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In 1998, Kansas City Southern Industries had a problem. More than 90 percent of its annual net income was coming from one subsidiary — Janus Capital, the then-white-hot mutual fund company. But KCSI was valued by investors as an old economy railroad conglomerate. The only way to cash in on Janus’ market potential was to spin it off. The price of freedom turned out to be high, as the two management teams fought an ugly, public battle over the terms of the spin-off. In the end, KCSI prevailed, in large measure because of John Marvin, of the Kansas City office of Chicago’s Sonnenschein Nath & Rosenthal, a soft-spoken partner who turned out to have a taste for trench warfare. A Kansas City native, Marvin, 62, spent most of his career with Watson & Marshall, which he describes as an “old-line K.C. firm” dating back to 1887. When the firm folded in 1996, Marvin went to Sonnenschein, which had been recruiting him for years. Although he was the point person in the biggest mutual fund story of the year, neither Marvin nor Sonnenschein specializes in the biggest source of mutual fund regulations, the Investment Company Act of 1940, nor is Sonnenschein a big player in the area. He describes his practice as general corporate finance and securities, a broad outlook that proved useful for the complex corporate, regulatory, and tax aspects involved in the deal. KCSI planned to combine Janus with three other financial services companies, then spin them off together as a new holding company called Stilwell Financial Inc. Janus favored a spin-off, but opposed that structure. “Janus thought its name was magic and that, in order to maximize the company’s value, it had to be independent,” says Marvin. But despite Janus’ phenomenal growth (by early 2000, it was capturing nearly 50 percent of new mutual fund investments), KCSI didn’t think Janus was ready to go it alone. Janus fought KCSI’s plan at every turn, particularly before the Securities and Exchange Commission. “The most difficult part was trying to process the SEC filings with Janus intruding into it,” says Marvin. Janus also issued public warnings that the proposed spin-off would have devastating effects on its funds and its all-star roster of money managers. In retaliation, and in order to show the SEC that KCSI controlled Janus, KCSI made the following statement about Janus CEO Tom Bailey in its 1999 annual report, published last year: “[T]he removal of Mr. Bailey would not result in significant harm to KCSI.” Companies don’t usually take such public shots at their own management, and it generated a hailstorm of publicity. Did Marvin write it? “I was fairly involved in it,” he answers, coyly. Not surprisingly, Janus has a different take. According to Jay Newcom of Denver’s Davis, Graham & Stubbs, personal counsel to Bailey, the fight grew out of KCSI’s failure to recognize the difference between money management and the railroad businesses. Gerard Kenny of Los Angeles’ Gibson, Dunn & Crutcher, which represented Janus, says that Janus only communicated with the SEC to correct inaccuracies. Exacerbating the fight was the cultural chasm between freewheeling Janus and the more conservative KCSI. “Money managers are like star athletes,” Marvin says. “There are egos involved.” That’s not the case with Marvin, say the Janus lawyers, who describe him as determined to work through distractions. “He always kept a cool head,” says Newcom. Although the deal is complete, the situation remains hot. Tensions are high between Janus and Stilwell, and Janus has been rocked by high-level departures, including that of chief investment officer Jim Craig. As usual, Marvin takes it all in stride. “I’m a Midwesterner,” he says, with wry understatement. “I do my work, go home, stay out of trouble.” Just don’t cross him.

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