In January 1979, in the middle of the uproar that marked the fall of the Shah of Iran, Henry Ray Ross Perot signed the visitor’s book at the notorious Gasr prison in Tehran. He and a couple of colleagues had flown to visit two employees from his computer services company Electronic Data Systems Corp, Paul […]
In January 1979, in the middle of the uproar that marked the fall of the Shah of Iran, Henry Ray Ross Perot signed the visitor’s book at the notorious Gasr prison in Tehran. He and a couple of colleagues had flown to visit two employees from his computer services company Electronic Data Systems Corp, Paul Chiapparone and Billy Gaylord, who had been seized by the authorities after a murky dispute with the Shah’s administration. The incarcerated twosome, who had been in custody in the chaotic foreign jail in the middle of a revolution for over a month, were naturally cheered by the visit of their charismatic billionaire boss. But Gaylord, who had been project manager for the troubled contract to computerize the Iranian health service, incredibly, felt it necessary to apologize to the folksy Texan. For he had grown a moustache during his weeks in custody – and as he knew all too well, that was the kind of thing Ross just could not abide. This slightly bizarre scene says more about the culture of loyalty and devotion that Perot was able to successfully instill at EDS than about the romantic escapade, later dramatized by writer Ken Follett as the story of Perot busting out his employees from under the noses of the mullahs as On Wings Of Eagles.
By Gary Flood
EDS and Perot have been separate for ten years now, and the computer services giant is once again an independent, and very successful, business. But Perot’s EDS, as well as the complex man who founded it and who has just again run unsuccessfully for the Presidency of the United States, are the fascinating subjects of a new biography, Citizen Perot, written by a former Wall Street lawyer, Gerald Posner. Citizen Perot presents a complex, often controversial, and almost always amusing picture of this unique individual. A mixture of huckster, brilliant entrepreneur, paranoid flake, patriot, intriguer, vicious streetfighter and indignant prude, Perot deserves study as much for his own idiosyncratic sake as for the fact that he founded the computer services industry, and has twice won the votes of a good many of his countrymen to become their ‘chief executive officer’. There are a multitude of stories and legends about the man – and most are either confirmed or debunked in the book. But the events alone are enough – like the fact that the man who bemoans the invidious nature of the US government became the nation’s first ‘Welfare Billionaire’ by computerizing its 1960s welfare services at gross profit. For example, Perot, who had been running EDS out of the offices of Texas Blue Cross for three years, and from which health care provider he had been taking a $20,000 yearly check as an employee, won the contract to build its Medicare system with no other bidder being entertained. A Social Security check up in the early 1970s into EDS’ astonishing success in Medicare and Medicaid estimated that it took about $0.36 to process a claim. A fair profit of over 50%, it judged, would be made by billing at $0.55 per claim. But EDS was billing $1.06, a 200% mark up – the kind of activity that led the company to be accused of anti-trust behavior. Although 90% of EDS’ business was from such contracts at the time, Perot saw no problem in telling The Dallas Morning News in 1970 that We don’t like government business. We don’t do any business direct with the government. In its initial public offering prospectus in 1968 the company claimed most sales were to insurance or finance, when three years later it was still sitting on over 90% of all US government deals for Medicare. Perot’s first draft of the IPO document was scuttled by the lawyers, who couldn’t handle the Horatio Alger angle: All alone, against overwhelming odds, with little money…. EDS was a huge success, for which Perot deserves the credit. Citizen Perot tells how Perot created an almost cult-like devotion amongst his mainly ex-Vietnam veteran staffers, through a combination of empathy and humiliation. He treated me like a dog, but I made a fortune because of him, says one. The clean- cut EDSers, swar
ming into a new data centre like paramilitaries, inspired fear and awe in equal amounts in customers and rivals. They are like the Marine Corps, commented business guru Tom Peters. Heck, they are the Marine Corps. The Marine Corps style EDS did lose one campaign: Ross screwed up big time on Wall Street. In 1970 many small brokerage firms were crashing, leading to real fears that the US financial system could collapse. A Crisis Committee of the bigger firms persuaded the Nixon administration, of which Perot was a supposed intimate, to ask rich outsider Perot to step in and prop up the system. Perot bought a struggling branch of Du Pont, and was set to bring his style of down-home wisdom and militaristic discipline to sybaritic New York. There was a culture clash you wouldn’t believe, the book quotes a Perot colleague. Perot eventually lost $70m in the venture, and left to lick his wounds. But he had not lost his appetite for a good fight. When EDS lost its most prestigious health care computer services contract in Texas to a rival, Ross decided to fight back. The strategy included a covert press onslaught to question the winning company’s competence and financial stability; a whispering campaign in local government circles that bribery and payoffs had been involved; secret investigation of the backgrounds of the committee members who had approved the bid, including videotaping their liaisons with ‘women not their wives’, as well as covert surveillance of executives; filing of numerous lawsuits; and enormous personal pressure by Perot on individuals important in the selection process. He did some job. Better than the CIA, muttered an awed observer.
The contract reverted to EDS, and so nasty had the fight been that when it came up for tender a couple of years later no other services company dared bid. Perot’s gift for slippery dealing shines brightest, perhaps, in his deals with General Motors Corp, which plainly just did not get him at all. Perot sold EDS, he still directly owned 46%, in 1984 for $2.55bn in cash and stock to General Motors. He personally made $930m from the deal, pocketing a further 5.5 million shares guaranteed to be worth $700m. But while EDS eventually thrived under General Motors’ roof, Perot’s antics so infuriated the General Motors’ leader, Roger Smith, that the board eventually wrote a check for another $742.8m to be rid of him less than two years later. But that was not quite enough for Ross. The day the payoff was announced he staggered reporters by issuing a press release cheeky enough to slam General Motors for being prepared to pay him that much money at a time when it was closing 11 plants and firing 30,000 workers. Yet that amount was what he had demanded. For an insight into how one and the same man could ask to be let out of the Navy because his fellow sailors swore too much, could believe a hit squad of Black Panthers hired by the Viet Cong scaled the wall of his compound before being scared off by his dogs – and with no contradiction become one of the most popular independent politicians in the world’s greatest country – Citizen Perot is definitely the book to buy. When journalists asked him following the General Motors debacle if the automaker had paid him all that money just to get shot of him, Perot quipped I would hope not. My philosophy is, ‘To know me is to love me’. Somehow, one just cannot help agreeing.
Citizen Perot: His Life And Times by Gerald Posner is published by Random House and is priced at $25.ISBN 0-679-44731-8.