Ross Perot's Days At Big Blue

By RICHARD BEHAR DALLAS

You can tell a great deal about tycoons from those pivotal moments before they became rich. Ross Perot's launching pad was IBM, where he spent his late 20s and early 30s (1957-62) selling computers from the firm's Dallas office. In mid-1962 Perot quit to start Electronic Data Systems, the source of his $3 billion fortune.

| TIME has tracked down more than 20 former IBM salesmen and managers, most now in their 60s and 70s, who worked closely with Perot in those early years. Some of their memories are fading, a number of key players are dead, and documents are virtually nonexistent. But the picture the retirees paint, while sometimes sketchy, shows Perot to have been more ruthless and petty in his early business dealings than is commonly known.

What do these allegations have to do with a person's fitness to serve as President? Though no one is accusing Perot of extramarital affairs or dodging the draft, the charges aired by his former IBM colleagues help define that elusive quality called character. Voters may in fact decide that they are not bothered by a candidate who uses his elbows in the rough-and-tumble world of business. But whether a candidate likes it or not, running for President opens him to wide-ranging scrutiny. The examination can be particularly painful for a newcomer like Perot, who is not accustomed to living in the microscopic world that veteran politicians have learned to accept early in their career.

Before they would talk, many sources asked for anonymity, fearing that Perot would harass them. In the end, most of these IBMers conceded great respect for Perot's sales ability and drive. But they strongly disliked or distrusted their colleague. "He was a money-hungry guy," recalls ex-salesman Ogden Kidd, now 63. "He was not a team player, and he was not comfortable working within the framework of business ethics that IBM had adopted at the time." Or, as another, more forgiving salesman puts it, "He was practicing '80s ethics in the 1960s."

Seed Money for EDS. An aggressive salesman can sell customers things they don't need and can't afford. One of the most enduring myths about Perot is that he sold so hard in his final year with IBM (1962) that he achieved his sales quota in mid-January. Less known is the fact that he reached this quota -- and pocketed a commission estimated at $30,000 (nearly $150,000 in today's dollars) -- from the "sale" of a single computer that was never actually installed.

The computer was a 7090 -- then IBM's most complex and costly machine, which retailed for up to $5 million and leased for $70,000 a month. The buyer: a newborn college in Dallas, the Graduate Research Center of the Southwest (GRC), which was later absorbed into the University of Texas system. School records show that the institution's trustees approved the order in January 1962, despite the fact that the school didn't yet have a campus. In 1964 the computer was ready for shipment, but the school could neither afford the machine nor find any space for it. Moreover, college officials estimated that the research computer was so powerful -- and their needs so minor -- that they could use it less than 15% of the time by mid-1965.

The college met its requirements by canceling its order for a 7090 and instead buying an IBM 1401 -- a simple nonresearch "baby computer" (price: $80,000) that is roughly 100 times less powerful and used for different purposes. "It's like the difference between a BB gun and a cannon," says a former top salesman, Ken Crider, who was "shocked" that IBM management allowed Perot to walk away with a commission on the original order.

The paperwork on the deal no longer exists, but a former IBM executive claims to have reviewed it after Perot resigned. "The proposal stated that GRC would start renting time on other people's equipment, until such time as it made sense to install a 7090," he says. "But IBM doesn't take provisional orders like that." This executive says IBM management in Dallas covered up the incident by quietly absorbing Perot's commission. Why? To save the hide of another colleague, who had approved the deal.

A Texas League Squeeze Play. One of Perot's best accounts was the Southwestern Life Insurance Co., which he inherited in 1958 from fellow salesman Jim Cox, who was promoted to a post in California. Some months earlier, Cox had received an order from Southwestern for a 7070 computer, then IBM's largest commercial unit. Perot had 90 days either to declare the deal dead (and get Cox to return a $10,000 partial commission) or to agree to try to install the machine himself for what was known as an installation commission. If he accepted the risk and failed, however, Perot would be required to pay IBM back the $10,000.

Cox, now 66, bitterly recalls that just as the 90-day period was ending, Perot demanded that Cox return his commission. "The account required almost constant attention, and Ross just let the deal die," says Cox, who feels that Perot then "would have resold ((the computer)) to Southwestern in a few months and kept 100% of the money. He was extremely devious."

Cox says Perot relented only after Cox surprised his superiors by requesting the right to install the computer himself from California. "I was going to . take it all the way to the top of IBM," he says. "There are very few people who have really tried to cheat me on anything. And, in Ross's mind, he wasn't cheating me at all. That's the frightening part."

Making Soup of Campbell. When Perot finally installed the 7070 at Southwestern, he received roughly $25,000 as a commission, which he wanted to keep for himself -- to the consternation of his IBM partner, Dean Campbell. When the two first started working as a team in the late 1950s, they shared 20 insurance-company accounts. Perot agreed to work on two large, difficult accounts -- including Southwestern -- while Campbell would take the rest. Perot told his boss that he should not split the Southwestern commission with Campbell because he had done all the work. In response, Campbell argued that Perot didn't visit the 18 accounts Campbell was managing but the pair was splitting those smaller commissions.

"Ross was able to convince a new branch manager ((who has since died)) that I shouldn't get the money," recalls Campbell. "He convinced management that he could walk on water. He is a master salesman. He really thought a lot less of me because I let him do it. I was just so aghast that he would have the audacity to even suggest it -- and doubly aghast that the new manager went along with it. After that, I wouldn't touch anything he got close to." Hard feelings aside, Campbell plans to vote for Perot in November. "I still don't like him," he says, "but I've never seen anybody who could accomplish as much as this son-of-a-gun could."

Join Me -- or Else. Merle Volding, a former IBM manager, knows what it's like to cross Perot. He recalls that Perot quit IBM in June 1962 on a Friday afternoon, then turned up the next morning at Volding's Dallas home and spent several hours trying to persuade him to join EDS in exchange for a one-third share. "I ended up telling him that he had a good idea, but that, 'Let's face it, you and I are so different, it wouldn't last six months,' " recalls Volding, now 68. "He got upset that I turned him down." Volding, meanwhile, had been promoted to marketing manager in Dallas, and was responsible for helping IBM salesmen protect their accounts from rivals like Perot.

Later that same year, Perot wrote to IBM chairman Thomas Watson Jr. accusing Volding "of all kinds of unethical things" in preventing his upstart company from competing against IBM, says Volding. Big Blue, having faced antitrust + charges before, in the 1950s, started an investigation but soon cleared Volding of any wrongdoing. "Ross knew damn well I wasn't unethical," he says. "I think he was just trying to get IBM to pull back and give him a free hand in signing up our customers. He used threats all the time."

Lining Up His Ducks. One former salesman, Ted Smith, now 59, recalls that shortly before Perot left IBM, he admitted to Smith that he had three contracts already signed up -- with GRC, Southwestern Life and Blue Cross-Blue Shield of Texas. A former IBM executive maintains that he has firsthand knowledge that before quitting, Perot sold additional IBM equipment to at least two of those entities, collected sales commissions and then had those firms cancel the orders once he left IBM. What's not known, he adds, is whether Perot had these clients lined up when he sold them the equipment in the first place. Charles Bridges, a former executive with Southwestern, says that Perot may have sold and then canceled "minor pieces of equipment" but that he "did not take unnecessary orders in order to pad his account." Bridges adds, "The problem I had with Perot is that if the game doesn't go the way Ross wants it to go, he keeps trying to change the rules so that he wins."

Dear IBM: %$ % %$!!*&!! Perot's relationship with IBM continued to be turbulent long after he left the company. In the late 1960s Aubrey Wilson served for nine stormy months as the EDS account manager for IBM, whose business with Perot was expanding. Wilson, 67, recalls being confronted with a stream of complaints from Perot. "He had his whole organization geared to route even the slightest provocation to his personal attention so that he could file a formal complaint," says Wilson, who retired from IBM in 1990.

One day, for example, an IBM staff member who had moved to Africa sent a postcard to a group of former colleagues who were stationed at EDS. The card pictured native women with exposed breasts. "It was like something you'd see in National Geographic," recalls Wilson. Nonetheless, Perot, who saw the postcard, fired off a letter to IBM "about how EDS employees were embarrassed by this pornography, and that we should control our employees better," says Wilson.

Sometimes Perot's complaints involved real business issues. In 1968 Perot cried vigorously about IBM's refusal to let him purchase equipment on credit, yet records show that he consistently refused to provide even limited financial data in order to prove he was creditworthy. Nonetheless, several months later, EDS filed a public prospectus that included reams of financial data. In March 1968, Perot wanted to buy IBM equipment that he was leasing, but he demanded that the deal be retroactive to the first of the month, which would save EDS three weeks' worth of rental payments, or $28,000. "When IBM refused, Perot fired off a letter accusing me of having called him a liar," says Wilson. "Of course, I didn't call him a liar. Nobody in a sales or marketing position is going to call a customer a liar -- at least not to his face."

As a result, Perot threatened to sever all ties with IBM, prompting the company to concede the $28,000 and apologize for any misunderstanding. "Perot then specifically asked for me to return to do business with him, but I refused," says Wilson. "He basically created that crisis and trampled on me to get what he wanted. And I found that totally immoral and unacceptable." As Aubrey Wilson and his colleagues at IBM have apparently learned, it's hard to be a billionaire and a Boy Scout at the same time.