How 'Fluffy' the secretary became an owner of a $54 million Philly company

From his office on 15th street that overlooks City Hall and Dilworth Plaza Bill Graham talks about doing business in Philadelphia. A profile of Bill Graham, who decided to turnover his firm to his employees. The party was swanky -- wine flowed freely and the setting was elegant. The occasion? "Congratulations to all of you, our valued employees on becoming owners" of the Graham company, an insurance company with $54 million in sales and 180 employees. 03/08/2017 MICHAEL BRYANT / Staff Photographer

Sometimes a succession plan involves champagne and bruschetta at Del Frisco’s swanky steak house in Center City.

And sometimes it involves throwing a chair against the wall.

William A. Graham 4th, 76, chairman of the Graham Co., has had it both ways in a three-generation, father-and-son saga that’s about love and rivalry and the need for each generation to make its own way.

There’s no question that Graham preferred the champagne party at Del Frisco’s to the tense handoff that accompanied his buying the insurance company his father started in 1960.

“Everybody was so excited and so exhilarated,” Graham said about the Del Frisco party March 2, when he told company employees that they would become Graham’s future owners.

Under an employee stock-ownership plan, the company will use some of its profits to buy the firm from Graham, his son and daughter, and his 36 top executive shareholders, paying them gradually over the next 10 to 12 years. Meanwhile, the rest of the profits go into a retirement fund for the firm’s 180 employees, owners as of March 1.

“I’m very grateful,” said Graham’s executive assistant, Florence “Fluffy” Fleming, 45, who began at the company at 17. “I do feel a sense of security in knowing that when I do retire, I’ll be comfortable. It’s a wonderful thing that he’s done.”

Graham said he bought the company from his father in 1968 for $400,000 in the transaction involving the thrown chair.

Graham said he could have sold the company for $230 million, or about four times annual revenues.

Through the stock plan, the employees are buying the firm for “way below $200 million,” although neither Graham nor his top lieutenants will say how much. As a result, the executives will take in less than they would have had Graham sold the business on the market.

Yes, Graham could have gotten more money, a lot more. "But you can’t make every decision based on how much money you are going to make."  

After all, he already owns a Shore house in Avalon, a membership at the Union League, and a home on three acres in Gladwyne that he shares with his wife, Frances.

Maybe, if Graham hadn’t hurt his back so badly that he can no longer ride, he’d have bought a few more Harleys to augment his collection of three -- including a tricked-out Fat Boy. Instead he sold them.

As for legacy, he’s already donated tens of millions, enough to bankroll sports complexes bearing his name at his alma maters, Bucknell University and William Penn Charter School. And, he made enough that he could walk away from a $31 million loss buying the Inquirer, Daily News, and philly.com. in a bankruptcy that hurt employees’ pensions.

“That’s the only time I lost money,” he said.

Graham grew up in Lafayette Hill and Flourtown and wrestled at Penn Charter and Bucknell. 

In 1962, he graduated from Bucknell with an excellent job offer from Union Carbide -- $7,500 a year, a car, and an expense account -- but didn't take it because his father insisted he join the family's fledgling firm.

Graham said he assumed his father would match the Union Carbide offer. Instead, his father paid much less -- $50 a week, lining up a second job for him at $200 a month selling life insurance. 

“You better know what you are doing before you get into it,” Graham said he learned from the experience. Also, Graham had no idea that his father's company was losing money. 

By 1968, Graham had figured out a way to make the company more profitable, but his father wasn’t amenable.

“He really blew his stack. He broke a chair. He threw it against a wall,” Graham said. “My father and I couldn’t agree on the color of a stop sign.”

He told his father that he’d either leave and start his own business, or buy his father out. The father agreed to sell and Graham figured he’d gain the company for $120,000 or about two times annual revenues, then the going rate.

When his father drew up the papers, the price was $400,000 and “he reassuringly told me, 'If you get behind, I can take over the business.’ "

Graham agreed to the price to make sure his mother had a comfortable retirement.

Over time, Graham honed his company’s strategy. It involved a careful assessment of his clients’ risks, followed by recommendations for steps that clients could take to reduce the risks. Assuming the clients cooperated, pricing would be a percent of the amount to be covered, plus a fee.

Graham’s policies have covered the steel erection company working on the Comcast towers, the demolition of the Goethals bridge in New York, and billions of dollars of construction at Harvard University and the Hospital of the University of Pennsylvania.

As the company grew, Graham hoped his children would enter the business. His daughter, Laura Graham, a professional photographer, was not interested. 

Son William A. Graham 5th, known as Quint, was another story. After college, he worked for AIG, American International Group, one of the nation's largest insurers.  

In 2009, he joined the family firm and soon was doing so well that he was named “Rookie of the Year.” But Graham said, his son would never credit himself for his own accomplishments. “It would be as if I had earned it rather than he.”

In 2012, Quint Graham left his father's company and moved to Houston, where his wife has family. He joined a Texas insurance company and is a partner.

“My son, I adore,” Graham said. “I was devastated.”

But Graham understood, very well.

“How would you like to work in a company where your father is the big mahoff and you are rookie of the year?

“In a few months,” Graham said, “I recognized that he did the right thing. He’s always been very, very strong. He had more guts than I did.”

And so, in 2014, the company expanded its ownership structure. By then, Ken Ewell, the company president, and Michael J. Mitchell, the vice chairman, handled daily operations. A couple of dozen longtime employees and key executives were added as shareholders.

But there was a problem. The shareholders would be able to start taking payouts at age 65. Someday so many would be 65 that the company would have to be sold to make the payouts. "We'd hit the wall," Ewell said. 

And there was another possibility: Graham could die and estate taxes would have to be paid. "It would be $100 million, and, believe me, I don't have close to that in cash. I don't even have 10 percent of that," Graham said. "Then the company would have to be sold."

Then Ewell, Mitchell, and Graham learned about employee stock-ownership plans and their beneficial tax consequences. The paperwork on Graham's plan was signed Feb. 28, the night before his 76th birthday.

“Everybody says I did it to perpetuate the agency,” Graham said last week. Otherwise, "a vulture would come in and they'd buy it [at such a high price] that they'd have to clean house very quickly." 

Graham wanted to make sure he took care of his employees, particularly his assistant, Fluffy. 

“That’s her nickname. Her name is Florence and she grew up in Fishtown and her father was a truck driver and her brothers were truck drivers. When I went to her wedding, someone said to me, 'Everybody’s a truck driver, but not Fluffy. How come she’s not a truck driver? But she’s got a mouth like one.’ And she does."

He laughed.

“I’m not going to live forever. Fluffy has been with me 26 years and she’s 45 or 46 years now. If I die in five years, she’ll be 51. Nobody would keep her if they bought the agency. They cut all the high-priced people right away. They are the ones that get everything done.

“People say, 'You’d get $200 million minimum' " selling on the open market, he noted. "I say, 'Look, you can only eat one hot dog at a time.’ "

He likes ketchup and raw onions.