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Fall Into the Cash

Let's hope the Fishers use it to clean up the messes they've created.

By Matt Smith 

Don Fisher, the iconic founder of the Gap stores, is known for the messes he and his sons step into. A few years ago, he invited a boycott of his company by bringing his sons into the side business of cutting down rare redwoods. The idea, Fisher said in his autobiography, was to improve the family cash flow.

During the 1990s, Fisher persuaded his sons to invest in the illegal-drug operation known as the San Francisco Giants to keep the team from moving to Florida. In 2005, his son John Fisher then bought the Oakland A's just as the baseball steroids scandal was heating up.

Two years ago, John Fisher contributed to the defeat of a ballot initiative that would have given California's 4-year-olds universal, free public preschool. Don Fisher spends portions of his vast fortune financing and lobbying on behalf of charter schools, which he values in part for their potential to undermine teachers' unions.

Last year's top San Francisco political drama involved a failed Fisher-backed ballot initiative that would have helped clog the city with traffic by increasing parking spaces for cars.

On June 1, the Presidio Trust will release an environmental review for a controversial plan to house Fisher's massive art collection in a $100 million building in the park's old post area. "You mean build a huge iconoclastic building in one of the great historic districts in America to ruin it?" is how Fisher political opponent and S.F. Board of Supervisors President Aaron Peskin described that move. Earlier this month, a National Park Service official formally added his voice to this criticism, possibly laying the groundwork for a messy citizens' lawsuit seeking to halt Fisher's museum on historical preservation grounds.

In other words, the Fisher family has long been perceived as a scourge on San Francisco. Thanks to a recent $400 million family cash infusion, obtained by partially bailing out of Gap Inc. shares, the Fishers have an opportunity to inflict more of the same — or to turn their bad-citizen image around.

Perhaps instead of using family money to saw down ancient endangered forests, worsen the lives of families with young children, and turn the Presidio's national park area into a temple to tycoon megalomania, the family could use the new money to undo some of the bad that their older money has done. Perhaps John Fisher could use his A's perch to lobby for real — rather than the currently bogus — drug testing in baseball. The Fishers could undo the damage of their campaign against public preschool by repenting, and backing a new pro-preschool ballot initiative. They could end their campaign against the teachers' union, and enable an agreement to allow the private charter schools they support to become unionized. The Fishers could turn their family redwood logging operation into a nature preserve. And Don Fisher could abandon his Presidio museum plans — saving a bundle on potential lawsuit costs — and use the money to convert the Gap Building at Folsom and Embarcadero into the art museum it was initially designed as.

The Fishers are apparently in the process of gradually falling out of the Gap. Family members might think about using the money to fill gaps in their weakened legacy.

Receiving far less attention than the Fisher clan's proclivity for stepping into messes is a muddle the Fishers are quietly, gradually, stepping away from: Gap Inc. itself.

According to announcements in the company's financial statements, during the past two years family members and the entities they control were expected to sell more than $400 million in Gap stock back to the company. They were to have cashed out $250 million last year, and $158 million this year.

As of last year, the Fisher family owned 34 percent of the company's shares, public filings say. Given that we're talking about a $14 billion corporation, the family is cashing in only a bit more than 9 percent of its Gap holdings. Percentagewise, that's the kind of portfolio diversification some of us do when we buy a pair of pants.

Notwithstanding, when insiders sell large blocks of shares — and the Fishers are the ultimate Gap insiders — it can be perceived as a signal that they've lost faith in the company's future growth. Retailers, Gap included, face a potential bloodbath in the current recession. The company recently enjoyed a stock price uptick after Gap Inc. announced it was essentially cannibalizing itself. The company last year cut 2,200 jobs, closed its matron-focused Forth & Towne division, and announced it would close 35 more Gap stores than it opens this year. The company says it will shrink its sales floors. And, if one is to believe a Gap employee blog, the company has been telling its sales staff to focus more on pushing Gap credit cards instead of customer service.

But the Fishers' share sell-off is actually of limited use in predicting the company's possible ill fortunes because of the highly public, systematic manner in which it has been performed. During the past two years the company has made public a series of Fisher-family share repurchase agreements, and has followed up with a press release announcing the family's sale of shares.

"If [Gap Inc.] were about to shit the bed, this isn't how you'd get out," noted one Wall Street analyst who didn't wish to be identified because he cursed.

The company, for its part, calls the sell-off "normal investor diversification."

So the question becomes not what the founding-family share bailout means for Gap Inc., but what the Fishers' increased liquidity means for San Francisco.

Will they use this money to underwrite more baseball drug abuse? Figure out some other way to hold down low-and middle-income families with preschool-age children, as they did when they helped defeat the 2006 preschool-for-all initiative? Or will they grow the empire of Fisher-backed charter schools until they finally bust the Fisher-despised California Teachers' Association?

Perhaps. Or they could experience a Scroogelike moment of atonement, and use their $408 million for truly worthy causes, such as undoing the damage they've already done.

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