondly of his three son-in-laws who also were recipients of a tough Hal question from time to time.
Many paragraphs ago, if Hal were here, he would have passed me the aforementioned note that read, “let’s move on.” So I will conclude my remarks by again thanking everyone responsible for bestowing this accolade on a person I consider both my friend and brother.
