Episode Transcript
[00:00:04] Speaker A: Welcome to Cafecito, a podcast dedicated to fostering connection and empowerment within the Hispanic and Latin American community.
[00:00:16] Speaker B: We're going to get started today with our Cafecito with Ernie Perez. Ernie is the head of our tax practice globally and we, we were talking last week about how to make things different.
We've tried a few different formats with our different Cafecito speakers and wanted to try this podcast kind of dialogue going back and forth. So we'll turn it over now. Ernie, do you want to do just a quick introduction? I'll let you introduce yourself, then we can get into some of these.
[00:00:44] Speaker C: Sure. Sure. Thank you. First of all, thank you, AG, for extending the invite to join you all. It's a pleasure to be here. And I also commend you and the rest of the team for what you've done over the past year. It's pretty amazing what you guys have put together and some of the things you're thinking about. So kudos to you for taking the initiative. As a quick introduction, I've been with the firm for over 17 years, going close to 18 years now. Started my career. I grew up in South Florida, went to the University of Georgia and also went to Georgia State University for law school. Started my career in 1992 at Arthur Anderson. Thought I was going to stay there for the rest of my career.
May partner in 2001. I have the Distinguished honor of being a member of the last class of partners of Arthur Anderson. May partner in September of One and I was out the door in May of two after the Enron debacle. Joined Deloitte for a couple of years and then a partner that I really worked very close with at Anderson, who actually was part of leadership by the time Anderson imploded. Got to know Tony and Brian because as many of you might know, it was Alvarez and Marcel who did the Arthur Anderson wind down when Anderson got into trouble, got to know Tony and Brian and their infinite wisdom mentioned to Bob Lowe, who was individual. Why don't you come over and start a tax practice at A and M? Bob came over in four and he was somebody that I enjoy working with. I went to Deloitte and it's a partner, but I wanted to work with somebody who I respected. And he had a vision, a dream of creating something special and came here and been here ever since started. My background is in really international tax, so I do a lot over the years. Dealt a lot with all parts of the world, Latin America predominantly, but also Europe and Asia. And over time I've had different assignments and for the last seven years I've been heading up the tax practice.
[00:02:54] Speaker B: Wonderful. Thank you. And we have some discussions we want to have around that here soon, especially for those of us who don't know tax, other than our annual federal tax return that we'd read, right.
[00:03:05] Speaker C: Yes.
[00:03:07] Speaker B: So, Ernie, you came to Miami from Cuba as a child, and as you and I have discussed, that's near and dear to my heart because my mom did the same thing. What was it like for you? Just maybe earlier on, on a personal level, growing up as an immigrant in Miami or in the mean overall? And then, like you said, you went on to live in Georgia as know.
[00:03:26] Speaker C: I came when I was two with my single, single know ag growing, probably we felt like we owned this place. Right? That's how we felt it. But as you get older, you realize what your immigrant upbringing really what it does and sort of the foundation it does to you. But I think my immigrant upbringing is a big part of who I am in terms of. For example, when I was growing up, we came over. A lot of families came after. So my house was always full of family members that were coming from Cuba. We would get close to. We would put them know, give them room for a couple of times until they got stable, saw that hard work and determination. So that was ingrained in me, but it really didn't hit me until I went to the University of Georgia. And I'll never forget this. I was at the University of Georgia, even mine. I went to Georgia in the 80s. There were still KKK marches in Stone Mountain, by the way, in Forsyth County. But one of my good friends that I met as a freshman was a black man, Fred Anderson from Millersville, Georgia. And Fred and I became good friends. We were both in school of business. He was in finance. I was in economics. And I remember talking about what we wanted to do, what we were aspiring for. And him and I both wanted to go to law school. And I sort of had my plans mapped out. This is what I want to do. And one day he said to me, how can you talk with so much confidence? And really caught me off guard because that's the only way I could talk. But I realized where he came from. I also realized where I came from. And so to answer your question, my immigrant upbringing growing up Miami gave me a confidence that everything was achievable, and that's what I've used for my entire life. And I think that has helped me tremendously further my career over the.
[00:05:26] Speaker B: Thank you. Yeah. And I think there's a lot of people in HLA right now from Miami, and there's a lot of. Cuba is a strong country to have a presence there, but obviously lots of other countries, like Venezuela and Puerto Rico came. There's lots of groups.
We're going to talk a little bit more about Miami in a second, but I'm curious to see how much you remember, just your recollections of how things happened when the Mariel boat lift happened. I'm not trying to age you or date you, but you were around then, and then I was, because there was the growth, and then there was Mariel, and then things kind of went and came again. Right?
[00:06:03] Speaker C: Yeah. Well, I remember. So Marielle happened. I was 14, 1314 years old, and I remember getting in a car with my family and driving to Key west, and I still remember vividly as the boats were coming in to Key west, we had our family members there, and we went to pick them up.
Some of them went to detention centers. We had some family that actually was sent to Pennsylvania, others to detention centers in Florida. But we basically housed a lot of our family members and helped them help them get their footing and basically get them going. What people may or may not remember is that when Castro released allowed for the folks to come, he also emptied his prisons. He emptied the prisons and basically put the folks, not only the prisons, but also the hospitals where you had mentally impaired individuals. So all those folks came to South Florida. And if you look at the early 80s, besides the drug trafficking and everything else, South Florida, I still remember there was a Time magazine cover of Miami called Paradise Lost because of some tourists that were here from Europe that got killed. So Miami in the mid to early 80s was a place that was pretty crazy. And it wasn't until George Bush, the father, really started cracking down on the drug cartel and drug business down here that things started to change.
[00:07:35] Speaker B: Yeah.
I was very young when that happened, but I remember hearing, and I remember them calling them the Mariolitos. Right. We're the ones that came on the boat lift. And that was definitely a negative connotation.
[00:07:48] Speaker C: Yeah. It was not said out of.
Yeah. Yeah.
[00:07:52] Speaker B: It wasn't a term of endearment. No.
So going into a little more into the professional world now, for most people, taxes are paired with death. Right. But when you were interviewed by Hispanic executive, you said you knew you had found your thing when you took your first tax class in law school. And I'm sure that's probably surprising to a lot of people, especially like an engineer like me. Could you talk about that? Had you thought about being a different type of attorney. Did that change you? What was that process like?
[00:08:22] Speaker C: Yeah, I'm passionate about tax, so I think tax gets a bad rap. But if you think about tax and you think about, I was an econ major right before I went to law school, so if you think about it, tax is about problem solving, so not dissimilar from an engineer. So when you have a tax problem, it really makes you be creative and think about, how do I solve it? And then you have your facts, and you have the law, and then is the law in your favor, or are the facts in your favor, and how can you basically do it? And in our case, most of us on the scalp are think of tax as your 1040s, right? But most of our clients, all of our corporate clients, private equity clients, have to navigate not only through US tax, but taxes in all sorts of jurisdictions, which comes into play with supply chain manufacturing centers, repatriation of profits, allocation of capital. So what I enjoyed about tax all these years is the problem solving aspect of it, because you're really helping create value to your clients by making sure the capital gets put to use in the most effective manner, and then deploy it, and then use it in whether it's manufacturing, whether it's creating jobs, whether it's giving back to the community. So I always tell our people in the tax, you play a big part in capital markets, because part of your job is not just to save people money, it's basically to make sure capital is deployed in a very efficient manner.
[00:09:50] Speaker B: It's interesting where you say that, because you're talking about it. I remember an engineering class I took called operations Research, where you have a set of parameters that give you constraints, and you have to find a solution to operate within those constraints. That sounds a lot like the kind of problems you're solving.
[00:10:03] Speaker C: I got advice, by the way. I got advice a long time ago from somebody, one of my teachers. He said, Ernie, when the law is on your favor, pound table with the law. If the facts are in your favor, pound the table with the facts. And if either the facts and the law are not in your favor, just pound the table and start screaming loud.
Maybe you win the argument that way.
[00:10:26] Speaker B: I've tried that before at home, and that's probably not the right place to do. No, it doesn't work with the law.
So when you had originally gone to law school, you weren't sure what kind of law you wanted to practice. What was your plan originally going in there?
[00:10:41] Speaker C: I knew I wanted to do some sort of business law first. Year of law school, you take required courses. So really second year is when you start taking your electives. And took corporate law, took securities law, took commercial paper, and then I took a tax course. And tax went out, to be honest with you. AG had to do with the professor. The professor was probably one of the best professors I had who just made the class interesting. So we got into class. It was problem solving, it was thinking outside the box. It was arguments as to why, what kind of position is it? Policy. So all that created a favorable impression. And then after my second year, I clerked with the chief counsel's office of the IRS, and that furthered my interest in the tax world.
[00:11:30] Speaker B: And that just opens up so many more jokes that you actually worked at the IRS.
No, that's good to know. I think that really helps out for a lot of people and a lot of us, just as we're people that are still making decisions for their careers. But then also, one of the big things that I've been trying to sell and market for HLA is those of us that have a better understanding of the other practices and other capabilities that we have at a M. We're going to be able to be that much stronger, because then we can collaborate. Right. And that's one of the things I want to try to do with HLA, is give us exposure to people in different practices, with different skill sets that they might not otherwise come in contact with on a day to day basis.
[00:12:08] Speaker C: Makes sense. Yeah.
[00:12:12] Speaker B: So, can you talk about the evolution of A and M? You were asked by Tony and Brian to start the practice through your connections, when you met them, through Arthur.
How has it evolved in the 17 years that you've been here, in terms of starting from where you were and where it is now, globally?
[00:12:31] Speaker C: Yeah. When you go back when I started, I'm going to put this in perspective. I started the firm was, we'll probably do close to $3 billion this year. The firm, two, eight to 3 billion globally.
Well, we have about 6100 people, maybe 6500 people by the end of the year. And about two thirds of our revenue are US based, and about a third are outside the United States. When I started, the whole firm was $100 million, and we had about 500 people. And 99.9% of the revenue were restructuring NACA revenue, and 99.9% of the revenue was earned in the United States. Just to put that in perspective, right, what it was. But if you go back to that time frame Sarbanes Oxley had come out, it created a lot of dislocation in the marketplace. And Tony and Brian, to their credit, saw the opportunity to get into the tax business, get into what was called then business Consulting, or CPI, corporate performance room today. Eventually in 2006, got into the transaction advisory business, got into the DNI business, right. And so forth.
So think about it in the context of you have a restructuring practice that's been around for a long time, every other business was nascent, just trying to grow. Forget about cross selling, forget about working together. We were just trying to build a business. So it created know Tunnel Vision to create your business. And when I reflect on that time, it was a lot of fun, but we weren't doing a lot of cross collaboration.
And the first seminal moment that happened for the firm was Lehman Brothers, a financial crisis of six, seven, because it was really a seminal moment because the firm couldn't handle all the work unless it brought people from tax. We had 30 people in the Lehman Tax department running the Lehman Tax Department, bringing transaction advisory folks to help unwind Lehman's private equity business, bringing business consulting folks to help out, bringing DNI folks to help out. So it was really the first time the firm realized that what we're building here has synergies beyond just having separate practices. So that was a big moment which allowed us all to grow. And so as the firm has grown, I think what has happened is that a lot of the practices have been able to mind the opportunities. So when you look at the tax practice today, globally, it's about a $230,000,000 practice. And primarily us and UK, we're growing. Now in the Netherlands, we have Mexico, we have Brazil. And it's growing. 50% of our work comes from direct market penetration and 50% comes from us collaborating with Big A and M, whether it's restructuring, whether it's private equity, or whether it's the corporate space. So I think that the firm has evolved. And by the way, I mentioned to you earlier that we'll probably do close 3 billion. A third of those 3 billion are internal referrals. In other words, it's basically one division bringing another division in. So I think where the firm is today is really in a fantastic place. And when you ask the question how has it evolved? Has it evolved now to a point where we're connecting the dots? And to your point earlier about finding out what people do, that's how we connect the dots. Because the one thing that our entrepreneur platform has been great for the growth. But one of our struggles is we keep adding talent every day, and it's hard to keep up with the talent, what the skill set the talent brings in. So we need to make sure that we know exactly who's coming in, what they do. Because when we connect the dots, that is when we really add value and do well in the marketplace.
[00:16:17] Speaker A: Thank you for listening. Make sure to subscribe to Cafecito so you never miss a new episode. Also, visit our website, Alvarez and Marsal to learn more and to connect with us.
