Wall Street Journal .  (Eastern edition).

New York, N.Y.: Sep 30, 1992 .  pg. PAGEA.1

Ray of Hope: A Modest Millionaire Quits Business to Help Rebuild Newark, N.J. --- Raymond Chambers Creates Ripple Effects in Schools, Politics and Cultural Life --- Tutors and Mentors for Kids

By Ralph T. King Jr.

Raymond Chambers once did a leveraged buy-out of Gibson Greetings Inc., earning more than $100 million with a $1 million investment. Today he is leveraging souls in this downtrodden city, also with impressive results.

Mr. Chambers was born and raised in Newark, the son of a blue-collar warehouse manager. He went on to become one of the nation's wealthiest men as a pioneer in leveraged buy-outs with William E. Simon, the former Treasury secretary.

Meanwhile, in the years following Newark's bloody 1967 riots, the social fabric of Mr. Chambers's hometown disintegrated. It lost one-third of its population. Of the remaining 275,000 residents -- 85% black and Hispanic -- more than one in four lived below the poverty line. It became a place where kids stole cars every night simply for sport and where drug-addicted parents sometimes abandoned newborns in hospitals for months.

Newark's educational, cultural and political institutions, with few exceptions, had decayed to a shocking degree.

So in 1986, Mr. Chambers left the business world and waded in. His solution was to enter all three areas with big projects that would generate ripple effects beyond the scope of his resources. Mr. Chambers's use of leverage -- getting projects off the ground with seed money, making some programs profit-makers that can support others, financing an effort with a highly leveraged commodity fund -- offers a lesson in how philanthropy and shrewd business tactics can work together.

Since 1986 Mr. Chambers has worked full time to try to rebuild Newark, spending more than $50 million of his own money and committing another $36 million in the form of guarantees to donate the cash if no one else will. Yet, through it all, he has tried to avoid publicity. At the groundbreaking for a movie theater being built largely because of his efforts, he stood at the back of the crowd, in dark glasses, while civic leaders made speeches and took bows on the stage. He has declined many requests for interviews. For this article, he did provide background information and issued a brief statement for the record, but only because this reporter, at Mr. Chambers's suggestion, once spent five months assisting in a weekend tutoring program he sponsored.

"Ray stands out as the American businesses entrepreneur of the Reagan era who has made an investment of a scale and an intensity that I don't think anyone else has matched," says Peter Goldmark Jr., president of the Rockefeller Foundation. While the Fords and Rockefellers in their day may have had a broader impact on the social welfare of places like New York City and Detroit, he says, "Ray is unique because nobody is doing that now. I don't think there is anybody from this era in his league."

Mr. Chambers, 50 years old, studied at Rutgers University in Newark and trained as a tax accountant at Price Waterhouse before pursuing investments. But in his statement, he says: "I had never seen people as down and out as the people of Newark. It had gotten so bad, I didn't think I had any alternative."

The movie theater, while one of his smaller projects, gives a good insight into Mr. Chambers's techniques. Newark no longer had a single cinema in its neighborhoods, let alone a bowling alley or a skating rink. Mr. Chambers couldn't get any bank to make an ordinary construction loan to build a theater in the most blighted neighborhood, the Central Ward. Finally, Newark-based First Fidelity Bank came through, after Mr. Chambers's foundation agreed put up a comparatively small sum, $800,000, and guarantee $3.9 million more.

Then he went about trying to find a theater operator to run it at cost. A. Alan Friedberg, chairman of Loews Theatre Management Corp., a unit of Sony Corp., finally agreed. "As I thought about it, I realized I didn't want to be just another CEO interested only in profits," Mr. Friedberg told the crowd at the ceremony. Rather, profits will go to the city, which in effect donated the land, and to a fund sponsoring civic and cultural activities in the vicinity.

To Mr. Chambers, that creates a kind of social leverage that's much more important than just giving money away.

Mr. Chambers's first move in Newark gave him the credibility he needed to go further. He got involved with the Boys' and Girls' Clubs of Newark. Their new director, Barbara Wright Bell, was struggling to renovate four dilapidated facilities that were overrun by youth gangs. Mr. Chambers liked her take-charge approach and grasp of inner-city problems.

He attracted an influential board and quadrupled its budget to $1.8 million with such new funding sources as an endowment with the stock from one of his leveraged buy-outs, Six Flags Corp., and a golf outing patronized by his business associates. Within 18 months, Ms. Bell had restored the clubs to mint condition and provided a haven for about 5,000 new members. Mr. Chambers now has about $10 million invested in the clubs.

With this success, Mr. Chambers won the respect of Newark Mayor Sharpe James, who now calls the organization the "jewel" of the city. After some discussion, the two men found they shared a vision of what needed to be done. "I deal with thousands of people who have money and want to help the city. Ray is unique," says Mayor James. "He doesn't come in and say you must do this and that, and he never looks or asks for anything in return."

Mr. Chambers set to work, operating through an outfit called the Amelior Foundation, of which he is chairman. Ms. Bell, as president, oversees Amelior's projects. "A movement around one man or one organization is not healthy," says Ms. Bell, 42, who learned how to get things done in the inner city from her father, an Episcopal minister. "Newark wasn't visionless before Ray came in, but he brought the vision closer to reality, pushed it more quickly and gave it more energy."

Education was their greatest concern. Newark's school system didn't work. Despite a $496 million budget, many of its 49,000 students were learning as much in the streets as in the overcrowded classrooms. Mr. Chambers was struck by an idea he had heard about on CBS's "60 Minutes." Eugene Lang, a New York businessman, had promised college scholarships to 61 Harlem sixth-graders. In the end, about half finished at least some college.

Mr. Chambers thought he could do better by starting sooner, as early as first grade; by being bigger, eventually to include 1,000 youngsters (650 are enrolled to date, from first grade through junior high); and by doing more, such as matching all the students with a mentor.

Amelior endowed the program, called Ready (Rigorous Educational Assistance for Deserving Youth), with $10 million, or $10,000 per student. Part of that is reserved for college costs, but most pays for tutoring, horizon-widening activities (from visiting New York City museums to attending a speech by South African Bishop Desmond Tutu) and parental assistance. Mr. Chambers has donated about another $10 million to various universities, partly to guarantee spaces for Ready students.

It's too early to tell how well the program will work; Ready was started in 1987, and its oldest participants are in the 11th grade. But it has done wonders for Deneane Jacobs. "I like when people say to me, `You ain't nothing,'" says the 17-yearold, whose 10 sisters all dropped out of high school. She plans to attend college and law school and hopes to become a judge. "When I get up there working in my fine office one day, I hope they're still around. I'm going to take them up there and show them," she says. Having cured a stutter and increased her reading speed, Deneane has markedly improved her grades.

Mr. Chambers wanted to find more immediate incentives than a college education to reduce Ready's current dropout rate of 35% (most of these move away or never attend a single Ready session). So Amelior paid the minority-owned City National Bank $300,000 for a 20% stake, and set aside $500 worth of shares for each kid to "inherit" upon graduation from high school. That not only helps the kids, but helped the bank survive to continue to make loans in inner-city Newark.

Many Ready parents are unemployed single mothers with lots to worry about besides making sure their kids stay in Ready. Mr. Chambers had heard about a skills training program for welfare mothers that was trying to expand. Amelior donated $400,000 to move the Newark Business Training Institute into new facilities, including a day-care center. This year it will turn out 400 graduates, double the 1990 number, and find jobs for three-quarters of them. Two dozen Ready moms are enrolled in classes this fall.

Another project is the One-to-One Partnership. Mentors for Ready kids were hard to find, so, with Geoffrey Boisi, he founded One-to-One to coordinate existing mentoring groups and start new ones. Mr. Boisi, 45, a veteran of Goldman, Sachs & Co., left Goldman to run One-to-One, inspired, he says, by Mr. Chambers's example.

The two men conceived a Wall Street commodity partnership whose trading profits will mostly go to kids who satisfy One-to-One program requirements, but also cover program costs. Charity-minded investors in the One-to-One Charitable Fund L.P. will earn a modest return at best, with the rest going to One-to-One. They won't face the typically huge risks associated with commodities because of hedging and diversification.

The fund's managers are four top performers -- Paul Tudor Jones's Tudor Investment Corp., Blenheim Investment Inc., J.W. Henry & Co. and Moore Capital Management Inc. -- all of which have waived their fees, which generally are 3% of funds under management plus up to 30% of trading profits.

The fund started trading two months ago with the first $20 million from investors. No results are available yet. Plans to raise $100 million by June were delayed after an article on the fund in this newspaper brought an unexpected number of inquiries, raising certain legal issues. The fund was restructured into a limited partnership, and fund-raising efforts recently resumed. Meanwhile, One-to-One has set up operations in 15 cities. Its Newark affiliate has arranged 250 matches and plans 1,500 more within five years.

Next on the agenda was the city's cultural life. Newark's downtown does have a first-class museum, but little else of interest to suburban residents or office workers after hours. A New Jersey performing-arts center had been proposed by state officials for years, but the idea languished, in part because of a $150 million price. In any case, other cities were more likely sites than Newark.

Then, in 1988, Mr. Chambers made state legislators an offer they couldn't refuse. He guaranteed that private donations would be raised to match a proposed $33 million state grant. Amelior put up the first big chunk. Mr. Chambers recruited a high-powered board including Ray Vagelos of Merck & Co. and Robert Winters of Prudential Insurance Co. of America, both big corporate donors, and called on others throughout the region. Newark's big employers joined quickly, but so did ones farther afield like American Telephone & Telegraph Co. and Matsushita Electric Corp. of America. Mayor James has agreed to try to scrape together $10 million of city money.

Ground is not yet broken, but the arts center is scheduled to open in 1996. Nearly half of the immediate 12-acre site is set aside for future private development; leases are eventually expected to generate revenue for the center.

With Newark's downtown soon to have an anchor, business leaders across the state seem to be taking the city, and its problems, more seriously. Blue Cross and Blue Shield of New Jersey has just completed a new high-rise headquarters here, and will relocate 2,700 employees from the suburbs. City planners have drawn up a redevelopment scheme for the adjacent riverfront. Another ripple: The center will offer extra instruction in the arts and performance space for students in public schools. Ready kids are expected to participate.

The most recent splash is in the political arena. As Newark has decayed, squabbling over the shrinking pie has increasingly divided community groups. But a campaign called Newark Fighting Back marks a new approach. Its ostensible goal is to cut drug and alcohol abuse in the city's most depressed sections, fed by a five-year, $3 million grant from the Robert Wood Johnson Foundation. But more important is the fact that nearly 100 community leaders cooperated to get the grant.

Once again, Mr. Chambers, via the Boys' and Girls' Clubs, was a key player. Several small agencies in the city wanted to go after the grant independently. The clubs' leaders, with the mayor's help, roped them in and donated staff to put the proposal together.

There is a nascent sense among the groups that they now have sufficient mass to map out broad, long-term solutions to such complex problems as unemployment, homelessness and crime. One who signed up, Virginia Jones, representing tenants in the high-rise building where she lives, has been criticizing city officials and anti-poverty programs for years. Her beef is that the people the programs are designed to help never get consulted. Says Ms. Jones: "This Fighting Back is a start. They understand my frustration."

Some people feel the projects engineered by Mr. Chambers are misdirected. The theater ground-breaking in June was interrupted by protesters calling for long-promised repairs at a rundown city housing project. Says David Weiner of the Newark Coalition for Low-Income Housing: "This kind of project is fine as an adjunct. The problem is that it becomes the primary focus while the more serious issue, housing, becomes secondary."

Others object that the arts center is no remedy for Newark's 13% unemployment rate or growing homelessness. Says Edward Verner, who heads an association of 200 leaders of local black churches: "There are people sleeping in parks a stone's throw from where the center will be. If you are going to renaissance Newark, then renaissance the poor first."

And, to be sure, life remains miserable for many Newark residents. Ronald Graham, a 25-year-old unemployed native of Newark, regards the .45-caliber pistol he owns as a basic necessity. "To me, this is hell," he says, gazing at a nearly empty parking lot in a shopping center with many vacant storefronts.

But, if nothing else, Mr. Chambers's leveraged approach is giving many people in Newark hope -- a sense, for the first time in years, that something can be done to break their cycle of poverty. Says Rep. Donald Payne, who represents Newark: "This community is blessed to have a Ray Chambers."