In the News New York Law Journal

Brighton Beach Memoir

Scott J. Gordon's road to partnership at Kirkland & Ellis began with the lucky break of his having been born an impressionable youth in Brighton Beach, that sea-breezed corner of Brooklyn renowned for Humorettes, celrays, malteds, egg creams, hot pretzels -- and, by the way, the most ferocious racquet sport competition in New York and probably the world.

Mr. Gordon, now 39, grew up just a kishke's throw from Garber Stadium in the legendary Brighton Beach Baths. An alert lad, he marveled at prowess of the neighborhood handballers -- the frighteningly graceful "alley crackers," so called for the sharp thwack of little rubber balls against gritty urban walls.

"No thanks, that hurts!" Mr. Gordon decided early on. "I'll use the paddle."

The rudiments of handball and paddleball being the same, Mr. Gordon learned what it took to succeed in athletics, Brighton Beach-style: lickety-split action in perfect synch with bullet-quick mental calculation. As time passed, Mr. Gordon learned further that the fundamentals of financial investment and a certain rarified specialty of the law are no different.

Which has led him now to describe his role at Kirkland in a relatively new and hot practice area as "Mr. Asset Securitization of New York City."

The Right Shot

He learned -- more than he realized in the years of hanging around Garber Stadium -- from the accomplishments of a neighborhood paddleball hustler of an earlier generation.

A man who went on to the higher stakes of Harvard and squash, and a colorful career in finance.

"He never hit anything but the right shot, the precise shot," said Mr. Gordon of the celebrated Victor Niederhoffer, a four-time world champion squash master and colorful Wall Street speculator. "He put [the squash shot] exactly where you weren't, and he always knew where you weren't going to be."

And how is that so different from what Mr. Gordon has been recently hired to do for Kirkland?

"If you know enough about an individual or a corporation -- their marginal cost curve, say, and their revenue curve -- then you know what their output is going to be," said Mr. Gordon, who favors the sort of conservative casual attire that would not likely tip anyone to his analytical impulse. "If you know enough, you can come to some quite firm conclusions."

In racquet sports, Brighton Beach-style, one learns from close observation, from hours and hours and days and days of toss-and-hit drills, from finally daring to play against the neighborhood sharpies, and from dreaming afterwards about the finer points of the game: about downcourt and backcourt feints and finesse strategy, the geometry and physics of floor versus wall and -- always -- keeping the antennae up for opportunity.

"I saw myself as the next Jimmy Connors," Mr. Gordon recollected of his youthful ambition.

But in addition to his tennis hero, Mr. Gordon likewise admired his father's career as a business executive.

`Capitalist Squash'

So, taking an opportunistic leaf from a chapter of Mr. Niederhoffer's life, Mr. Gordon left Brighton Beach for the University of Rochester, where he earned an MBA at the William E. Simon Graduate School of Business Administration. In keeping with the spirit of Mr. Niederhoffer, who famously declared that he played "capitalist squash," Mr. Gordon tried out for the Rochester squad.

"I was a sort of lower-down player on the varsity team," he said.

Even so, Scott Gordon had new techniques to dream about in squash, a game multiplied in complexity from paddleball by an enclosed box of six full striking surfaces. There were lob serves to conceptualize, and sidewall skimmers and ceiling blasters and backwall floaters and ankle-sizzling kill shots and -- always -- controlling the court, protecting one's island from the onslaught of an invading opponent.

And how is this elementally different from analyzing and quantifying risk and valuing expected cash flows? From seeking out originators of business assets that would produce cash flow streams, and issuing securities through lawyerly "Special Purpose Vehicles," known to investors as SPVs?

Mr. Gordon, one of a relative handful of attorneys around the country working flat-out in the growing asset securitization field, described the perfect SPV in remarkably squash-like terms:

"It's a little island with a big wall around it. It protects the assets from a lot of the risks of the outside world."

The assets at question would be homogenized cash stream potentials such as mortgage funds, collateralized debt, credit card revenues and, increasingly, entertainment royalties -- as in the notable case of rock-and-roller David Bowie, who securitized himself a few years ago with $55 million of so-called Bowie Bonds privately placed by Fahnestock & Company, the New York investment firm.

"You picture a group of assets going into the top of a box, with cash flow coming out the bottom," said Mr. Gordon. "It's like cooking. A lot of raw ingredients produce something edible at the other end.

"And if you sprinkle in some derivatives," Mr. Gordon said, adding now a new and spicy metaphor, "then you expand the possibilities."

Mr. Gordon said he basically acts as a lead attorney in putting together SPVs, working with "many parties around the table" in his transactions.

"In order to work effectively, you need to bring in many other disciplines -- professionals to do the drafting, tax lawyers, bankruptcy lawyers, ERISA lawyers," he said. "There are also the underwriters, and counsel for the originators [corporations]. Trustees will have their own counsel, and there are rating agencies, and the sometimes investors themselves have counsel."

The man who lured Mr. Gordon from his position as an associate at the firm Clifford Chance LLP with an offer he could not refuse -- partnership at Kirkland -- said he appreciated the Brighton Beach loquaciousness.

"He has the kind of demeanor we were looking for," said Kenneth P. Morrison, a partner in the Kirkland & Ellis Chicago headquarters who heads up the firm's asset securitization department. "We wanted somebody thoughtful and articulate, somebody attracted to the the opportunity and challenge of starting a securitization wing, if you will, in New York.

"Not to mention that he had excellent background."

Before going to law school -- Mr. Gordon earned his JD in 1993 at Fordham University School of Law -- he worked the trading floor for CIBC World Market Corporation. After Fordham, Mr. Gordon went to work as an associate with the firm Battle Fowler LLP, and later Clifford Chance.

Watch Out!

"My concentration [in asset securitization practice] went from about 25 percent as a first-year associate at Battle Fowler gradually to 75 percent in my fourth year, when I left for Clifford Chance," Mr. Gordon said.

Then came the unrefusable offer of partnership at Kirkland. Mr. Gordon began duties last November, and is soon to head a team of three -- including the additions of two associates from the Chicago office, Alex Fallis and Andres Mena.

"I wasn't interested in someone whose deal was that they had a whole lot of business they wanted to bring over to us," said Mr. Morrison. "I didn't want someone who'd be just a sort of stand-alone business. Stand-alone business can walk away.

"I wanted someone to come in and work with our existing clients, to become an integral part of Kirkland," he added, "and to work with new clients."

Kirkland's asset securitization program is currently a traditional one, according to Mr. Morrison. The firm develops SPVs on future cash flow receivables from such areas as automobile and truck finance, retail and wholesale leases and the asset-backed commercial paper market.

As for the likes of Bowie Bonds, said Mr. Morrison, "It's interesting, and I'd love to do those deals. And we probably will."

Mr. Morrison acknowledged that the entertainment business is a much faster track than Kirkland is accustomed to playing. But Mr. Gordon, after all, is a squash player who knows from change-up and speed.

"You start out with a very soft, delicate shot, placed where your opponent can't get it," he said. "After that -- watch out, the game gets very, very fast."


This article is reprinted with permission from the December 28, 2001 edition of the  New York Law Journal. c 2001 NLP IP Company