Hungry but Hopeful in NYCAuthor(s): Tim HarperSource: ABA Journal, Vol. 70, No. 12 (December 1984), pp. 70-74Published by: American Bar AssociationStable URL: http://www.jstor.org/stable/20757516 .

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PROFILE

Hungry but Hopeful in NYC

By Tim Harper

Richard Heller contemplated the bank account balance of Krassy & Heller, P.C., and smiled a crooked little smile. In six short months it had gone from an initial $40,000?$20,000 each from him and his partner, Joseph Krassy?to less than $1,000. Heller thought about the $70,000 an

nual salary he had given up to start his own fledgling firm specializing in blue sky securities law.

A lopsided grin He thought about the clothes he

hadn't bought, the vacations he hadn't taken, the dinners he hadn't tasted. He thought about how, for the first time, he had dipped into his savings to pay the bills at home. And how, at 32, after hav ing quit for a year, he had started smok ing again.

But Heller brightened considerably when asked if he had any regrets. No, he said. None. He broke into a huge, lopsided grin when asked if Krassy &

Heller, the law firm, was going to make it. He talked about how $5,000 was sup posed to be coming in the next week, $6,000 the following week and maybe a lot more in the weeks after that if he and Krassy corralled a couple of clients they were pursuing.

"We're not going to become mil

lionaires," he allowed. 44But we do see a

more secure day-to-day existence than we have now."

Hungry and hopeful Krassy & Heller is different from

many baby law firms. It's in Manhattan, for one thing. And before teaming up, the two partners were both well-paid,

recognized authorities in their corner of the law.

But in many ways Joseph Krassy and Richard Heller are like any other young lawyers starting their own law firm: hun

gry but hopeful, often chagrined and al ways challenged, depressed one day and high-five happy the next.

They wrote and then tore up their own partnership agreements and negoti ated whose name would go first. They found their own office space, hired (and fired) their own secretary, did their own decorating and wired their own phones. In their practice they don't know what they're going to earn from one month to the next, they write out their own checks to pay the bills and?to keep doing all of the above?they find their own clients.

Krassy, 40, the Budapest-born son of

Hungarian immigrants, grew up in New York and now lives in New Jersey. He is a lean man with thick, graying hair and a

dapper mustache. He wears well-cut

suits, shirts with sparkling white collars and golden links in french cuffs.

After being graduated from Fordham, he served in the Air Force. The military discipline lingers: he runs up to five miles and smokes no more than five cig arettes a day. When he left the service, he and his wife, son and daughter, now 17 and 15 respectively, moved back to

New York, where Krassy took a job as a bank systems analyst. "I soon had a

sense, however, my destiny was not in

banking," he said.

He went back to Fordham Law School at night. After graduation in 1976, he went to Cleary, Gottlieb, Steen

& Hamilton, where he was put in charge of the firm's blue-sky work as a "perma nent associate" with no chance of mak

ing partner. Four years later he switched to an

other big New York firm, Wilkie Farr & Gallagher, where he had the opportunity to make partner and build up the blue sky department.

An inexhaustible array While Krassy is sleek, Rich Heller is

more puppyish, a likeable, friendly sort with almost-reddish brown hair and a

beard that might look a little better were it thicker. He is always on some sort of diet, although regular basketball and tennis keep him reasonably fit and only a few pounds overweight.

Heller, an ABA member since 1979, grew up in New Jersey but now lives in Manhattan. He has a seemingly inex haustible array of friends and relatives marching forward to help him find jobs, loans, offices, carpeting, clients, what ever. After graduation from Rutgers in 1974, he used his family connections? his father is in the furniture business?to

Richard Heller: No regrets.

ABA Journal, The Lawyer's Magazine Photography by Jeanne Strongin

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land a job as a salesman in a Virginia furniture store.

"It was not my forte," he said.

He was graduated from Wake Forest Law School in 1978 and became a blue sky specialist. Like Heller, he was hired as a permanent associate, with no

chance at partner, at Cahill Gordon & Reindel in New York. In early 1983 he was approached by another big New York firm, Fried Frank Harris Shriver & Jacobson, to create and direct its blue

sky department.

Gilt-edged paper Blue sky is one of the most arcane

and antiseptic areas of the law. Put sim

ply, it is state regulation of securities, a movement that started in the Midwest after the turn of the century and spread to the coasts well before the federal Se curities and Exchange Commission was

created in 1933. The aim was to protect innocent citizens from flim-flam men

peddling fancy but worthless gilt-edged paper to an unsophisticated but cash

rich and investment-crazy America. The name comes from a 1917 U.S. Su

preme Court case, Hall v. Geiger-Jones Co., 242 U.S. 539. which upheld the Kansas and Ohio laws protecting the rubes from "speculative schemes which

have no more basis than so many feet of

blue sky." It could just as easily have become Brooklyn Bridge law.

Every time a security changes hands, there are blue-sky considerations. But

for many big law firms blue sky is a headache, a loss leader, a necessary

The Krassy and Heller compromise: top billing for Krassy, a Midtown address for Heller.

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evil. With 50 sets of state laws to be considered, blue sky represents re-in

venting the wheel for every big deal. That kind of expertise is needed only once in a while, and no one walks in the door with a multimillion-dollar deal just because a firm has a good reputation for blue-sky law. Yet an overlooked blue

sky technicality can sour a big deal and even send people to jail. And, after all, it would be embarrassing for a big firm wooing a big client to admit it couldn't handle the entire package in house.

Many cups of coffee There are only three or four dozen

lawyers in New York who are part of what they call the blue-sky community, so Krassy and Heller quickly got to know each other. They became friendly business associates but not really friends. They called each other to talk about different deals and strategies, and compared notes on the latest blue-sky developments here and there.

One afternoon in August 1983 they finished a business lunch at Delmon ico's, and over coffee Heller began dreaming aloud about how great it would be to start a strictly blue-sky law firm. As they drank more coffee and talked, they realized they had shared a dream for a long time. "Joe got pretty excited about it," Heller said. "His ex citement caused me to think about him as a real-life partner. From my point of view, he had the seasoning I felt I lacked."

"What both of us wanted was an op

portunity to prove ourselves in an inde

pendent environment," Krassy said. "I

didn't have qualms about Richard. My principal reservation was that blue sky was a specialization sewed up by the major firms."

Neither said anything that day at lunch, nor do they say much today, about their apparent dead ends at the big firms. Heller was a permanent associate

at Fried Frank, and Krassy felt his chances for partner were slim because

Wilkie Farr was retrenching after two years of rapid expansion. For whatever reasons, they concentrated on the

positive aspects of a new venture rather

than the negatives of the current jobs.

Bringing the news home Both men went home that night and

told their wives they might have finally found the right situation for founding a firm.

"We decided together," recalled Marge Krassy, a former nursing admin

istrator who now teaches natural child

birth. "I was probably more encourag

ing. I could see this was something he wanted to do. The only question was whether this was the right opportunity."

44We constantly talked about it," said Nancy Heller, an office manager for a

plastic surgeon. 441 said we should do it. Maybe if I knew more about blue-sky law I wouldn't have said that."

The talking went on, tentatively, for two months. Heller felt as if he was the one pushing, largely because Krassy was older, better established and had a home and family?more to lose, in other words. The two couples were in Puerto Rico in October 1983 for the annual con vention of the North American Se curities Administrators Association. In a hotel hallway Krassy and Heller ran into each other as they hurried to meetings in opposite directions.

44Have you thought about it?" Heller asked.

44Yeah," Krassy said. "I'm com

mitted."

4'Great," Heller said over his shoul

der. 4Talk to you later."

So Krassy & Heller was born. If it were a scene in a movie, Willie Nelson would be in the background singing Irv ing Berlin's 44Blue Skies"?"nothing but blue skies, from now on."

Getting financing That night at dinner the two men and

their wives got to know each other a bit better.

441 liked them immediately," Nancy Heller said. 4Tt was important that I thought Joe was competent and nice and aggressive in business, but I trusted Richard's instincts. It was not that im portant whether I liked them or not; it was a business arrangement. But it was

a bonus that I did like them." Through the rest of October and

November, Heller and Krassy did most of their planning over the telephone. Heller quit Fried Frank after Thanksgiv ing 1983, and his one-bedroom apart

ment on Manhattan's Upper East Side became the temporary office. Krassy quit his job at Wilkie Farr in mid-De cember, after being assured he would still get his $4,000 year-end bonus.

"Financing was our first and foremost

concern," Heller said.

Heller's brother's wife suggested he apply for a loan at the suburban New Jersey bank where she was vice presi dent. He did, and got a $27,000 un secured loan at 2.5 percent over the

prime rate. Krassy went to the Chemical Bank, where Wilkie Farr had its ac counts, and talked to account officer

Joan Thomas. She approved him for a $30,000 loan, also unsecured but at only three-quarters of a point over the prime. She offered the same deal to Heller, who took it and paid off the New Jersey loan.

"They were an exception," Thomas

said later. "Joe Krassy was with a firm that was one of our customers. He was

folks we knew, if you will. Start-ups coming in off the street would have a hard time getting the same accommoda tion." Besides, she said, the bank was

confident that if Krassy & Heller failed, the principals would simply return to their $70,000 a year jobs to pay off the loans.

Heller and Krassy also helped their cause by submitting a business plan and a series of projections done by Heller's brother, a certified public accountant.

Marge Krassy helps out during lunch.

72 ABA Journal, The Lawyer's Magazine

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Nancy Heller: "Maybe if I knew more about blue-sky law I wouldn't have said we should do it."

"They were very well prepared," Thomas said. "We discussed it here at the bank and decided they had a good chance of success because so few firms

have blue-sky lawyers on staff. I called a

big firm and made discrete inquiries with a senior partner, and I was encouraged."

"Give me Midtown" At first Krassy and Heller tried to

write partnership agreements, but they kept getting bogged down in overop timistic details such as how to divide profits over $200,000 a year. They finally junked the partnership in favor of a sim ple corporation that made them equal shareholders.

Together and individually, Krassy and Heller spent a lot of time looking at of fice space. Krassy wanted to settle

downtown, near the big Wall Street firms. Heller wanted Midtown, nearer

the newer but just-as-big all-purpose firms.

"You give me Midtown, and Til give you your name first," Heller said.

"Done," Krassy said.

They looked at small dark places on side streets, at a bright airy space with a view of Central Park for $150 a square foot. Then Heller's cousin's wife, a real

estate agent, guided them to a small suite on the third floor at 400 Madison Ave. Nice address, crummy place, Heller decided. But Krassy persuaded

him to reconsider, and the landlord agreed to repaint, rewire and renovate to their requirements. They ended up with about 800 square feet for $2,300 a month. Counting insurance, the secre

tary's salary, office equipment, utilities and supplies, their monthly budget is about $6,000?before their own salaries.

People related to Heller directed them to auctions where they and their wives picked out cut-rate carpeting, used

desks and file cabinets, a second-hand

memory typewriter and a pre-owned

photocopier. From her attic, Heller's

mother donated the chair in which cli ents now sit. Krassy combed the back

pages of magazines until he found the best deal on telephone equipment and, doing the wiring himself, cut the installa tion cost from $2,000 to $500.

The only things they bought new at full price were the frames for their diplo mas.

A tale of Quintana They put a classified advertisement in

the New York Times for a secretary and interviewed all the applicants who spoke English well enough to handle the tele phones. After consulting with their wives, Krassy and Heller chose John Quintana, 20, whose only previous cler ical work had been as a receptionist at

Alcoholics Anonymous. But he was

bright, spoke well and quickly mastered

the memory typewriter. But if Krassy and Heller were uncer

tain about him, Quintana was uncertain about them, too. He refused to give up his nighttime job as a busboy, so he and his new employers worked out a novel arrangement for him to come in at 10 in the morning instead of nine. He would be paid for seven hours a day rather than eight, thereby giving Quintana an extra hour in the sack each morning and Krassy & Heller about $1,800 in wages it did not have to pay the first year.

But after a number of late arrivals and one all-day absence, Krassy and Heller fired Quintana and replaced him with a woman who seemed perfect until she de veloped a mental block about learning to use the memory typewriter. She quit, and Krassy and Heller, desperate be cause of mounting paperwork, called Quintana back.

He eagerly returned, bringing back with him perhaps the only secretarial nameplate in New York legal circles in clear plastic with JOHNNY stenciled on it. He hasn't had a problem with tar diness since.

Mutual funds and syndications They moved into their new office in

February 1984, bringing along two cli ents, both referrals from friends of

John Quintana, with perhaps the only secretarial nameplate in New York legal circles in clear plastic with JOHNNY stenciled on it.

December 1984 Volume 70 73

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Krassy advises Sam Kirschenbaum on underwriting an offering on some property.

Heller from the two months they had worked out of Heller's apartment. In the first case, at their hourly rate of $125, Krassy & Heller earned $1,875 for blue

skying two mutual funds. In the second

they made a $5,000 straight fee on a real estate syndication.

They held an open house in March, and about 300 friends, relatives and cli ents?in that order?braved an ice storm

and hors d'oeuvres ? la Richard and

Nancy Heller.

More deals came along. They got $7,500 for a 50-state dealer registration. The Patrician Group, a real estate syn dication firm with $125 million a year in sales, had them blue sky one offering, then another. They got their biggest fee, $10,000?it would have been $15,000 to $40,000 at one of the big firms, they in sist?in a syndication deal for real estate tax shelters on Manhattan's Upper West

Side. They blue skied a movie deal, a lim

ited partnership for a racehorse and a

syndicate for marketing an invention to mist-spray cold medicine. Krassy, an

ABA member since 1977, continued to serve as a member of the State Regula tion of Securities Committee of the ABA Section of Corporation, Banking and Business Law.

Their roles began evolving?Krassy as the office overseer who paid the bills and rode the books. Heller as the rain

maker. But after the deluge, the rain be

came a drizzle and then, by summer,

only an occasional shower.

At the end of the first three months, they had brought in $18,000, a reason able attack on the $20,000 revenue pro

jection worked out for that period by Heller's CPA brother. But the two part ners, who began with draws of $2,000 a month, trimmed them during the sum

mer to $1,500, then $1,000 and finally during September, nothing.

"The jury's still out, but we're paying our bills. This is frustrating because you want to look at our books today, our

worst day ever. Last week we had

$13,000 in our account, and we'll have

that much again soon," Heller said in

late September. Joan Thomas and Chemical Bank

have approved more money for them,

but Krassy and Heller don't think they'll need it. They predict that as business picks up in 1985, each will get back their initial $20,000 investments during the next year. They said they hope to buy a word processing machine and within a

year have enough business to justify hir ing a paralegal.

Showing confidence Meantime, they are not suffering?too

much. The Hellers, who took a trip to

Europe on vacation in 1983, went to

Connecticut in 1984. The Krassys, who sailed in the Caribbean in 1983, went

camping in New England in 1984. "It's been no problem so far," Marge

Krassy said. "You have to give yourself a good two years for something like this."

"I always thought Richard was a gen

ius," Nancy Heller said. "But it's too

soon now, the firm hasn't been in exis

tence long enough yet to say whether he's even more of a genius than I

thought." "We're going to make it, no ques

tion," Krassy said. "The universal expe rience is that prospecting takes time.

What we're doing now is laying the groundwork for later."

"It's too soon to look back, to say whether we would have done anything differently," Heller added. "We can't tell

yet." "Ask us again," Krassy suggested,

"in a year or two." L-j

(Tim Harper is a New York City law y er a n d jou rn a Iis t.)

74 ABA Journal, The Lawyer's Magazine

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