Lazarus would retire from Toys "R" Us in 1994 an enormously wealthy man. He had company at the top. The Reagan tax cuts for the rich had concentrated a huge chunk of America's wealth at the upper reaches of the nation's economic summit.
In the fantasy world of conservative economic orthodoxy, this concentration could only be good news. Wall Street financial engineers, the orthodox narrative goes, can parlay the mega millions that tax cuts save rich people into investments that create jobs and prosperity for all.
In reality, Wall Street's financial engineers -- the kingpins of "private equity" -- did not parlay the fortunes of America's lightly taxed rich into prosperity for all. They instead used the investment dollars the rich provided to buy up struggling publicly traded companies and take them private. Their basic gameplan: "fix" the companies and then take them back to Wall Street and make a killing going back public.
But the companies the private equity firms took private typically found themselves stuck paying off the debt the private equity kingpins incurred buying them up. The new private equity overlords would, in turn, try to cover that debt by cutting costs, often by putting the axe to worker pay and benefits.
This "fix" sometimes worked. In other cases, the companies continued to struggle. Either way, the private equity managers won. If no windfall materialized on Wall Street, they would still walk away with millions in management fees.
In the Toys "R" Us story, the private-equity crowd came on the scene in 2005. Two private-equity giants -- Bain Capital, Mitt Romney's old stomping grounds, and Kohlberg Kravis Roberts -- joined that year with a real-estate investment trust to acquire the toy giant for $6.6 billion. Toys "R" Us was struggling at the time with competition from Walmart, and Amazon was coming up quick in the rearview mirror.
Toys "R" Us could not pull away. The company's net debt jumped from a few million in the year before the private-equity takeover to nearly $5 billion in the year after. Annual interest payments jumped to $400 million.
These interest payments, notes a Bloomberg analysis, made new investments that could update the looks of Toys "R" Us stores -- or better lure online shoppers -- much more difficult to arrange. By 2006, Toys "R" Us was spending more on servicing its debt than the company was making on its operations.
Last September, Toys "R" Us filed for bankruptcy. Last month, the company's creditors essentially pulled the plug. Toys "R" Us CEO David Brandon announced on March 15 that the company would be shutting down its 735 U.S. stores. Over 30,000 workers would be losing their jobs.
The company's private-equity investors? They collected $470 million in fees from Toys "R" Us during their ownership tenure.
And Charles Lazarus? The 94-year-old died on March 22, one week after the Toys "R" Us shutdown announcement.
Lazarus died rich. One sign of the size of his fortune: In 2013, the "toy king" sold one of his homes, a Fifth Avenue duplex in Manhattan, for $21 million.
The Lazarus heirs, meanwhile, won't have to worry about losing much of their inheritance to federal estate taxes. Thanks to conservative tax-cut orthodoxy, estate tax rates now stand at a modern-day low.
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