The Power of Penny Pritzker

The billionaire head of Barack Obama's fundraising machine is the person to call when you want to ``get the job done,'' says Warren Buffett. Her critics say she's enriched herself at their expense.

By John Lippert
Bloomberg Markets, October 2008

Penny Pritzker was driving to Chicago's Midway Airport in June to meet Barack Obama when her cell phone rang.

She, the Obamas and campaign staff were flying to St. Paul, Minnesota, where Obama would proclaim himself the presumptive Democratic presidential nominee. Pritzker's 17-year-old son wanted to remind her to savor history in the making.

``Don called and said, `Don't do what you typically do, which is worry about the next thing you have to get done,''' recalls Pritzker, Obama's campaign finance chairwoman.

Don's hopes were dashed two days later. A photo showed a beaming Obama with his wife, Michelle, watching over his shoulder. They were riding in a freight elevator to address 32,000 fans crowding the Xcel Energy Center. Pritzker was staring down, typing an e-mail.

`I'm working on my BlackBerry, trying to respond to our supporters,'' Pritzker, 49, explains six weeks later at Chicago's Hyatt Center, headquarters for a family empire that her great-grandfather founded 106 years ago and is now worth as much as $40 billion.

`No Nonsense'

If Obama makes it to the White House, some of the credit will go to Pritzker for organizing the best-financed campaign in U.S. history. She's tapped such wealthy donors as hedge fund manager Kenneth Griffin and Warren Buffett, who was the main attraction at a pair of $28,500-per-person Chicago fundraisers in July.

And she's pulled in first-time contributors with their $5 pledges, generating an e-mail list of 5 million and counting. Obama raised $338 million through June compared with $212 million for Hillary Clinton, 60, and $136 million for John McCain, Federal Election Commission reports show. In July, Obama, 47, raised another $51 million and McCain, 71, tallied $27 million, their campaigns said.

`She's a no-nonsense, no-drama, no-ego person,'' Obama says during a July flight on his campaign jet from Butte, Montana, to St. Louis. ``She and I share certain core values about how to run organizations, and hopefully that will inform how we manage the government.''

Family Empire

Pritzker is heading Obama's fundraising at the same time she's in charge of four family businesses and is spearheading charities devoted to physical fitness and education.

She runs Classic Residence by Hyatt, a chain of retirement homes, and The Parking Spot, an airport shuttle service. She's president of Pritzker Realty Group and chairwoman of TransUnion LLC, a credit checking company. She's a director of Global Hyatt Corp., which owns or operates more than 365 hotels in 44 countries.

Pritzker is also helping to preside over an uneasy truce that will sell off some of the family companies and dismantle its empire. The breakup will give her and 10 siblings and cousins at least $1.35 billion apiece, according to court documents.

``The Pritzker holdings constitute one of the top 10 private wealth buckets in the U.S.,'' says Byron Trott, vice chairman of Goldman, Sachs & Co. and lead investment banker for the Pritzkers and Buffett. ``They've compounded wonderfully in value over the last 15 years, and Penny is one of two key operating executives.''

The other is her cousin Thomas, 58, chairman of Global Hyatt. The company operates 115,000 rooms worldwide. Marriott International Inc., the world's largest hotel chain, operates 545,000.

Hard Fighters

Pritzker has spent a good bit of her career fending off criticism about her family and her role in its businesses. U.S. government officials sued the Pritzkers to collect taxes from her grandfather Abram's estate after he died in 1986.

The case centered on hundreds of trust funds Abram had set up in the Caribbean to avoid taxes. In 2001, an Illinois savings and loan that was once headed by Penny collapsed. Some 1,400 depositors are still out about $10 million, says Clinton Krislov, an attorney suing Penny and bank officers on their behalf. That same year, part of her family turned on her when seven brothers and cousins alleged in court documents that she'd enriched herself at their expense.

``The Pritzkers fight as hard in their business deals as they do with each other,'' says Barry Render, a Chicago native and business professor at Rollins College in Winter Park, Florida.

Single-Minded

As an example, Render points to $7.6 million an investor group Penny headed paid the city of Orlando, Florida, for 1,100 acres (445 hectares) of land abandoned by the U.S. Navy in 1999. This year, the development has $1.1 billion in taxable property.

Pritzker says her contract, which she won through competitive bidding, increased Orlando's tax base.

Fran Sweet, a retired Ameritech Corp. manager, is more blunt. Sweet lost $100,000 in the failure of Hinsdale, Illinois- based Superior Bank, the S&L half owned by Penny's family.

``The Pritzkers are crooks,'' Sweet says. ``They don't care anything about people who spent their whole lives trying to save.''

Penny Pritzker defends her conduct.

``We had seven years of clean audits and then the auditors said, `Well, maybe we'll change the way we calculate,''' she says.

Iron Woman

Penny showed her single-mindedness early on. When she was a child, she spent Saturdays playing with her father Don's adding machines at Hyatt offices. At age 16, three years after her father died, she asked grandfather Abram for a role in the family companies.

In 1985, the year she started working at Hyatt, she entered an Ironman race in Hawaii that included a 2.4-mile (3.9- kilometer) swim, a 112-mile bicycle course and a 26.2-mile run. After tripping in a lava bed and spraining her ankle, she kept going.

When asked how far she ran while injured, she replies, ``Oh, something like 20 miles.''

This past July, she competed in a minitriathlon with her ophthalmologist husband, Bryan Traubert, 53; her son, Don; and her daughter, Rose, 15.

`Blew Me Away'

``I ran step-by-step with Rose until the last 300 yards, and then she blew me away,'' Pritzker says, her long, athletic hands folded in front of her in a Hyatt Center conference room, where an 18-inch (46-centimeter), caramel-colored ceramic dog by artist Jeff Koons is one of the few ornaments. `I got such joy out of that.''

In the campaign, Pritzker provides the discipline and organization needed to cash in on Obama's anti-war message and inspirational appeal, says Matthew Barzun, a fundraiser in Louisville, Kentucky.

In February 2007, Barzun, 37, asked Pritzker for permission to hold a $25-per-person money-raising event. She agreed as long as he didn't spend more than 5 percent of what he collected.

``That made us think, `Do we really need chicken?''' says Barzun, who went on to raise more than $500,000 for Obama. ``We served pitchers of water.''

Buffett praises Pritzker's management skills. His Berkshire Hathaway Inc. agreed in December to pay $4.5 billion for 60 percent of Marmon Holdings Inc., where Penny was a director from 2002 to '08.

`Get the Job Done'

While she was helping to run things and hire new managers for Marmon, which makes everything from water treatment equipment to brake drums, operating margins almost tripled to 12.4 percent, according to a press release. The company had $7 billion in annual revenue in 2007, up 30 percent in five years.

``Once she's in charge of something, you can forget about it, because she's going to get the job done,'' Buffett says via telephone from his office in Omaha, Nebraska. ``That's my yardstick for management performance.''

Pritzker is known for organizing her workload. She lays out detailed plans and then develops measurable goals for herself and subordinates, says Marty Nesbitt, 45, who's now president of The Parking Spot, which he and Pritzker started in 1998.

To run the shuttle service, with its Dalmatian-spotted vans, 800 employees in 19 locations and $100 million in annual revenue, Pritzker and Nesbitt meet face to face for about an hour each week. They spend an additional four hours each quarter at board meetings. Nesbitt says having a formal plan for growth and profit makes it easier to monitor day-to-day performance.

Always Available

Pritzker is always available to react to unexpected events by phone or e-mail, Nesbitt says. She spends early mornings and late nights on her computer at home.

``If I get an e-mail from Penny at 1 a.m. or 4 a.m., it doesn't surprise me,'' he says.

Pritzker's conduct has entangled her in controversy. In 2001, relatives including her younger brothers, Anthony and J.B., and her cousins John and Daniel accused her, Thomas and Nicholas Pritzker of paying themselves too much to run the family enterprise, moving assets to their own trust funds and failing to disclose those actions.

The disputed compensation and assets were worth about $1 billion, people familiar with the situation say. The squabble came to light when another cousin, then 19-year-old actress and Columbia University student Liesel Pritzker, filed a lawsuit claiming her father, Robert, had drained her trusts.

Robert denied in court documents that he'd done anything wrong. Thomas, Penny and Nicolas did the same. To avoid a court fight, the three of them agreed to a 10-year restructuring under which the family will keep some assets, sell others and share some with partners or public shareholders, Thomas Pritzker says. The family is also restructuring the 950 trust funds through which it controlled its empire in 2002.

Untangling Spaghetti

``I call it taking a bowl of spaghetti and untangling it,'' Thomas says. ``We don't know of anyone who's undertaken something with the complexity of this.''

The breakup is well under way. Trott's Goldman Sachs Capital Partners, the private equity arm of Goldman Sachs, plus an investment firm affiliated with Wal-Mart Stores Inc. Chairman Rob Walton, has spent $1.1 billion for a minority stake in Global Hyatt. In total, Hyatt may be worth $11 billion, says Ted Mandingo, owner of an Elmhurst, Illinois-based hotel consulting firm.

Selling Assets

The Pritzkers sold chewing tobacco maker Conwood Co. to Reynolds American Inc. for $3.5 billion in 2006. That year, they tried and failed to shed Triton Container International Ltd., a shipping container company, for as much as $2.5 billion. And Penny says they've sold a significant portion of a $5 billion real estate portfolio that she developed.

The Pritzkers own 80 percent of a partnership that holds a 15.6 percent stake in Royal Caribbean Cruises Ltd. The family portion was worth $719 million on Aug. 19. The Pritzkers list eight casinos on company Web sites. The casino licenses alone are worth $500 million each, says John Kindt, a University of Illinois business professor.

Next year, the family will open a Grand Hyatt hotel and casino with 2,973 rooms next to the Bellagio hotel in Las Vegas.

In six years, by the time Buffett buys the other 40 percent of Marmon, he'll have spent $10 billion-$11 billion to acquire that company, Trott says.

Buffett says he was so confident in the financial analysis that the Pritzkers developed for Marmon that he decided during a flight from San Francisco to Omaha to buy it.

``It came with a price attached,'' Buffett says. ``In the end, we could meet it.''

$40 Billion

All told, the Pritzker empire is worth as much as $40 billion, a person familiar with the situation estimates.

The family's offshore accounts prevent anyone from getting a complete picture of their wealth. In 1986, when Abram Pritzker died, his heirs claimed an estate worth $25,000. The Internal Revenue Service sued to collect $53 million in back taxes. The two sides settled in 1994 for $9.5 million, according to U.S. Tax Court records.

In his campaign, Obama says he wants to crack down on overseas tax havens and stop allowing hedge funds to pay a 15 percent capital gains rate on most income, rather than the 35 percent income tax rate.

``The top 50 hedge fund managers made $29 billion last year,'' Obama said in Philadelphia in April. ``That's not fair.''

Penny says there's no contradiction between her family's tax avoidance and her support for Obama.

``Our family has done more than just good tax planning,'' she says. ``What we're good at is building businesses, creating jobs and supporting our economy.''

Siding With Buffett

Pritzker says she agrees with Buffett, who spoke at the Museum of Contemporary Art in Chicago about social obligations of the rich.

``Warren said that over the last 20 years, the net worth of the 400 richest Americans has grown seven times and the average American's net earnings are flat. He said that's not right, and that's why he's a Democrat,'' Pritzker says. ``I agree. It's not good for our democracy.''

Depositors say Pritzker is on the wrong side of another hot-button issue -- the subprime meltdown. They're suing over the 2001 failure of Superior Bank.

Her political opponents have been quick to capitalize: ``Obama's National Finance Chair owned a failed bank that specialized in subprime lending,'' the Republican National Committee said on its Web site on June 9.

S&L Failure

Penny's uncle Jay Pritzker and his friend Alvin Dworman paid $42.5 million for the Lyons Savings Bank of Countryside, Illinois, in 1988. In 1993, the bank, renamed Superior, became a pioneer in the securitization of subprime mortgages. The resulting growth allowed the Pritzkers and Dworman to pay themselves $200 million in dividends and enabled Dworman to borrow $100 million.

In 2001, Superior's auditors, Ernst & Young LLP, concluded that income from securitizations had been overstated and recommended asset writedowns totaling $420 million. Regulators closed Superior in July 2001.

Five months later, the Pritzkers agreed to pay the Federal Deposit Insurance Corporation $460 million over 15 years, with no interest, to help cover losses. Penny represented the Pritzkers in negotiations, she says.

Tim Anderson, a retired Libertyville, Illinois, banking consultant, says that if the FDIC had asked ratings companies to lower their AAA outlook on Superior's securities, the move would have alerted Wall Street to subprime borrowing woes long before the current crisis.

`Clout, Cash and Connections'

What's bugging depositors is the FDIC's promise that the Pritzkers would get a portion of proceeds from its lawsuit against Ernst & Young for sloppy auditing. The firm settled in 2004 without admitting wrongdoing and paid the Pritzkers $31.3 million.

That payout should have gone to people who lost money, attorney Krislov says.

``When you've got clout, cash and connections, you can take a tough stand against the little guy,'' he says.

Rather than defend the family's actions in court, Penny agreed in December 2001 to reimburse the U.S. government for money paid to depositors. Through the FDIC, the government guarantees checking and savings accounts for a minimum of $100,000 and makes additional payments to depositors as assets of the failed bank are sold.

In the Red

These payments left people such as Sweet in the red. She deposited $500,000 in Superior a month before it closed and says she's worked as a paralegal to make up some of what she lost.

Pritzker says she recommended the agreement to her family after the September 2001 terrorist attacks in New York and Washington.

``It was unseemly, at a time post 9/11, to be in litigation with the federal government,'' she says.

Another Pritzker company that's run into controversy is credit reporting firm TransUnion. It controls the $3.3 billion market in equal shares with Atlanta-based Equifax Inc. and Dublin-based Experian Group Ltd.

After widespread consumer complaints about shoddy service in the credit checking industry, the U.S. Congress passed legislation in 2003 that allowed people to obtain free copies of credit reports so they could check for mistakes and block information obtained from identity theft.

That same year, a jury awarded Judy Thomas of Klamath Falls, Oregon, $5.3 million after she claimed TransUnion took six years to correct a mistake in her credit report. The award was later cut to $1.3 million. The company has always encouraged consumers to monitor their reports, Pritzker says.

TransUnion IPO?

Since Pritzker became chairwoman in 2005, she's taken steps that could lead to a public offering. She included independent directors such as John Canning, chairman of the Federal Reserve Bank of Chicago, and Joseph Mansueto, CEO of Morningstar Inc., the company known for its mutual fund ratings. TransUnion has the same governance as any public company, Canning says.

``We haven't made a decision about an IPO, but certainly we've put in place a structure where, if you decide to go that way, all you have to do is press a button,'' Canning says.

Today, the Pritzker empire consists largely of privately held companies. Even so, as anyone who visits Chicago knows, it's hard to miss the family name.

Ten Pritzker galleries house the Art Institute of Chicago's most precious paintings, including ``A Sunday on La Grande Jatte -- 1884'' by Georges Seurat. A Pritzker concert pavilion lies at the heart of Millennium Park. The University of Chicago has a Pritzker medical school. Northwestern University has a Pritzker law library.

`Very Lucky'

``Look, I'm very lucky,'' Pritzker says, wearing a thick string of white pearls and a light-gray suit that complements the black hair brushed over her forehead. ``The twists and turns that come with life are just that.''

In her public role, she spent 20 hours a month from 2004 to 2007 heading a task force with Griffin, the founder of Citadel Investment Group, and others to boost eligibility requirements for Chicago public school principals. She donated $4.5 million to the cause.

Griffin later raised as much as $100,000 for Obama, according to the candidate's Web site.

In May, Penny, Bryan, Don and Rose joined a ``fun run'' sponsored by a foundation called Chicago Run. She and Bryan set up the charity to combat obesity, a contributor to her father's death from a heart attack at age 39.

During three months this year, 2,350 Chicago school children registered to run 60,295 miles, says Arne Duncan, CEO of the city's public school system.

Defining Herself

Dressed in a T-shirt and shorts, Penny passed out water and registered participants, just like other moms. No one at the Douglas Park event would have known who she was, Duncan says.

``Historically, my family leaders preferred that we had no public presence,'' Pritzker says. ``In this day and age, with complete access to information, we can't take that position. It's important to define myself, as opposed to letting some other force define me.''

Pritzker began cultivating her identity early on. Three years after her father's death, she wrote to her grandfather, asking if she could be trained in the family business. At his 80th birthday party, Abram wore a tux that had the green stationery on which she'd penned her request sticking out of the breast pocket.

```How am I supposed to know that women are interested in business? I was born in 1896,''' Penny recalls Abram telling her. ```But if you're interested, I'll teach you accounting.'''

`Ungodly Smart'

Penny's mother Sue suffered from alcoholism, according to people familiar with the situation. She died in 1982 when she fell out of a truck that was towing her broken-down car. Penny had graduated from Harvard University a year earlier. She went on to get her Master of Business Administration and law degrees simultaneously from Stanford University in Palo Alto, California, in 1985.

Penny took Abram's offer to heart, relying on him and his oldest son, Jay, for guidance. Jay, Penny's uncle, had graduated from high school at age 14 and was the leader of the third generation.

``Jay was ungodly smart,'' says Buffett, who met him in 1954. ``He saw all aspects of a situation in about the first three seconds.''

After Stanford, Penny joined the law firm her great- grandfather Nicholas had started in 1902. He'd arrived in Chicago after escaping pogroms unleashed against Russia's Jews after the 1881 assassination of Czar Alexander II.

No Coat

He was so poor a hospital gave him a coat, Penny told a Harvard alumni club last year. He taught himself English, worked as a tailor's assistant and studied law at night.

Of his three sons, the star was Abram, who proved adept at buying Depression-era real estate. Under his leadership, the law firm started functioning as an investment bank.

The firm included Arthur Goldberg, who served on the U.S. Supreme Court from 1962 to 1965. Also a member was Stanford Clinton, who later became general counsel for the Teamsters union's Central States Pension Fund.

Clinton helped the Pritzkers obtain Teamsters loans to build hotels, according to the ``Kansas City Times.'' These loans totaled $54.4 million from 1966 to 1975, according to the newspaper, which published a Pulitzer Prize-winning story on the family after a skywalk in a Kansas City Hyatt collapsed in 1981, killing 114. The hotel was owned by Crown Center Redevelopment Corp., a subsidiary of Hallmark Cards Inc. Hyatt managed the hotel for Crown Center.

Tax-Free Deal

The Pritzkers declined to be interviewed by the ``Times,'' citing lawsuits after the skywalk collapse. The newspaper quoted Jay as telling the New Jersey Division of Gaming Enforcement in 1981 that the loans were legitimate business transactions, unconnected to the union's controversial reputation. Jimmy Hoffa, the former Teamsters general president and pension fund trustee, disappeared in 1975.

By then, Jay had been amassing companies and saving on taxes. Buffett, writing in his 1988 shareholder letter, says he met Jay when Jay was running a Brooklyn, New York, chocolate maker called Rockwood & Co.

Jay wanted to liquidate his cocoa bean inventory since the price had jumped 20 percent to 60 cents a pound. Rather than incurring a 50 percent tax by selling the beans, he exchanged them for outstanding shares of Rockwood stock.

This tax-free transaction was so popular with Buffett and other shareholders that Rockwood shares rose from $15 to $100 during the period shortly before the tender until shortly after it, according to Buffett.

``Thereafter, I avidly followed Jay's business dealings, which were many and brilliant,'' Buffett wrote to shareholders.

`Uncle Dad'

Jay bought the original Hyatt, near Los Angeles International Airport, in 1957. He wrote his $2.2 million offer on a napkin the same day he saw the hotel, says Melvyn Klein, a business partner from Corpus Christi, Texas.

Jay accelerated his growth by buying a half-finished hotel with a 23-story atrium in Atlanta in 1967 and calling it Hyatt Regency. He bought and sold Braniff Airlines, Ticketmaster Group Inc. and McCall's magazine. In 1988, he made a bid for RJR Nabisco Inc., Klein says, losing out to Kohlberg Kravis Roberts & Co. in what was at the time the most expensive takeover.

As Jay was building the empire, Penny says she grew so close to him that he signed letters ``Uncle Dad.'' She started at Hyatt in 1985 as a financial analyst.

`Completely Committed'

Thomas Pritzker says he'll never forget how she handled one of her first assignments. He asked her to find a building the Pritzkers could swap for a Hyatt property they wanted to divest, enabling them to incur lower taxes than if they'd simply sold it. Within 10 days, she tracked down brokers with buildings on which the swap, called a like-kind exchange, would work.

``She did the whole thing,'' Thomas says. ``All you had to do is say, `Penny, will you please go do this?'''

In 1987, Jay gave her $30 million to build upscale retirement homes called Classic Residence by Hyatt. By 1991, business was so slow she replaced its executives and told Jay he might have to close the company.

``I was asking him whether he should fire me,'' Penny Pritzker recalls. ``But Jay was saying, `This is great. She's concerned. She's completely committed.'''

Within six months, the U.S. started to pull out of a recession. The company stabilized. Today, Classic Residence has 21 retirement homes in 11 states. It generated $434 million in revenue in 2007.

`Focus on Mortality'

In 1995, Jay rewarded Penny's work by naming her, along with Thomas and Nicholas, as fourth-generation leaders. Estate planning wasn't one of Jay's strengths, says Klein, his business partner.

``This whole subject required Jay to focus on mortality,'' Klein says. ``That's an issue he didn't want to deal with.''

Family harmony didn't last long. Two years after Jay died at age 76 in 1999, seven relatives threatened to file a lawsuit to remove the leaders. They alleged that Penny, Thomas and Nicholas had paid themselves too much.

``The only alternative to such protracted and harmful litigation is a negotiated agreement,'' the dissidents said in a court document. ``Retaining the status quo was not -- and is not -- an option.''

Resolving Quarrels

In December 2001, the dissidents and family leaders reached a pact on the restructuring, according to court documents. They agreed family members would share audited financial reports, hold regular meetings and have recourse to independent arbitrators.

The family's effort to resolve quarrels in secret collapsed in November 2002, when Liesel filed her suit. She and her brother Matthew accused their then 76-year-old father, Robert, of draining their trust funds of more than $1 billion. They said he did so because he was angry at their mother, Irene, who'd divorced him, according to court documents. In 2005, Liesel and Matthew settled for $450 million each.

Thomas Pritzker says that as time goes on, all wealthy families come to include people with differing interests and capabilities.

``The challenge is to overlay a meritocracy on a family business,'' he says in a Hyatt Center conference room on the other end of the 47th floor from Penny's.

Thomas says the Pritzkers need 10 years for the restructuring partly because of the ad hoc way Jay organized the empire. As they unravel the trusts, the Pritzkers have to be careful not to trigger tax liabilities going back to 1961, when the first of the trusts was formed, Thomas says.

`Crisis du Jour'

``Vice president of `crisis du jour' is my title,'' he says, referring to his lead role in the restructuring.

Another road block is that in 2001, no single entity controlled Hyatt assets. Some hotels were owned by Marmon and some by family trusts; some hotel management contracts were held through a ready-mix concrete company.

Because of this convoluted structure, Hyatt missed a chance to merge with a major competitor in the early 1990s, Thomas says. He declined to name the potential partner.

Before they could begin to think about selling hotels, the Pritzkers had to spend 2 1/2 years creating a unified company called Global Hyatt, Thomas says.

This delay sparked disputes among the Pritzkers and several arbitrations since 2001, a person familiar with the situation says. Some family members blame Thomas for missing a chance for a Hyatt public offering before the subprime crisis and high gasoline prices reduced travel in 2007, this person says.

`Decent Person'

Thomas declined to comment on family discussions. He says the Pritzkers will consider a public offering when they've positioned Hyatt for sustained growth.

Penny declines to comment on the 2001 agreement, other than to say it's working. As evidence, she says she had dinner in July with a son of John Pritzker. The elder Pritzker was one of the dissidents.

``What's important is that however the ownership transforms, those businesses are left in a position where they're not torn apart,'' she says.

John, 54, who runs San Francisco-based private equity fund firm Geolo Capital, says in an e-mail he's satisfied with how things are turning out.

``Penny has commanded the respect of our family because she has earned it through her hard work, smarts, total effort,'' he says. ``Simply put, she is a good and decent person.''

Just as her family was heading into turmoil a decade ago, Pritzker met Obama through mutual friends at a YMCA in Chicago's Lakeview neighborhood. He was then serving in the Illinois senate.

YMCA Connections

The part of Lakeview, north of downtown, where the YMCA was based was in the early stages of middle-class gentrification. Pritzker went there so her elementary-school-age kids could attend a basketball clinic run by Craig Robinson, Michelle Obama's brother.

Robinson, who was a vice president and bond trader at Morgan Stanley in Chicago, introduced Pritzker to the Obamas. Today he's the head basketball coach at Oregon State University.

The Parking Spot President Nesbitt encouraged Penny to take her children to the YMCA. Nesbitt had known Robinson for 20 years and was friendly with the Obamas, choosing Barack as the godfather of his youngest son, Xavier. The Obamas went to the YMCA to watch Nesbitt's oldest son, Alex, play.

``We came there to spend time with our kids, and we grew close because there was a consciousness of shared values -- a commitment to the city, a strong work ethic and a certain comfort in a diverse community,'' Nesbitt says.

Summer Home

As their friendship deepened, Penny invited the Obamas to spend weekends at her summer home near South Haven, Michigan. The Pritzkers live in a three-story, stucco-and-glass house that sprawls across five city lots on a Lincoln Park street filled with Chicago's priciest homes.

At Penny's urging, her children attend high school 10 miles to the south in Hyde Park at the University of Chicago Laboratory Schools. Half of the students are professors' children and 40 percent are ``children of color,'' says director David Magill. Michelle Obama, 44, is on the board, along with Pritzker, Nesbitt and John Rogers, CEO of Ariel Investments LLC, the oldest minority-owned money management firm in the U.S. Rogers is another $500,000 fundraiser for Obama.

In July, he hosted a fundraiser for the candidate that Buffett attended and delighted the billionaire by serving Cherry Cokes, miniature hot dogs and candy made by See's, a company Berkshire owns.

Cherry Cokes

``You have to feed me like I'm 5 years old,'' Buffett says.

Such relationships show how Obama's campaign is rooted in alliances among black business and community leaders such as Rogers and wealthy, white so-called lakefront liberals like Pritzker, says Joel Kotkin, a historian who's written about Chicago and other cities at Chapman University in Orange, California.

In 2004, Obama gained another local tie as he ran for the U.S. Senate. He accepted the endorsement of Richard Daley, whose family has run city hall for 40 of the past 53 years. Daley endorsed Obama for president in 2007.

``This is a one-party system,'' Kotkin says. ``It pays to be on the side that runs things.''

During Obama's U.S. Senate campaign, Pritzker served on his fundraising committee. Nesbitt says he's believed since then that Obama could be president and could unite a country seeking alternatives to the policies of George W. Bush. To do that, he needed money.

``That's when we all started spinning around in our chairs looking at Penny,'' he recalls.

`Destiny Knocking'

Pritzker told her husband that because she was so busy, she'd refuse if Obama offered her the fundraising job. That changed when Bryan -- to emphasize his point -- pounded on the door of their kitchen in January 2007 and said:

``This is destiny knocking on the door of your country. You have to find a way to help Barack.'' After checking with her children, she said yes when Obama approached her.

When Obama decided to forgo public funding and compete in Republican strongholds like Virginia, he placed a big bet on Pritzker.

Obama's team planned to bring in $450 million for the campaign and the Democratic National Committee from mid-June through November, several fundraisers say. That compares with $350 million that John McCain and the Republican National Committee planned to raise, McCain campaign manager Rick Davis says. McCain will start his post-convention presidential bid with $84.1 million in public funds.

Anti-War

At the outset, Pritzker had the advantage of Obama's clear opposition to the Iraq War and his motivational speeches, says Steve Grossman, a former Democratic National Committee chairman and Hillary Clinton fundraiser.

He stood apart from all of the other candidates, enlisting anti-war, Internet-savvy Democrats who'd backed Howard Dean in 2004, Grossman says. As Obama harnessed the Web to reach first- time voters and donors, Clinton relied on her 30-year network of activists, Grossman says.

Pritzker raised $25 million for Obama in the first quarter of 2007, $1 million less than Clinton's campaign raised. She reinforced Obama's egalitarian appeal by not conferring fancy titles on big donors and not forcing fundraisers to use the same tactics in every city, says Kirk Dornbush, an Atlanta biotech investor and Obama supporter.

`I Trust Her'

Even if people paid $2 for a button, Pritzker and her finance director, Julianna Smoot, had them fill out a donation form, Dornbush says. That helped to create an e-mail list that now includes 5 million people.

As she turned to Buffett and other high-dollar donors, Pritzker's name helped open doors, says Valerie Jarrett, 51, an Obama confidant and investor with Penny in a downtown Chicago apartment complex that was sold last year.

Pritzker was determined to respond quickly and accurately when potential givers inquired about Obama's positions on issues. She checked frequently with Jarrett.

``I hear from Penny all the time at 2 a.m.,'' Jarrett says.

Obama credits Pritzker with placing an urgent phone call asking him to reroute his plane to Des Moines, Iowa, in October 2007 to reassure fundraisers despondent over his low poll standings.

``I trust her that if she's bringing something to me, it's worth paying attention to,'' Obama says.

What's Next?

Steve Westly, a former EBay Inc. senior vice president who ran for governor of California in 2006, says Pritzker's organizational skills have had a big impact.

``With Penny, the meetings started on time,'' he says. ``We had clear PowerPoint slides and clear guidelines. We hit all the numbers. I've been active in the last seven presidential campaigns, and I can tell you, these things never happen in the Democratic Party.''

Pritzker's campaign work will open new doors, says Westly, another $500,000 Obama fundraiser.

``Penny has succeeded at the highest levels of the political world and highest levels of the corporate world,'' he says. ``Every opportunity in the country will be at her doorstep.''

When Obama met with his economic advisers on July 28 in Washington, Pritzker participated along with Buffett, Robert Rubin, 69, chairman of Citigroup Inc.'s executive committee, and Paul Volcker, 80, former chairman of the Federal Reserve.

Great-Grandfather's Words

Pritzker says she's thinking about Obama's winning, not what she'll do after the election. As she looks ahead, she's still influenced by a small book her great-grandfather Nicholas wrote just before his death in 1957. Immortality, he wrote, is achieved chiefly in values people pass on to their children.

During Don's summer vacation, Pritzker encouraged her son to volunteer at the Learn Charter School to teach remedial fifth-grade math. The school is six blocks west of Douglas Park, which was a magnet for the Jewish immigrants like her family that poured into Chicago from Russia and Eastern Europe.

Four generations later, Penny Pritzker has emerged as the public face of a private dynasty. She has started and managed companies, run charities, fended off attacks by siblings and weathered regulatory actions and lawsuits. She's now brought her pragmatism and single-mindedness to managing the finances of another citizen of Chicago whose narrative arc stretches, like hers, back to far-off lands.

Whether her husband was right and the knock on their kitchen door in January 2007 was destiny or just another episode in Pritzker's already accomplished life will become clear in November.

To contact the reporter on this story: John Lippert at jlippert@bloomberg.net

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