Hall of Fame - Robert Schatz

Robert Schatz

This bio has been edited and condensed from a verbal interview with Mr. Schatz.


Jack Veale:                  This is Jack Veale recording for Inductee Robert Schatz. Today is July 10, 2020.

Rob, this is Jack Veale. Congratulations on being inducted into the ESOP Hall of Fame. We're doing a recording that will be transposed into a word document for online to the ESOP Hall of Fame website.

Robert Schatz:            Thank you, Jack. I'm very honored. I appreciate you giving me this opportunity.

Jack Veale:                  You were selected by others, and I'm just doing the work. So, Rob, would you please tell us a little bit about your background and your storyline because you have a great story for many years. How long have you been with ESOP--35, 40 years?

Robert Schatz:            So, I've been with ESOP since 1982. So, that's about 38 years, give or take. And I started when I was with a law firm, and I was doing bond financing, which is tax-exempt financing using tax-exempt bonds as the financing vehicle. Sunset legislation came in, and they were going to make those transactions go away. So, I basically had to find something else to do. At the time, banks were lending, and if they lent to an ESOP, they got a tax advantage under Section 133 of the code. So, I started representing the banks documenting the 133 loans.

I met and did transactions with a number of the ESOP lawyers and investment bankers at the time, and they liked the fact that I understood ESOPs and lending, so they would call me into their transactions to represent the financing banks.  I did that for about five, six years and built up a very successful practice representing the major banks and some of the regional banks in that form of tax-exempt financing.

In 1987, Section 133 was repealed, so, again, I had to find something else to do. Basically, while I still represented the banks who were providing financing for ESOP transactions (even though they were not tax-preferred), I also started representing the other parties in an ESOP Transaction, whether it be the ESOP trustees (in their capacity as the “buyers”), the Company (as corporate counsel), in its capacity as the plan sponsor; or the selling stockholders.

So, that's how my practice evolved, and since then, it's just grown and expanded where I'm now with a boutique ESOP Law firm with five ESOP attorneys and three offices (West Hartford, CT, Rochester, NY, and Spokane, WA).

Jack Veale:                  Cool. Very cool. Do you have any people you would like to thank who helped you in your career along the way?

Robert Schatz:            There is a lot of people who have helped me along the way, including Jerry Kaplan and Greg Brown, when they were working together and Marty Carmody (and his successor, Jamie Walrack) at First American Bank.  I believe Jerry, Greg, and Marty, are also in this Hall of Fame of yours?

Jack Veale:                  Yes, they are.

Robert Schatz:            Jerry, Greg, and I (along with my partner, Rob Brown) are members of the American College of Employee Benefits Council, ACEBC.

There was also Jack Curtis, who has since passed.  Jack was a partner in the firm of Ludwig & Curtis at the time.  Jack Curtis involved me in a number of transactions, but between Jack, Jerry, and Greg, they started getting me work as counsel to the trustees on their transactions. So, I owe a huge debt of gratitude to Jerry Kaplan, Greg Brown, and the late Jack Curtis.

Jack Veale:                  Cool. If you were to look back and at how the industry was back in the '80s, which is when you were there, how has the industry changed? Or has it?

Robert Schatz:            Well, the industry has come a long way. You have to remember that ESOPs came into the tax code in 1974 with ERISA. The Internal Revenue Code of 1986 totally revised the rules for tax advantages and tax-exempt transactions involving ESOPs. So, if you look at it, the industry in 1986 when the Tax Reform Act passed, it was only 12 years old – teenagers, so to speak. We were still “swashbuckling,” exploring how to structure transactions within the regulatory framework to meet the owners' and employee participants’ objectives.  These typically were very complex transactions, and we had to use a lot of creativity.

Since then, the transactions that we've designed have become more commonplace, and the industry has grown through its teenage years now into its more mature years. We have a good body of case law-- unfortunately for bad transactions or badly structured transactions -- because as you know, bad facts make bad law, and the bad facts get litigated (or you don't get decisions).

The biggest change has been a more active involvement in ESOP scrutiny by the U. S. Department of Labor, and that has created a whole new body of requirements--legal and financial--that govern ESOP transactions and require us to work within those parameters in structuring transactions.  It's not a particularly difficult thing to do, but it does require all the advisors to manage the client's expectations as to what can and can't be done. Back in the '80s, we all thought we could do just about anything. Now, we can do almost anything within the parameters of the rules of the IRS and the Department of Labor.

Regardless, it's a lot of fun effecting ESOP M&A transactions, especially because the parties are not adversarial so much – everybody is working toward a common goal. And I think that “community of interest” is what separates ESOP transactions from other M&A type of transactions.  Everyone is cooperative and trying to seek a just resolution.

Jack Veale:                  Awesome. And as you look at the industry and its changing, what do you see on the horizon for ESOPs?

Robert Schatz:            I think ESOPs are gaining traction.  There is better acceptance among accounting firms who are beginning to look at them as a possible succession plan for their clients.  I think trusts and estates lawyers are looking at ESOPs now more than they used to, and I think that companies themselves are looking at their peers who have become ESOP-owned and have succeeded immensely and saying, "Maybe there's something to this,” so they are starting to explore it more.

So, we're seeing a greater groundswell of ESOP support and well-meaning owners trying not only to secure their own future but to protect the future of the employees that helped create the value of the owners’ companies.  The population of “aging” owners is expanding as “baby boomers” age.  As these owners and their advisors, who are more versed in the “ESOP options” than ever before, explore the owners’ financial planning and their companies’ succession planning, I am excited to be part of the ESOP community and believe that the future of ESOPs is bright.  I think that an ESOP for the right company and the right owners, structured properly, will always result in the company outperforming its competition in its industry.

Jack Veale:                  Excellent. Do you have anything else you'd like to add before I conclude the interview?

Robert Schatz:            I would just like to say that among the people in your Hall of Fame, I'm honored to be included with them. They are the best and the brightest in the ESOP community, and I'm honored to be counted to be one of them. And I thank you for that.

Jack Veale:                  You've earned it, and I'm proud that you have accepted the induction. So, from here, I'm going to conclude this interview and thank you, Rob, for your time and commitment to the ESOP world.

Robert Schatz:            Thanks, Jack.

Jack Veale:                  Thank you.