(FORTUNE Magazine) – PAUL REICHMANN is a man who likes to take huge risks to build enormous things. Along with two of his four brothers he created an empire of office buildings and natural resource companies and a fortune that in 1989 rivaled Queen Elizabeth's. But today the master builder's greatest project, Canary Wharf, stands half-empty, a 21st-century ghost town on the edge of London. And his family's vast $10 billion fortune is gone, consumed by real estate speculation and disastrous stock market investments. How could Olympia & York Developments Ltd., the Reichmann family company that had the financial prowess to borrow nearly $20 billion, end up mostly in liquidation, the Reichmann equity wiped out? Like other developers, O&Y was trapped in the deflationary firestorm that engulfed commercial real estate worldwide at the start of the 1990s. But O&Y was also wrecked by the man who constructed it. Paul Reichmann's taste for risk taking and his towering confidence in his own ability as a financier inevitably led to the destruction of the world's largest real estate company. Reichmann has already jumped back into the high-stakes game. In February he teamed up with investor George Soros, the Hungarian-born American whose group of Quantum funds purportedly made $1 billion by shorting the British pound during Europe's currency crisis last September. The two men have formed , Reichmann International to serve as an adviser to the Quantum Realty Fund, which has $500 million to invest in commercial real estate in the U.S. and Canada. About $100 million of that comes from Reichmann and Soros. Says Soros, whose appetite for risk is at least as big as Reichmann's: ''Mr. Reichmann has already hit what we consider to be three grand slams in real estate.'' In an exclusive interview with FORTUNE, Reichmann, who lives in Toronto, talked for the first time about how his mistakes and those of his bankers destroyed Olympia & York. ''It is my fault,'' he says humbly. ''I did not concentrate on risk management, and I did not realize the change in the marketplace that came about with the Gulf war. Psychologically, a lot of things I should have done I didn't, because I knew that when this big tenant -- Barclays Bank -- moved in, Canary Wharf would have been acclaimed as the greatest success of the century. In the end, the blame is all mine. The mistakes were not in real estate but in our financings of other things, like Abitibi-Price ((a huge paper products manufacturer)) and Gulf Canada Resources ((an oil and gas company)), that we did during an inflationary period.'' The story of O&Y's demise underscores management lessons about recognizing crises and dealing with them promptly. Reichmann dismissed those who questioned the soundness of O&Y while the company was overextending itself in the late 1980s as ''children who don't know what they're talking about.'' In the end he didn't understand how lenders, angered by his refusal to acknowledge the company's problems in time to deal with them, would refuse to help him. Reichmann's dream was to reshape the skylines of the world's major financial capitals, starting in Toronto and moving on to New York, London, and Tokyo. He bought or built office towers and then borrowed against his properties when prices were rising to develop the next one. To hedge his floating-rate borrowings, he engaged in sophisticated currency and interest rate futures transactions. He also pulled several billion out of his property holdings and invested the money in natural resource companies whose cycles he mistakenly assumed would run counter to real estate. Hubris led him to ignore sound advice from his bankers to begin talks to overhaul his company's finances when real estate values started collapsing. Says one banker: ''He effectively told me that I didn't understand and that everything was going to be fine.'' Had Reichmann -- like Rupert Murdoch, & Donald Trump, or many other distressed bigtime gamblers -- asked his banks at an early stage to help him renegotiate his debts, O&Y probably would have survived, although as a much smaller company. When O&Y finally hit the wall in March 1992, Reichmann found that he had few friends. His oldest allies, the Canadian banks that had been financing him for three decades, turned against him with unusual ferocity and abruptly shut off the spigots. His biggest lender, the Canadian Imperial Bank of Commerce, on whose board he had sat until February 1992, felt especially betrayed by his continuing assurances that all would be fine at O&Y. AT 62, Paul Reichmann cuts as distinctive a figure in international business as anyone imaginable. His slightly stooped, 6-foot frame is almost always clad in a conservatively cut black suit, white shirt, and black tie. Faultlessly polite, the bearded financier rarely raises his voice above a near whisper and has the manner of a sage or rabbi. Until 1977, Paul and his brothers Albert, 64, and Ralph, 59, were Canadian developers who had built two Toronto office buildings -- one of them, First Canadian Place, was the first of the three grand slams -- and a string of warehouses. The second came in 1977 when Paul placed a perspicacious $320 million bet on New York City, just back from the brink of municipal default. He bought the Uris portfolio of eight Manhattan office buildings. Property values in New York roared back, and five years later the portfolio was appraised at over $2 billion. Reichmann refinanced it and plunged the profits into the development of the $1.5 billion World Financial Center in lower Manhattan. It was the third slam. The four-building, 7.5-million-square-foot project was widely regarded as doomed when the ground was broken in 1981 because property values were still soft in lower Manhattan. But Paul Reichmann pulled it off again, selling one tower to American Express and leasing others to blue-chip tenants including Merrill Lynch and Dow Jones. By then he was considered a contrarian genius and terrific market timer. Said one banker who got trapped in the O&Y meltdown: ''We trusted him and gave him great license to do things. For a long time we thought he was different from the other developers. He seemed wise. But yes, he was also a gambler.'' BANKERS fell over themselves to finance his deals. Real estate lending was hot, and a piece of a Reichmann loan marked the lender as a bigtime player. In this environment it was easy enough for the brothers and O&Y's senior managers to deal arrogantly with the moneymen. While O&Y could borrow billions of dollars at a time from syndicates of banks and raise many hundreds of millions by selling bonds backed by office buildings, the intimate details of its cash flow and debt structure were known only to the secretive Reichmanns. Even O&Y executives in New York, who transferred tens of millions to the Canadian parent every month, knew little of the company debt structure and cash flow. Few of its nearly 100 banks were given copies of O&Y's annual consolidated financial statements. And these reports did not show the cross-collateralized structure of the company's debts nor how the borrowings were spent. It was nearly impossible to trace cash once it entered the parent company, according to an investment banker who reviewed the books. Says he: ''It was like scrambled eggs.'' Only Paul, and perhaps his brother Albert, knew how all the pieces fitted together. Investment bankers at Salomon Brothers who were underwriting a $1 billion mortgage bond offering for O&Y in 1984 were refused access to the company's financial statements. When Salomon insisted, the company relented -- sort of. The documents were taped to a conference room table and the investment bankers were given a short time to review them and memorize what they could. They were not allowed to bring pens or paper into the room to make any notes. Reichmann tended to treat the rest of the world in the same cavalier manner. ''If you see it, you will understand,'' he would often say to anyone who questioned the prospects for Canary Wharf, which he began developing in 1987 with the encouragement of the Thatcher government. With this project came a higher profile for the Reichmanns, especially Paul. The brothers, who had been occasionally spotted traveling coach on airlines, even splurged on a Gulfstream jet to make the frequent trips between Toronto and London. Canary Wharf, the minicity of marble-lined towers, was expected to cost about $7 billion and ultimately to house about 50,000 workers in at least 20 office buildings totaling 13 million square feet. By 1991, Reichmann had pumped some $3 billion of his family fortune into just the first few phases of the project. Says he: ''In the context of the time, which was 1987 and 1988, my discussions with my brothers were that the concept was right and would succeed. When we made that decision, we decided the risk was that we might lose $1 billion. And with our situation in 1987, that was a risk worth taking.'' Indeed, he was already involved in preliminary discussions to help develop a $30 billion city within a city in Tokyo. In the 1980s, Reichmann was also spending billions in an unfortunate attempt to diversify. Eventually he bought control of Abitibi-Price and Gulf Canada Resources. These two stockholdings produced enormous losses that left little in the coffers when the property markets began to sour. Other disastrous investments included a large interest in Santa Fe Pacific Corp. and loans to Campeau Corp. that cost Reichmann more than $200 million. Now he says regretfully, ''We should never have invested in things we were not experts in.'' From early 1991, Reichmann was constantly negotiating to borrow more than $1 billion to help stave off the cash squeeze he could see coming. He pushed hard for Barclays Bank, one of Britain's largest, to lease a huge block of space in Canary Wharf. But the Barclays negotiations were protracted, and no agreement was signed in time to save O&Y. With each glitch in his many negotiations, it became harder for Reichmann to raise the cash he desperately needed. The game ended in February 1992, when Morgan Stanley sued the company for $240 million. Why, everyone wanted to know, was O&Y's own investment adviser, which supposedly had some idea of the company's cash situation, taking its client to court? To encourage Morgan to take space in Canary Wharf, Reichmann had struck a sale and leaseback arrangement with the investment banker, and then, in Morgan's view, reneged on the deal. Reichmann refused to settle the dispute privately. ''Did I believe they would go to court?'' he asked. ''How could they imagine that it would help them when they knew that they would set in motion the destruction of Canary Wharf? And as property owners there, it would be against their interests.'' Morgan ultimately won its suit, and set off a chain of events that led to a cash crisis in March and eventually a bankruptcy filing for O&Y. In April, when the bankers had formed a creditors' committee and finally got a look at the books, they found a portfolio of assets that were hopelessly underwater, complex webs of highly leveraged companies, and numbers showing that O&Y had been hemorrhaging cash for at least two years. By late spring Canary Wharf was seized by creditors, and in the autumn the Canadian bankruptcy court was preparing a plan to liquidate most of the company's assets. The U.S. subsidiary of the O&Y empire is still afloat, but the brothers have resigned from O&Y. Although insolvent, the company might have avoided liquidation had Reichmann's three Canadian lenders not pulled the rug out. Only a few weeks before the March crisis, Reichmann suckered these banks by insisting that the company was not in desperate straits. The aggrieved Canadians, who as the largest of his bankers ran the creditors' committee, retaliated by refusing to provide additional funding for Canary Wharf. Other lenders, including Citicorp and Chemical Banking, favored giving Reichmann more money to finish up the huge project, but the Canadians were adamant, and their refusal pushed O&Y toward liquidation. ''The Canadian banks didn't trust each other, and they didn't trust Paul or Miller,'' said a banker who participated in the negotiations, referring to Robert S. Miller Jr., a key Reichmann adviser. ''The only banks that Paul had a personal relationship with were the Canadians,'' he added, ''and with them it was personal.'' Reichmann continued irking his lenders by postponing creditors' meetings and dribbling out incomplete financial information. He and his advisers angered the very people whose forbearance they needed. He admits now that ''myself and the advisers and some of the bankers all acted as amateurs. None of them had been through a restructuring like this before. Some were experts in Case A but not in Case B. I really couldn't say I got good advice or bad advice, because what's clear is that we didn't have anyone who knew how to go about it properly.'' Several O&Y executives and some of its lenders now say that Reichmann was in an almost unreachable state of denial as his problems careened out of control. His brothers were rumored to be worried about how he would bear up under the pressure of seeing the family company come apart as a result of his own mismanagement. NOW THAT a court-appointed trustee is overseeing the orderly liquidation of O&Y, Reichmann says he rarely thinks about the events that led to his downfall. He is as sure of himself as ever, dreaming about new megadevelopments and acquisitions. Says he: ''I fully expect to work on two or three more projects as big as Canary Wharf in my life.''