Subject: RE: CAF
From: "Neil Callahan" <[email-masked]>
To: "'Hunter Biden'" <[email-masked]>
Cc: "'Eric Schwerin'" <[email-masked]>, <[email-masked]>
Date: Tue, 27 Jul 2010 23:08:24 -0400

Hey guys,

I am not trying to Monday morning QB this or make anyone feel bad.  What’s done is done, live and learn, it’s all good.

We just need to embrace the reality of where we are and who we are dealing with and take an approach that we believe will make us whole.  An aggressive, hardnosed approach is likely our best option towards making us whole.

And Hunter has a potty mouth and is known to be cranky, so we are about half way there.

The good news is we tested out the weapon, and it’s very lethal when pointed at the right target.  Let’s find some more targets – ready, aim, fire.

------------------------------------------------------------------------------------------

Neil Callahan

Rosemont Seneca

401 Greenwich Street, Suite 400 | New York NY 10013 | 212-933-9965 | 212-796-4037

1010 Wisconsin Avenue, Suite 705 | Washington DC 20007 | 202-333-1880

917-945-9516 (mobile) 

866-749-8879  (fax) 

From: Hunter Biden [mailto:[email-masked]] 
Sent: Tuesday, July 27, 2010 10:46 PM
To: <[email-masked]>
Cc: Eric Schwerin; <[email-masked]>
Subject: Re: CAF

All of these points are great and exactly why we are idiots for agreeing to a success fee based on a handshake deal with between Lorenzo and someone we've never met.

Sent from my iPhone

On Jul 27, 2010, at 9:59 PM, "Neil Callahan" <[email-masked]> wrote:

Got it.  So getting a 0.2% fee was something we agreed to up front.  And is that a 50|50 split with TA?  So really a 0.1% fee or do we get the whole thing?

I’d still argue for the whole fee up front – CAF could do something next year (i.e. CFO goes to jail, over charging, endless reasons) and Amtrak pulls the contract – not our fault, our job was done.  Or we need an agreement they will pay put the payment in escrow and it will release it to us in full if CAF violates and stipulations (a standard practice).

Although my point number 6 is something we should consider.  Asking them to purchase a tangential service – something they are going to do anyway, why not through us (i.e. RSP Event Management)

If you are assuming push back from CAF, you can’t you go in asking for what you want – you have to go in higher/more and then be happy to settle at what you want.  So going in with “my understanding was the fee is for the 1st year” or something like it is a good way to start the conversation and anchoring to a number that they feel like they got a win once we get to where we want to be anyway.

Our checkered history with TransAtlantic (IB, Ormazabal) tells me that we must assume CAF is trying to fuck us and we go in very hard right away, almost unreasonably hard to make a point.

All of the Spanish clients we have dealt with so far are just not nice guys – they are dicks when it comes to business - so we have assume CAF is the same and treat them accordingly.

------------------------------------------------------------------------------------------

Neil Callahan

Rosemont Seneca

401 Greenwich Street, Suite 400 | New York NY 10013 | 212-933-9965 | 212-796-4037

1010 Wisconsin Avenue, Suite 705 | Washington DC 20007 | 202-333-1880

917-945-9516 (mobile) 

866-749-8879  (fax) 

From: Eric Schwerin [mailto:[email-masked]] 
Sent: Tuesday, July 27, 2010 9:30 PM
To: <[email-masked]>
Cc: Hunter Biden; <[email-masked]>
Subject: Re: CAF

The success fee was definitely on the entire $258m not the first year. The point I want to make to CAF (assuming there is push back) is that we agreed to a much smaller fee than the norm so it should be no skin off of their nose and also it was in recognition that we were hired at the last hour.  BUT our value is obvious.  Hunter's relationship with CAF gave Amtrak that extra bit of confidence to award the contract to CAF.   I don't want to renegotiate - I just want what was agreed to and is more than reasonable.  

Also, Lorenzo negotiated the fee directly with the CEO of CAF. It is coming out of the budget in Spain.  Jesus is not Pedro. 

I am not saying they won't pay, just want to figure out how memorialize it.  And if they push back we have our coordinated message. 

Eric D. Schwerin

[email-masked]

Sent from my iPhone

On Jul 27, 2010, at 8:43 PM, "Neil Callahan" <[email-masked]> wrote:

Hi guys,

A couple of questions / comments:

1.       Agreed with all the additional Advisory type services we can tack on 

2.       Did we know the size of the deal going in - $258m?  Or was the Success Fee $800k pertaining to winning the bid?  To me the winning bid is for $25.8m, and our $800k is on that.

3.       Our position could/should be that our success fee is $800k on the first 10% - $25.8m or 3% which is fair and reasonable, and we expect equivalent (3%) on all additional awards under the bid 

4.       10% sales commission is customary across the board to their internal folks, deal teams, etc.   RSP claiming 3% or about a 1/3 rd of the commission is not outrageous

5.       Or we give them a choice – 3% on this deal and 3% on all deals going forward – or 0.2% on this deal and 5% on all deals going forward.

6.       Offer them a tangential service / Line of Business such as RSP Promotions, or RSP Business Meetings, RSP Research, RSP International, etc. – we’d offer an additional line of business with an expectation of $1m-$1.2m annually of revenue and sign a 3 year contact.  They will say “oh, I did not know you guys did that” and we’ll just build a mini-delivery team around the 3 year $3.6m contract.  (This is a fairly common and effective tactic, the thesis is they will hire someone to that service, why not us, and we will deliver it to an acceptable level of service.)  But is clearly not our Core Business, which is also being expanded as noted in point #1.

7.       Going to Spain for a negotiation session where it will be RSP vs CAF/TA is lose lose proposition, I’d rather hit the spas of Pyongyang – the trip to Spain should just be a big fat party and discussion of the next contract, collecting a check and nothing more. 

8.       The Governor could give some grandfatherly advice to CAF – “make sure you treat your partners right, especially RSP” – basically do the right thing.

9.       I suspect the main indigestion is that Jesus does not have the budget approved to cover it, or he is/was not authorized to make such a deal and the people in DC will be basically be like, thanks, but I never hired you and it’s not coming out of my budget, a nice pat on the back from the DC team is anticipated.

Best,

Neil

 

------------------------------------------------------------------------------------------

Neil Callahan

Rosemont Seneca

401 Greenwich Street, Suite 400 | New York NY 10013 | 212-933-9965 | 212-796-4037

1010 Wisconsin Avenue, Suite 705 | Washington DC 20007 | 202-333-1880

917-945-9516 (mobile) 

866-749-8879  (fax) 

From: Eric Schwerin [mailto:[email-masked]] 
Sent: Tuesday, July 27, 2010 5:42 PM
To: Hunter Biden; [email-masked] Archer
Cc: Neil Callahan
Subject: CAF

For discussion tomorrow at 10:30am.

Here's what we should propose to CAF.   The deal was for approx an $800K success fee as I recall.  This always (as standard operating procedure) was contingent on the actual award and when the money is obligated by Amtrak.

Amtrak has so far only allocated $25.8m of the $258m contract.  (It is a five year contract at $258m, with the first year only being valued at 10% of the total, $25.8m).   So, we would only be receiving 10% of the $800,000 anyway had we had a signed agreement on the success fee.  And by the way, $800,000 is .2% of $298m.   Way, way below the going rate for these types of things.

I think we should send CAF a letter saying that per our agreement we want to memorialize our understanding on payment of success/sales percentage fees.   We should ask for our $80,000 now (the 10%) and agree that the rest is paid out as the money in obligated.   We could also look at increasing our annual retainer by $80,000.   

We should also agree to help them with the following things:

1) Advice and strategy related to Amtrak

2) Advice and strategy as related to work CAF can do to help Amtrak secure financing for the remaining 90%

3) NY State relations - including work with the Governor (to include a press event ASAP in Elmira)

4) Federal Government Strategy (no lobbying, but this could include a recommendation to hire a lobbyist)

5) Labor Relations

We may even want to look at expanding the relationship to focus on Light Rail.

FYI, Lorenzo wants to schedule a trip to Spain in September to talk to Jesus about this.  I don't think we should go until this is finalized.

 

Eric D. Schwerin

Rosemont Seneca Partners, LLC

1010 Wisconsin Ave., NW

Suite 705

Washington, DC 20007

(202) 333-1880

[email-masked]

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