Early Birds: At 540 Park, power breakfasters always get the worm.

If breakfast is the most important meal of the day, the power breakfast could prove the most important meal of your career...particularly at 540 Park at the Loews Regency Hotel, the legendary Midtown eatery that gave birth to Manhattan’s morning-meeting tradition.

Bob Tisch, the late co-CEO of the Loews Corporation, first coined the term during New York’s 1975 fiscal crisis, when he invited politicians and labor chiefs to his hotel’s dining room to hash out recovery strategies over omelets and coffee. These days, breakfast at the Regency is less about labor strikes and political turmoil than about closing a big deal before even setting foot in the office.

That’s why, on any given morning, you might bump into Wall Street elder statesmen Felix Rohatyn (a regular since the ’70s), Sandy Weill and Michel David-Weill. Ex-Citigroup CEO Chuck Prince, former NYSE director Ken Langone and ex-Nasdaq head Frank Zarb might be warming up with hot oatmeal and fresh berries (the $29 price tag is no object).

“I’ve noticed that the crowd is getting younger recently,” says restaurant manager Rae Bianco, who has catered to the power-breakfast scene for the last 10 years.

A look around the wood-paneled, oversize-mirrored space does yield its fair share of fresh faces, who frequently cross the room to greet the more-established players jockeying (politely, Bianco insists) for the coveted window tables facing 61st Street. That’s where you might find Lehman Brothers CEO Dick Fuld, Goldman Sachs vice chairman Bob Hormatz or wealth-­management guru Alexandra Lebenthal exchanging views on the market, elbow-to-elbow with corporate chieftains such as Barry Gosin of Newmark Knight Frank and CBS’s Les Moonves.

And while it’s chic for television personalities Larry King and Donny Deutsch to tuck into their egg-white frittatas after 9, or for Al Sharpton and Hillary Clinton to order sweet granola and low-fat yogurt around 8, the dealmakers and CEOs pack the tables at 7 a.m. sharp.

“Every day, there’s a new dynamic,” Bianco says. “Of course, there are familiar faces, but the mix is always different. It’s like musical chairs — these guys just keep changing dancing partners.”

Seeing Eye to Eye: Morgan Stanley’s Peter Crnkovich takes up his firm’s charitable legacy.

In 1997, Morgan Stanley’s Peter Crnkovich was faced with a question many parents dread: “Dad, can I have a puppy?” Little did he know the answer to his then-11-year-old daughter’s prayers would lead him to a longstanding role on the board of The Seeing Eye, a Morristown, New Jersey–based nonprofit that trains canine companions for the blind.

Attempting to placate his daughter, the chairman of Morgan Stanley’s health-care investment-banking unit sought out the charity, which employs an extensive network of mid-Atlantic volunteers to raise would-be guide dogs through puppyhood (about 16 months) until they’re ready for rigorous training. When he agreed to foster Fenton, an eight-week-old golden retriever, Crnkovich, a 52-year-old father of three, intended it to be his kids’ trial run at having a pet. “My wife and I also thought it would be a great way to teach our kids about responsibility and give them a lesson in sacrifice for the greater good,” he says.

While Fenton — who proved too easily distracted to make an ideal guide — has lived with them ever since, the experience left an indelible mark on the senior members of the Crnkovich clan. Now, 10 years later, Crnkovich serves as the chairman of finance and investment of TSE’s board of trustees, part of a longstanding Morgan Stanley tradition: The firm has had a presence on the organization’s board since founding partner Perry Hall joined it in 1935.

Crnkovich takes his role on TSE’s endowment committee seriously. “I know I’ve got to keep moving forward on that as a source of operating revenues,” he says. In its nearly 80-year history, The Seeing Eye has trained and paired more than 14,000 dogs, primarily German shepherds, labradors and golden retrievers.

While a dog’s training typically costs close to $50,000, the person to whom the pooch is assigned has to pay only $150. (Those in the military pay just $1.) These discounts are especially impressive for an organization that takes in very little in government grants. TSE’s $23 million annual budget comes almost entirely from private donations and the successful management of its sizable endowment.

Nonetheless, Crnkovich has learned that the bottom line isn’t always the best measure of success when it comes to his work with TSE. “When you see what a guide dog can mean to changing the life of an individual,” he says, “it’s just incredible.”

Romancing the Stone: For decades, Martin Rapaport has tried to create diamond futures, running afoul of the industry. A study in tenacity.

“We’re at the very beginning of the birth process,” says Martin Rapaport of his crusade to launch a futures contract for diamonds. His tone is strikingly upbeat for someone whose life’s work has been marred by so much failure. “Something has to happen.”

Rapaport, 56, is the founder and chairman of the Rapaport Group, a diamond brokerage and clearinghouse, and the industry’s leading provider of diamond pricing and market information. Over the course of three days last September, he held his first “Rapaport Certified Diamond Auction” online, the seminal step on the road to establishing an index based on monthly transaction prices and eventually, he hopes, a futures market tied to the index. To hold this auction, Rapaport’s company selec­ted and approved the stones while the Gemological Institute of America rated them, similar to the way Moody’s or S&P rates a bond. Rapaport’s vision of commoditizing diamonds goes back three decades — but only recently has success seemed even remotely possible.

Should his plan ever come to fruition, the larger financial community — speculators — could trade the diamond market the same way it trades energy and precious metals. Diamonds are perhaps the last significant commodity not currently traded via some specific financial instrument.

“Diamonds are, in fact, already a commodity in all but name,” says Tom Zoellner, author of The Heartless Stone: A Journey Through the World of Diamonds, Deceit, and Desire. “Treating them as commodities will only help bring more transparency to this business, and perhaps chip away at the artificial scarcity that has kept the retail price so far out of whack with economic realities.”

Says Rapaport: “It doesn’t just happen that a guy wakes up in the morning and says, ‘I’m going to make a futures contract for diamonds.’ ”

Indeed, Rapaport grew up in Miami, then moved to Antwerp to apprentice as a diamond cleaver. He relocated to New York in the mid-1970s and started a diamond brokerage. At the time, inflation was on the rise, the dollar was sinking and diamond prices were all over the map, largely because the industry was dominated by a few large producers — principally De Beers, which controlled 80 percent of the market. Deals were typically solidified by little more than a handshake. “Consumers were clamoring for transparency,” Rapaport says.

So in 1978, he started publishing a consensus price list. Power brokers in the highly insular diamond universe were not enthused. Many feared the list would undercut prices and put them all out of business, a fear that seemed to materialize when diamond prices took a nosedive that same year. “They didn’t like me at all,” Rapaport says. “They threw me out of the diamond industry — I had to wear a bulletproof vest for two years.”

Faced, he claims, with threats against his life if he didn’t back down, Rapaport chose to expand his list into the Rapaport Diamond Report, which over the last 30 years has become an important industry tool. His company now employs more than 100 people in New York, Las Vegas, Antwerp, Mumbai, Dubai, Johannesburg, Hong Kong, Shanghai and Tel Aviv.

Further vindication came in 1987, when the same industry honchos who had earlier demanded his exile elected him to the board of directors of the New York Diamond Dealers Club, where he served for the next six years.

In recent years, Rapaport has focused on his diamond futures quest. He has tried (and failed) to launch diamond futures in New York before. In 1982, he filed a proposal for diamond derivatives with the New York Commodities Exchange, which met with stiff opposition from industry stalwarts.

Fast-forward to 2007 and a changing climate in which individual diamond producers are able to exert less influence: “The diamond industry is emerging from a century of monopoly,” he says. Once-monolithic De Beers, for example, reports that its market share has dropped to around 45 percent. If Rapaport’s idea will ever take hold, now would appear to be the time.

Suppliers are faced with increasing demand from ballooning middle classes in countries with rapidly developing economies, such as China and India.

To meet this demand over the next decade, suppliers will need to access more liquidity to increase production — a difficult challenge in an already overleveraged industry whose bank debt has doubled in the last four years, to more than $12 billion. “The timing to introduce diamond-backed financial instruments is impeccable,” Rapaport argues. “The industry needs it; global markets demand it.”

A diamond futures market would give producers access to more bank credit, allow dealers to hedge against the demand from new economic powers and offer an alternative to stockpiling, a controversial tactic that presents market-manipulation risks. It would also offer a new tool for traders — as good as metal or energy futures, Rapaport believes — to hedge against the market effects of globalization.

Rapaport continues to take criticism from some who believe that trying to commoditize diamonds is a fool’s errand. One upscale jeweler tells Trader Monthly that no one in the industry thinks a diamond futures market is realistic, pointing out that diamonds would have to lose their emotional salience to become a truly viable futures market. Rapaport counters, “Guys trading on the exchange won’t be thinking about emotional salience.”

Some naysayers also argue that since no two diamonds are alike, it is impossible to group them together like, say, pork bellies. Rapaport believes he has a solution for that, too: In his online auctions, he focuses on buying and selling one-carat stones certified by the Gemological Institute of America within a very specific color, clarity, cut and quality range. Zoellner, summarizing why he remains skeptical of diamond futures, points out that in the 1970s, an “investment diamonds” market briefly surfaced and was “laden with fraud.”

Rapaport is steadfast: “I’m coming in and shining a spotlight on a particular corner of a very dark room,” he says. “I don’t need to light up the whole room. People can get the landscape of the room in relation to that light.”

So far, his auctions have yet to yield the results he seeks. In September’s — the first of four held in 2007 — Rapaport sold just 27 of the 210 diamonds on the block, while only one was sold at October’s auction. He came to believe the chosen stone specifications proved too steep a premium for early investors. For November’s auction, he introduced two new classifications to widen the range of his offerings.

That plan met with slightly more success; he sold just under half of his 40 gems that day. “Of course it was disappointing, but I know it’s a process,” he says. “I have to let the market lead.” He intends to keep running auctions every month throughout 2008 and hopes to have enough spot cash-transaction prices to turn his index into a bona fide futures contract by the end of 2009.

At a recent diamond-industry conference hosted by Rapaport’s company, Ed Zwick, the producer of the film Blood Diamond, gave a keynote address urging industry-wide reform. “The one thing I learned over two years working on the film was that there really is no such thing as the ‘diamond industry,’ ” he said. “It’s a community of souls, of people, of thousands of individuals.”

Rapaport is only one of those souls. Sometimes, though, in the struggle for monumental change, that’s all it takes.

Biz Bites:

As the end of yet another merger boom nears, new research indicates some companies could do better by holding off on that purchase sitting in the pipeline. A study by Michigan State University professor Gerry McNamara and his co-authors looked at more than 3,000 public companies involved in industry acquisition waves between 1984 and 2004, and found that acquisition returns bottom out about two-thirds of the way through a cycle. Early birds saw stock gains averaging 4.2% post-deal, while companies that hopped on the bandwagon later experienced an average 3% drop in share price. What gives? Early movers tend to make better-researched choices and buy at more advantageous prices, while latecomers are more likely to lose value because they often act on market hype rather than on rational financial decisions.

Smart Cookie: A decade ago, Credit Suisse underwrote one of the more unlikely IPOs of the 1990s.

When Keebler Foods — the cookie-and-cracker company personified by pint-sized creatures who live in a hollow tree — went public in January 1998, it wasn’t elfin magic that whetted the market’s appetite. The $321 million initial offering had all the right ingredients: one venerable brand name, two food-industry veterans and a sweet turnaround story.

No one would have predicted Keebler’s success two years earlier when the Elmhurst, Illinois–based company, a subsidiary of the U.K.’s United Biscuits, ended 1995 with a reported $138 million in losses. But Invus Group, the New York–based investment arm of Artal Luxembourg, smelled the possibility of something better baking. With industry veterans Sam Reed and David Vermylen leading the charge, Invus partnered with Georgia-based baking concern Flowers Industries in a $487 million leveraged buyout of the struggling business in January 1996.

Once Keebler was in private hands, Reed and Vermelyn began an overhaul, replacing senior management, acquiring Sunshine Biscuits and, in a stroke of marketing genius, reintroducing Ernie Keebler as the brand’s chief “spokes-elf.” The revamp helped solidify Keebler’s status as the U.S.’s second-largest cookie maker and lay the groundwork for a strong public debut. In January 1998, despite a skittish IPO climate, investors gobbled up Keebler stock in a strong sign of confidence in management. The company sold just over 13 million shares at $24 each.

As part of the IPO, Flowers boosted its stake to 55 percent. Flowers retained its majority ownership in Keebler until 2001, when it decided it couldn’t stand the heat and got out of the kitchen, selling off its entire interest in the cookie maker to Kellogg.

Food Fight
Morgan Stanley had financed Invus and Flowers on the Keebler LBO. It was thus quite a coup when Credit Suisse beat out Morgan Stanley as the lead bookrunner on the $321 million IPO, thanks to its track record of solid execution and understanding of the Keebler brand. Credit Suisse took the lead spot again on the company’s secondary offering in January 1999.

Cookie Monster
Flowers’s decision to retain a majority interest in Keebler was viewed by investors as a good omen. The deal was upsized from its planned 11.6 million– share sale to 13 million shares. The stock priced at $24 a share — the top end of the range — and traded up 12 percent to $26.81 on its first day.

Elfin Magic
In March 2001, Ernie Keebler joined Snap, Crackle and Pop in Kellogg’s stable of beloved cartoon food icons when Kellogg purchased the cookie-and-cracker brand from Flowers Industries for $4.5 billion. The Battle Creek, Michigan, cereal manufacturer paid $42 a share for Keebler shares, a 75 percent premium over the IPO price.

Bringing Home the Bacon: Michael Gordon helps Share Our Strength fight childhood hunger at home.

For Merrill Lynch media/telecom banker Michael Gordon, working with Share Our Strength, a respected charity that tackles world hunger, came almost as naturally as cooking up a deal. As with most of his business transactions, Gordon’s involvement with Share Our Strength stemmed from relationships: A client, veteran entertainment executive Neil Braun (NBC, Viacom, Starz Media), recognized both his pragmatic skill set and interest in the issue and recruited Gordon to join him on the charity’s board two years ago.

Gordon was drawn to its business-minded approach to fundraising. Since 1984, it has raised more than $200 million without taking a dime from the federal government or foundations. “It doesn’t follow a cookie-cutter approach to nonprofit,” Gordon explains. “It raises money and invests in programs like a for-profit enterprise.”

Share Our Strength certainly hosts its share of more traditional fundraising events and dinners, though they’re catered by the likes of Jean-Georges Vongerichten. But it also focuses on sponsorships, licensing opportunities and private donations, which it funnels to small, deserving local hunger-relief efforts. It has also been successful at forging strategic partnerships and joint ventures with for-profit companies, including American Express, Tyson Foods and, most recently, the Food Network.

This all sounded familiar to Gordon, who had been helping telecom clients strike similar strategic partnerships, such as Verizon’s recent European venture with Vodafone. But what truly resonated was Share Our Strength’s focus on helping feed the U.S.’s 12 million hungry children. “It’s hard not to connect with this on a visceral level,” says Gordon, who has three kids of his own.

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