The rise and fall of Ilan Reich (p. 2)

In March 1987, at age 32, Reich reported to the Federal Correctional Institution in Danbury, Conn. He washed pots, taught English and rode a tractor for his job on the grounds crew. He kept a journal; he played chess; he fretted about what his son, who was learning to read, would say when he realized what the letters P-R-I-S-O-N stood for.

He also plotted his return. Although most people, even the ones who hadn't rejected him, wanted him to disappear - move to Maine and work in a bookstore or something to avoid the awkwardness of their having to deal with him - Reich wasn't going to do that. "I considered it, but at some point I ... decided that was going to be a huge cop-out and that I'd always regret it," he says. He would pay his debt to society, then prove to everyone that his lapse in judgment was just that.

After seven months Reich was released to a halfway house for six weeks. He took a job at Western Publishing Group, doing business development for an investor named Richard Bernstein, whom he had met when he was at Wachtell and they were on opposite sides of a negotiation.

He earned a decent living, but it wasn't enough. To truly recover, he decided, he had to be readmitted to the bar. His chances were slim; in New York State at the time, only five lawyers disbarred for felony convictions had ever been readmitted.

So Reich launched his maniacal pursuit of the unattainable. He did charity work. He wrote to friends. Some supported him, while others brushed him off. He reached out to big-name lawyers, even several whom he barely knew, and explained why he deserved another chance. "That kind of unidirectional strength and fixation is bound to irritate people," says Judge Sweet today, "[but] I think his rehabilitation is due primarily to his own efforts."

Although the New York Appellate Division's disciplinary committee initially recommended against Reich's reinstatement, the final judgment six months later readmitted him. He isn't sure why the decision was reversed, but it didn't matter much. After almost ten years of struggle, he was free to practice law again.

"I just closed my door and cried," he says. Reich stayed up all night, writing letters aching with regret and relief to the people he'd betrayed and to others who had helped him. "You achieved the sweetest victory: the restoration of my dignity," he wrote to his lawyer Milton Gould.

Still, many of the same lawyers who wrote letters were unwilling to hire a convicted felon. "It was devastating," says Lederman, now at Milbank Tweed Hadley McCoy, who has stayed friendly with Reich. "He [couldn't] get hired. Because the stain was there."

After a six-month search, Reich accepted a job at a small firm, Olshan Grundman Frome Rosenzweig & Wolosky, and was immediately attracted to the most controversial cases. In 1997, Inamed (Charts), a manufacturer of breast implants swimming in a sea of product-liability lawsuits, hired his firm to help with a takeover defense against a hedge fund. Working with the chief executive, Donald McGhan - who was also the subject of an SEC investigation - Reich helped break the logjam and settle some 40,000 outstanding lawsuits.

For the company to start afresh, however, the board decided McGhan had to go. In January 1998 it named Richard Babbitt CEO and Reich executive vice president, and then, in December, president. Inamed thrived, going from $106 million in 1997 sales to $240 million in 2000, the same year the board elevated Reich to co-CEO. Sure, the proxy statement had to list his history in stark black letters, but he was again in the public eye, making decisions and earning big money. In 13 years Reich had clawed his way from a jail cell to the helm of a large public company.

Yet for all his drive and intelligence, Reich's style somehow managed to undermine his substance. In 2000, Babbitt (now deceased) was accused of sexual harassment. Before consulting the board, Reich put Babbitt on paid leave. "I should have reversed the order [of events], but given where I was in life, maybe I had some hypersensitivity to ethics and morality," he says.

The board saw things differently, and effectively put Reich on leave too - permanently - in January 2001. "I think he was eager to become No. 1, and he may have moved too aggressively," says Mitchell Rosenthal, a former Inamed board member. "[The relationship] couldn't go forward after that."

Today Reich is eager to gloss over how things ended. The job "brought me back in every respect - emotionally, psychologically, reputationally," he says. It brought him back financially, too, with more than $10 million in severance. "By the time I got finished with Inamed, I think I was on par with, if not beyond, where my peers were at Wachtell Lipton. It was a measuring stick in my mind," he says.

When lawyers finish a deal, they often commission a bound leather book containing all the papers pertaining to the transaction. Now that Reich felt he had some closure, he decided to do the same. He consolidated all the correspondence around his case - his prison journals, the stories written about him, the materials on his readmission project, and even the psychiatric reports and the abstract doodle he drew while awaiting sentencing. He put the material into three bound volumes, with tabs separating sections and a gold-printed leather spine that reads, "Ilan K. Reich: Selected Personal Documents, 1986--1995." The unvarnished history of the most shameful act of his life now sits on a shelf in his den, where his children are free to look at it. "You can't erase history," Reich says. "You have to live with it and deal with it."

Believing his resurrection complete, Reich decided to try something else: relaxing. Not that he was particularly good at it. He played golf obsessively, snowboarded, served a short and contentious stint as CEO of SpectruMedix, a troubled biotech company he had invested in, and then began flying lessons, something he'd started at the age of 20 and then abandoned because, he says, "it wasn't that safe."

He bought a plane and threw himself into charity work for an organization called Angel Flight America, shuttling sick people to medical appointments as often as three times a week. In one month in April 2004, he flew 18 missions. "I put literally 15 years of flying on my plane in two years," he says. "It's the most direct form of philanthropy I've ever been involved in."

Next page: The rise and fall of Ilan Reich (p. 3)

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