FOR YEARS, GUCCI HAD BEEN descending from Riviera swank to Jersey gaud. Its overlicensed double-G appeared on everything from coffee mugs to ashtrays. Fake versions of its handbags were sold on urban street corners everywhere. Then, suddenly, it found a shoe that fit: a sexy, backless clodhopper that became the must-have of devotees of high style in 1993. Gucci went on a winning streak. By March 1995 its designer, Tom Ford, was electrifying the fashion world with a revival of '60s rebellion. Soon celebrities like Madonna were in head-to-toe Gucci. At the company's London boutique this fall was a waiting list 100 chic names long for the new, $325 velvet hip-huggers. At Bergdorf Goodman in Manhattan, 256 women await a reshipment of $295 high-heel pumps. The fever has hit Wall Street. Last week Gucci was the red-hot initial public offering. At $22 a share, the once unhip, money-losing 72-year-old Florentine company was worth $1.3 billion.
No one is as happy about that turnaround as Nemir Kirdar, 59, the Iraqi-born founder and president of Investcorp, the Arab investment boutique that engineered Gucci's turnaround. Shod in black reptile-skin Gucci loafers, Kirdar sat confidently in his company's New York City office--occupying the entire 37th floor of a Park Avenue high-rise--contemplating Gucci's renaissance. After Investcorp bought the company in the late 1980s, Gucci lost so much money some feared it would go bust. "There was a time," says Kirdar, "when--in the minds of several of our clients as well as some of our own professionals--Gucci was a write-off." But during the first half of this year, Gucci posted a $24.8 million profit, five times the figure for the same period last year.
Gucci is only one of many jewels in Kirdar's crown. In 1984 Investcorp bought Tiffany & Co.--and sold it in a 1987 public offering for six times its purchase price. In 1990 Investcorp bought Saks Fifth Avenue. Since its founding in 1982, Kirdar's bank has arranged more than 50 acquisitions in the U.S. and Europe, valued at more than $7 billion. Such deals have spawned press accounts praising the bank's "gold-plated reputation" and Kirdar as "the banker to billionaires...a legend in financial circles." Says G. William Miller, a former Treasury Secretary: "Investcorp [has] shown a tremendous ability to buy, develop and sell businesses."
A close look at Investcorp's record, however, indicates its reputation may not be entirely deserved. Many Investcorp acquisitions have turned into costly disappointments. The bank stands accused of serious misconduct in two court cases that have received almost no public attention. Moreover, former executives of a prestigious jewelry firm under Investcorp control have told TIME they believe the firm has engaged in misleading accounting practices. Investcorp has a cozy relationship with officials in Bahrain, where the company is based and where the government is responsible for regulating it.