Rapid-American's balance sheet often resembled that of some Latin American country, with debt accounting for more than 80% of total net worth. When Riklis let his attention wander from his companies, there were disastrous consequences. But that, he says, was his fault, not the debt's. "If you make long-term investments and pay for them with long-term debt, you will not be in trouble," he says. "You must understand a basic principle: I have 20 years to pay it. In 20 years the rabbi and the dog will be able to converse."
Fixing his listener in the eye, he inquires politely: "You know the story?"
It's a parable from the Jewish Diaspora about the Polish landowner who orders the rabbi to teach the landowner's dog to talk, on pain of exterminating the local Jewish community. "So the rabbi says, 'All right, but I want you to know, it's going to take 10 years.' So all the people say, 'But rabbi, you're crazy. You'll never be able to teach the dog how to talk.' He says, 'Well, in 10 years, who knows? Maybe the landowner will die, maybe the dog will die . . . or maybe the dog will learn to talk.' "
The sense of Rapid-American being a debt-heavy ship waiting for the wave to overturn it kept Riklis controversial. One of his essential techniques still gets today's raiders cursed: After he gained control of a company by paying the biggest shareholders cash, everybody else would get his non-cash--not dollars, but paper securities. These might be shares of stock, or long-term bonds, or promissory notes. But as far as the recipient was concerned, the dollar values imprinted on them could be anything from a fair measure of their worth to a figment of the Riklis imagination. Many such shareholders chose to believe the worst and further diluted their assets by hiring lawyers to sue Riklis over the matter. Sometimes they even forced him to raise his offer.
But Riklis always kept his eye on the essential: To pay someone a million dollars, he had to have a million, cash, in hand. To pay someone a million dollars face value in 6% bonds, he only had to have $60,000 a year. The difference is the time left to make the dog talk. Riklis insists that the back end of the deal was always equal in value, if not better, than the front end, but tell that to the small shareholders who faced the chore of selling their Rapid-American funny money in a humorless bond market.
He would go to great lengths to cultivate the controlling shareholders, often tycoons like himself. Better if it was an older person inclined to cashing out, even if he did not realize it yet. That person was likely to find Riklis perched on his doorstep, making a gracious offer for his control block and being a pest for as long as it took.
So it was with Schenley International, the liquor distiller and distributor controlled by the imperious Lewis Rosenstiel, who was 70 when Riklis first approached him in 1961 and 75 when he closed the deal. "To make a deal with Lew Rosenstiel," Riklis says, "you had to sit down and listen to his crap and smother him with love and affection and cajole him and laugh at his jokes and get used to all the stories. When he calls you to come to Florida, you get on a plane and come to Florida, and normal businessmen don't do these things. They feel that a transaction is worth a certain price and that's it. That's not the way deals were made in those days. You had to be a real lover."
Another complaint was that he maintained too casual an air about the line dividing his part of Rapid from the public shareholders'. In formal terms, Riklis was Rapid's largest shareholder--but not its only one, for there were thousands of investors who had bought its stock on the open market. Nevertheless, he was often charged with running the company virtually as a private preserve, mixing his personal investments with Rapid business as if it were all one stew.
In 1978, the mixing of Riklis and Rapid affairs had become so thorough that the SEC hauled him in for some lengthy testimony about his financial condition, which Riklis delivered as if from the bottom of a very, very deep financial hole. He owed $60 million, personally, because of his private investments, and the SEC sued him for a series of transactions in which he sold off parts of Rapid to pay down its debt, then took personal loans from the buyers to help pay down his own debt. Riklis agreed to an injunction forcing him to separate Rapid's affairs from his multitudinous private deals. He also nursed a sour view of the typical stockholder as being some five-share owner who bought into the Riklis vision, only to start grousing and second-guessing. Three years later, he rid himself of these holders by taking Rapid private.