The New York Times Magazine | July 22, 1988

THE COMEBACK KIDS

By Michael Daly

The helicopter clattered over the dark waters of the harbor, and Calvin Klein asked the pilot to make a slight detour for his two guests. Steve Rubell and watched the Plexiglas windshield fill with the gleaming towers of the New York skyline. On this clear night last December, there seemed no greater spectacle on earth.

"I mean, what's the Grand Canyon?" Ian says.

As the helicopter shot up the middle of Manhattan, neither Steve nor Ian bothered to glance at the squat shell of the nightclub they were opening on East 14th Street. The small hotel they had recently renovated was lost amid the modest structures of lower Madison Avenue. What commanded the eye were the spires of the Empire State Building, the Chrysler Building, and the RCA Building.

"I didn't even think of anything else," Ian says.

The helicopter looped around midtown and banked out over the East River. For a moment, the blaze of Manhattan gave way to the shadowy sprawl of the Brooklyn streets where Steve and Ian had been raised. As the craft's nose swung back for the landing, there was a last glimpse of the skyline.

"Ian was like a kid at Disneyland," Steve remembers. "I was excited, but I was glad to get out of the helicopter."

At the East 34th Street heliport, Steve and Ian thanked Klein for the weekend at his Key West retreat and for the helicopter ride in from the airport. Klein headed home, and the pair climbed into Steve's Mercedes 380 SEL. As they cruised cross-town, Ian said that they should erect a tower that would rise above all the others.

"I said, 'It should also be beautiful,'" Steve says. "He said, 'Of course it should be beautiful.' We decided that we shouldn't tell anybody. To say we were going to build the tallest building in the world might sound arrogant."

Eight years have passed since these two friends from college days joined in the venture that made them famous. Ian was then a serious and reserved attorney clearly still pained by the early deaths of his parents from cancer. Steve was a hyper, five-foot-six restaurateur with an older brother who was six foot three, a top tennis player, and a prominent doctor. Ian the introvert and Steve the extrovert were bound together by affection and ambition and a sense that they formed a kind of balance. Never formalizing their partnership with a piece of paper, they decided to open a discotheque.

"When Steve and I do something, it's almost like Spanky and Our Gang," Ian says. "It's 'Let's do a nightclub.'"

On April 26, 1977, the first dancer stepped onto the floor at Studio 54. For twenty wild months, Steve and Ian were lords of the night in New York. While 29-year-old Ian supervised the operations inside, 32-year-old Steve took the door. Mobs begged this bantamweight figure in a baseball jacket for the nod of approval.

"There's no nice way to reject somebody," Steve says. "I know. I [had been] rejected a lot."

In the basement, Steve's mother counted proceeds of more than $600,000 a month. With the arrogance of sudden and unexpected power, the pair ignored the warnings that the whole town knew they were skimming huge sums. Federal agents finally raided the club and found garbage bags of cash stuffed in the basement ceiling. Steve and Ian's rise to fame and wealth ended with their being led away in handcuffs.

"We didn't exactly handle success in the best possible way," Steve says.

The ensuing indictment charged Steve and Ian with evading $800,000 in taxes. They tried to disrupt the case with an unsubstantiated report that Hamilton Jordan of the Carter White House had used cocaine at the club. They later swung reduced sentences by helping the IRS grab four colleagues in the disco business.

"We weren't very good criminals," Steve says. "I still can't go to the zoo."

At the minimum-security prison in Montgomery, Alabama, a guard handed Steve and Ian each a pair of scissors. The guard then ordered them to kneel and clip the grass along the chain-link fence. Ian remembers, "He was going to show us, that guy. Steve said, 'When he's looking, you do it. When he's not, you don't.'"

Later, Ian was promoted to busboy. Steve became the superintendent's driver. Both spent long hours pondering their fall. Steve says, "Things don't just happen. It had to be a major problem, a weakness in character. Greed and stupidity."

After thirteen months. Steve and Ian were released to a halfway house on the Upper West Side. The two young men who had wielded the power of rejection at Studio 54 found themselves shunned. Many people seemed to see them as a symbol of a crazed era that was best forgotten. The 1980s had become a time of yuppies and AIDS. Those who had once stumbled home from Studio 54 at 6 a.m. were rising at that same hour to head for work.

"People would say to me, 'How can you be friends with Steve?'" Bianca Jagger remembers. "A lot of people who were begging to come into Studio 54 now would not talk to him."

On a pay phone down the street from the halfway house, Steve and Ian made the initial contacts in a long struggle to prove that their first success had not been an accident. Their comeback is a tale of tenacity and ambition and street-smarts. When they began, they could not persuade a bank to give them a checking account. Four years later, they were running a $14-million hotel with a 96 percent occupancy rate and a $10-million nightclub said to gross as much as $350,000 a week.

"They have big egos and they love working and they are relentless," says an associate named Honey Aldrich. "They wanted to be on top again. They were trying to think of any way possible to do that."

In their struggle, Steve and Ian ventured from the night world of discos into the daylit realm of real-estate development. Steve began gossiping less about stars and more about mortgages and assemblages. Ian spoke of testing his creative abilities on something much bigger than a disco or a hotel. Someday, they now promised, the skyline would include a monument to the money and power and talent of two driven men from Brooklyn.

"Wait till you see the way we light our building at night," Ian says.

Steve Rubell and were released from the prison in Alabama on the morning of January 30, 1981. They had both gained weight, and regular hours had left them looking more rested than they ever had when they were running a disco. Steve had spent the previous few days on the jail's baseball field holding a sheet of tinfoil under his chin, and he stepped off the plane at La Guardia with a slight tan.

"I didn't want people to say, 'He looks beaten,'" Steve says.

At the airport, Honey Aldrich was waiting with Steve's Mercedes. Ian was quiet and withdrawn. Steve chattered and asked to stop for magazines and junk food. When Aldrich dropped them at the West 74th Street halfway house, she gave them matching pairs of blue, and, white, striped pajamas. They had to wait over an hour for a supervisor to check them in and assign them to a fourth floor room.

"It was like, 'Okay, what do we do now?'" Ian remembers.

The following afternoon, Steve and Ian went for a stroll down Columbus Avenue. They stopped in at Charivari, and several acquaintances came over to say hello. Steve ran out of the store.

"When you're in jail, your only goal is to get out," Steve says. "Once you're out, it sort of hits you. I was afraid to see people. I didn't know how they would react. I thought they were staring at me, and I didn't know if they were staring positively or negatively."

Among the friends who remained loyal, Bianca Jagger presented Steve with a Cartier watch. Klein offered him a blank check and told him to fill in whatever amount he needed to get him through. Halston and David Geffen chatted with him almost daily.

"Steve had lots of stories to tell," Geffen says.

One newspaper gossip reported that Steve had attended a party hosted by Roy Cohn at the Armory. Another article said that Steve had been spotted in front of a nightclub. In both instances, Steve had in fact been at the halfway house, struggling through his evening drug test.

"Just when you had to pee, you couldn't," Steve says.

Ian had shown a fine sense of design at Studio 54, and he now began a serious study of architecture. He remembers, "I couldn't function in my personal life until I got my business going. I got involved with impersonal things. Steve wanted to get back social standing and all that stuff. I wanted to learn about architecture."

From the Rizzoli bookshop, Ian called the fashion designer Norma Kamali at her West 56th Street office. Kamali went across the street and found her friend with a huge stack of books on buildings. Kamali says. "He like emptied out the store. I said, 'Think you have enough to read?' He said, 'I have to know about this.'"

A few days before Studio 54's fourth anniversary, Steve and Ian were released from the halfway house. By then, a businessman named Murk Fleischman had agreed to purchase the shuttered disco if appropriate arrangements could be made with the authorities. Honey Aldrich watched Steve and Ian sort through records of their shattered success.

"I think they were still in a state of not believing," Aldrich says. "They had been on top of the world, and they blew it."

In May, the State Liquor Authority granted Fleischman a license. The IRS approved a plan by which Fleischman's payments would erase the rest of Steve and Ian's tax debt. The pair offered to help get the disco open and rolling. For a few days, Steve's phone jumped with people wanting to get into Studio 54.

"Then it became obvious we didn't own it," Steve says.

On Halloween, Steve and Ian supervised their final event at Studio 54. Ian oversaw the construction of a castle, and he remembers, "We used Bosch, that painter Bosch. We did it, but it had no passion." Steve watched people dressed as goblins and witches spin on the dance floor.

"It was on to the future," Steve says.

After paying more than $1 million to lawyers and about as much to the IRS, Steve and Ian had lost much of their fortune. While they were still far from poor, they did not have the resources to mount a project of any significance.

"We needed the banks," Steve says.

At first, no bank in the city would even grant Steve and Ian personal checking accounts. They could not secure credit cards, much less swing big loans. Steve's brother, Don Rubell, says, "I don't think it was a question of what Steve and Ian were going to do. It was almost a question of if they could do anything."

Without bank references, Steve and Ian were unable to lease an office. Honey Aldrich rented a one-bedroom apartment on West 55th Street in her name. She got old office chairs from Studio 54 and bought three black desks at Conran's.

"We had three telephones that didn't ring, and we started to drive each other crazy," Aldrich says.

Each morning, Aldrich made coffee. Ian arrived and sat down at the desk by the window. Steve took the desk in the corner. Steve remembers, "I said, 'Wait a second, there's nothing to do here.' Ian said, 'We got to be structured.' I couldn't wait till lunch hour, and then I couldn't wait till six o'clock."

As one day crawled after another, Steve grew upset if there was not an ample supply of soda in the refrigerator. Ian's temper flared if somebody took a pen from his desk. Ian remembers, "You know how kids play house? We were playing 'we're in business.'"

A short time before, Donald Trump had opened the Grand Hyatt. Harry Helmsley had unveiled the Helmsley Palace. Steve and Ian decided that the hotel industry was "of the moment" and somewhat more respectable than the nightclub business. They set out to acquire a multi-million dollar establishment of their own.

"The only problem was we didn't know how to do it," Ian says.

Over the days that followed, Steve and Ian spoke to everybody they could who knew anything about the hotel business. An executive at the Helmsley-Spear realty firm seemed taken by their celebrity, and he invited them to a party. He delegated a young assistant named Marty Hecht to help them with their business inquiries.

"Steve sometimes acts like a spaced out discotheque owner, and you don't think he heard you," Hecht says. "But he doesn't miss a beat."

With Hecht as a tutor, Steve learned to run rate and occupancy projections on an Apple computer. Hecht remembers, "We would work late into the night. We'd run something 14,000 different ways, and he'd take it home and digest it and call me first thing in the morning. I'd hear the shower running, and he'd say, "What happens if we change the rate this way?'"

Between bouts with the computer, Steve chatted on the phone with hotel and real estate people. Hecht says, "He would make it sound like he was just shooting the breeze, but I think he was rifle-shooting. He drops something in the middle of a conversation and makes it sound like the tip of an iceberg. He gives the impression he knows about these doings with all these heavy hitters, and you tell Steve things you know because you want things out of Steve. It's all mirrors."

By then, Steve and Ian had decided to make a play for the Hyde Park hotel at East 77th Street and Madison Avenue. The purchase price was $24 million, and they were about $24 million short. "We were going for the big bucks," Ian says.

"We were going to get back on our feet in six months."

When the pair met with a series of financiers, the computer printouts Steve brought along were often tattered. Ian remembered that Steve had an old habit of using bits of paper to clean his teeth.

"He would tear off the corners and chew on them," Ian says.

During the meetings, Ian was focused and direct. Steve rambled and played the neophyte. Hecht remembers, "Steve says, 'Gee, you're the smartest. You're the greatest. Could you give me advice?' You'd be surprised how people's egos fall for that. The person reveals entirely his way of thinking and operating, and Steve hasn't revealed anything. He's just absorbed it all."

Repeatedly, Steve demonstrated that even staid men of money and power are susceptible to being star struck. Hecht says, "The conversation would start, 'There was a party at Calvin's at the Hampton's,' or 'I just spoke to Bianca,' and this would impress the guys with millions who know nobody. Steve was a walking Liz Smith column."

After Steve left a room, Hecht watched caution creep back into the excited faces. Hecht says, "Everybody wanted to know Steve because of what he once was, but nobody wanted to be in bed with him. Nobody wanted to do business with him. They thought, 'But am I going to end up in jail?'"

At one point, Texas real-estate developer Clifton Harrison invited Steve and Ian down to Dallas for his wedding. Steve says, "You know I'm not the Texan type. I would have gone to Hong Kong. We were trying to raise the money."

Subsequently, Harrison journeyed to South America and tried without success to syndicate the Hyde Park deal as a limited partnership. He advised Steve and Ian to seek a more modest project and a single backer who would be willing to take a chance on them.

"I said, 'Y'all got to get practical,"' Harrison says.

Back in New York, Hecht suggested syndicating the project to celebrities as a tax shelter. Hecht remembers, "Steve said, 'I just give favors to these people. I don't take favors from them.' He wants them to owe him."

At the office on West 55th Street, Steve's printouts joined the Studio 54 papers in the dead files. Steve went back to counting the sodas in the refrigerator. Ian kept watch on his pens. Aldrich remembers, "With every false start, there would be phone calls and lots of plans, and then it would fall apart and it was back to the old coffee and Cokes. Time went slowly, slowly, slowly."

Whatever their past sins, Steve and Ian did have a proven ability to make money with a disco. They now offered to open a club with anybody who was willing to bankroll a hotel as well. There were no takers.

"They would say, 'Look, if I want to do a hotel, I'll go to Hyatt, not you guys,'" Ian remembers.

Several people did express interest in backing just a club. These included Alan Cohen, part owner of the Boston Celtics and past president of Madison Square Garden. He approached the disco world with the same attitude that had earned him the nickname "Bottom Line Cohen" in the sports pages.

"It looked like a good business from the numbers," Cohen says.

With a business associate named Pete Frankel, Cohen offered to finance a club in Europe. Steve and Ian hopped a plane to scout for a site. Their stops included D¸sseldorf, and Steve remembers, "They were so serious even when they were drinking. I said, 'I just really have to go home.'"

As they strolled the Champs Elysées in Paris, Steve disappeared into a McDonald's. Steve remembers, "We were eating all this food with all these sauces, and I really wanted a hamburger. Ian said, 'I refuse to be seen with you. I refuse to even go near you.'"

To Steve's apparent relief, the franc plummeted, and the search for a club location shifted to New York. Steve and Ian inspected the defunct railway station under the Waldorf Astoria and the East 60th Street heliport and the bus garages on Ninth Avenue. The Cloud Club atop the Chrysler Building looked good, and they timed the elevators.

"Too slow," Steve says.

At West 36th Street and Sixth Avenue, they spotted the Greenwich Savings Bank building. They were unable to convince the president that the place would serve better as a disco. Steve says, "We glamorized it and called it an entertainment center. He said he didn't know if the board would go for it."

All the while, Steve and Ian kept an eye out for a hotel. They stopped by Studio 54 for a social chat with Mark Fleischman and by chance learned that he was part owner of the Executive Hotel on lower Madison Avenue. The Executive proved to be a run down establishment seemingly favored by hookers. The man at the front desk smoked cigars and had a less than solicitous demeanor.

"He barked at you," Ian says.

Over the weeks that followed, Steve and Ian negotiated their first major real-estate deal. Fleischman's four partners seemed to sense easy money, and each grabbed for a bit more. Steve and Ian put up little resistance as the price topped $6 million.

"If we got back into business, I really didn't care what we paid them later on," Ian remembers. "It wasn't only getting the deal rolling. It was getting our lives rolling."

Then Steve and Ian set out to raise the money to close the deal. For six months, they went from one potential backer to another. Ian remembers, "They all just said no. We were sitting around the office, and things were getting tense even between us."

On the last night of 1982, Steve and Ian left their office and strolled down Broadway. They had been out of jail for 23 months. Nobody was willing to lend them money for the Executive Hotel. They had yet to find a proper site for Cohen's disco. And Ian now spoke of leaving New York.

"Here it was, New Year's Eve, and we had nothing to celebrate," Ian remembers. "I thought, 'Maybe it won't work.' I thought, 'Maybe we won't get it back together again.'"

As the pair prepared to accept defeat in the Executive deal, Ian remembered a brief encounter with Phil Pilevsky some months before. Pilevsky was a 36-year-old political scientist and educator from Brooklyn, who had become a real-estate developer as a sideline. He exchanged knowledge and connections for a share of the action, and he was on his way to acquiring $1 billion in property without investing a penny of his own.

"I don't put up money," Pilevsky says.

When Pilevsky examined the Executive deal, he quickly spotted a provision the other prospective partners had apparently failed to see. Either kindness or hunger for a top price had made Fleischman's crew lax about the terms. They had agreed to hold the mortgage and to grant a rare concession called a subordination clause. This meant that any bank that lent Steve and Ian money would be in line for payment before Fleischman's crew. Steve and Ian could borrow start up funds using a building that was not yet theirs as collateral.

"We didn't know that it was a stupid thing to even ask for," Ian says. "We asked them for it, and they just gave it to us."

Without hesitating, Pilevsky said he would secure the financing for 50 percent of the hotel. If the business failed, the subordination clause would allow the bank to satisfy the debt by seizing the building. Pilevsky and Steve and Ian could just walk away.

"Phil said, 'What, are you kidding? I'm in,'" Ian remembers.

A few days later, Pilevsky contacted Brian Haynes at the National Westminster Bank. Haynes was from an Irish neighborhood in Brooklyn more famous for ironworkers than bankers. He did not like what little he knew of Steve and Ian.

"I said, 'No way I want to get involved with people like that,'" Haynes remembers. "[Phil] said, 'It's not what you think. The guys are Brooklyn guys from the street.'"

At Smith and Wollensky's steakhouse, Haynes met with Steve. Haynes expected to find a drugged out disco kid. He instead encountered a young man in a gray suit, white shirt, and striped tie who spoke somberly about his past mistakes. Haynes spent several days checking out the story.

"If they were telling me anything that was not exactly as it was, I wouldn't have lent them a dime," Haynes says.

While other bankers cautioned him against dealing with such characters, Haynes approved a $2.5 million acquisition loan. He says, "I'd always been brought up to believe that if you do something and get punished for it and pay your dues, you get a fresh start. Everybody said, 'You sure you know what you're doing?'"

On July 15, 1983, Steve and Ian sat down with the appropriate parties to seal the Executive deal. The closing proved to be a tortuous ritual involving dozens of partners and lawyers who all seemed to have different thoughts. On several occasions, the negotiations broke down.

"This was even harder than the IRS," Ian says. "It was like talking to people in different languages."

The fourth day happened to be Ian's thirty-seventh birthday. He kept working late into the evening. He says, "It was either close it today, or it was over....Making a deal is like going out with girls. The blush was off, and the romance began to fade. They began to think that it wasn't as good a deal."

Around midnight, Fleischman's crew finally signed. and Steve Rubell were back in business. Ian says, "Steve went out to celebrate. I went to sleep."

One of the first people Steve called with the news was his brother. When the phone rang, Don Rubell happened to be entertaining houseguests who had just checked out of the Executive. Their departure had been precipitated by the sight of a huge rat racing across the floor of their room.

"They said, 'Why would Steve want to buy that?'" Don Rubell remembers. "I said, 'I don't know. I assume he's not going to keep it that way.'"

On the second floor of the Executive, Steve and Ian set up the desks from the West 55th Street office. Steve spread the word that he was looking for a controller, and three executives called for an appointment. The first two rang from the front desk but fled before Steve could get downstairs. Steve caught the third by the entrance and persuaded him to sign on.

"My strategy then was to always wait for people in the lobby so they wouldn't walk out when they saw it," Steve says.

With the promise of great things to come, Steve and Ian persuaded Stephen Quinn to give up a mid-level position at the Carlyle. Quinn moved in and became the general manager. In a Brooks Brothers suit and an understated tie, he took the place of the cigar chomping gentleman at the front desk.

"We had a great average rate," Quinn says. "A lot of rooms turned over six, seven times a night."

As one lady of the evening checked out, she turned and smashed a bottle over a man's head. The man then punched the woman in the mouth. In another instance, somebody reported to Quinn that a guest needed assistance. Quinn entered the room and found a woman who had been bound and badly beaten. He untied her and summoned an ambulance.

"She was thankful," Quinn says.

In Room 609, some mysterious guests put their own locks on the door. Steve and Ian discovered that the occupants were FBI agents who were eavesdropping on the nearby Polish consulate. Steve says, "We hear 'FBI' and we both die from fright. We don't want anything to do with them."

As the pair prepared to transform their establishment, Steve stayed at the city's better hotels. He deemed the Hyatt too impersonal. He says, "You walk in, you feel like a midget, which I have a tendency to feel like anyway." He found the Carlyle's staff highly efficient but haughty.

"They didn't even want to give me the room," Steve says.

Ian met with dozens of builders and architects and designers. He and Steve did not have the money to knock down walls, and he needed somebody who could do the job with just fixtures and paint. In a magazine, he came across photographs of several bathrooms decorated by AndrÈe Putman of Paris. Putman's restrained, elegant touch was just what Ian wanted.

"Everybody expected our hotel to have go-go dancers in the lobby, disco music in the elevators," Ian says.

At that moment, Putman was visiting New York. Steve and Ian caught her in the lobby of the Drake Hotel just as she was leaving for the airport. Ian says, "She is a big fancy lady with a big hairdo, and she talks about chintz and things like that. She looks like a decorator, but she's a good guy, Andrée."

Then Ian took Putman for a tour of the Executive. Putman says, "I thought it was a joke. You know, I am French, and I have certain ideas. I could not believe it was going to be a place to go. It was shocking. The most depressing kind of people. Probably the ugliest furniture I've ever seen in my life."

Amid the hookers and pimps, Ian and Putman began work. They started with one room and had the walls sprayed with Zolatone, a variant of a speckled paint used in tenements. The new bathroom floor was similar to that found in some prisons. The sort of glass employed for bus shelters went into the shower.

"You take something that functions very well and you dress it up a bit," Ian says.

When Putman suggested a stainless steel sink, Ian spent weeks agonizing over various models. Steve says, "I said, 'Ian, I don't want to hear another word about sinks.'" One day, Ian had some twenty people lie down and give an opinion on 40 kinds of pillows. For weeks, he had lighting designer Paul Marantz whipping up prototypes for a small hallway fixture.

"It was too big or too bright or too elegant or it didn't feel right," Marantz says.

A number of industry experts warned Steve and Ian that a new hotel usually does not make money for three years. The pair decided that they had to press ahead with the Cohen disco deal. On East 14th Street they found a 57-year-old, seven story theater called the Palladium.

"It was totally messy and bizarre and very dirty," Putman says.

In his study of architecture, Ian had seen pictures of Arata Isozaki's work. Isozaki flew in from Japan, and Ian took him to such places as Studio 54 and Area to see how other clubs had been done. Ian says, "I was afraid it was beneath him. I thought he was going to say, 'Look, this really isn't what I do.'"

The following month, a package arrived at the hotel from Tokyo. Inside, Steve and Ian found two scale models of a monumental structure within the shell of the Palladium. Steve says, "It was beautiful, but nobody would have made any money on it."

Three weeks later, Ian went to Japan. He persuaded Isozaki to forgo the expense of a vaulted ceiling. He also suggested warmer colors and more staircases. He says, "No matter how spectacular it is, you still have to get from one level to another."

In a rare free moment, Ian went sight-seeing. He returned and handed Isozaki a postcard of a walkway leading to the Ginkakuji temple. Ian remembers, "I said, 'Iso, I want the lobby to look like this.'" At all times, Ian took care not to bruise Isozaki's ego.

"You never say, 'I don't like it,'" Ian says. "You gently say something might work better. You try to make him think he doesn't like it."

Even the revised design was much more extravagant than anything Alan Cohen had anticipated. Cohen says, "It seemed like a big project, a big, big project. I was a little uneasy." Steve and Ian said that clubs were now big business and that they needed to top what they had done at Studio 54.

"We said, 'If it costs more, you make more,'" Steve says. "It took a lot of massaging."

As a wrecking crew gutted the Palladium, Ian continued to direct the renovation of the hotel. He made certain the bathroom tiles were one sixteenth of an inch closer than is customary. If the density of the tiny dots in the Zolatone was not just right, he had the wall repainted. And he constantly brought friends through to test their reactions.

"I'd know six people were just there and he had tortured them," Norma Kamali says. "He'd say, 'What do you think-what do you think-what do you think?'"

To keep some income trickling in, Steve and Ian continued to rent the rooms that had not yet been remodeled. They offered a $44.95 "weekend package." Guests squeezed into the elevators with carpenters and plumbers and painters. They awoke to jackhammers.

"It was quite literally like checking into a construction site," Quinn says.

With the fall season approaching, Steve and Ian spent $82,000 in overtime to get the hotel ready. Steve posted help wanted ads on school bulletin boards for doormen, clerks, bellhops, and telephone operators. Experience did not matter. The right look did. Steve did not want "New York attitude," and he selected only people from out of town. Many were aspiring film stars.

"They didn't know anything about the hotel business," Steve says. "But I didn't, either."

On October 1, what was now the chic Morgans hotel opened. Handsome and polite young men in designer uniforms stood ready at the door. A sweet voiced woman sat at the switchboard, pledged to answer every call within three rings. Steve and Ian decided against any festivities and instead raced around checking everything from ashtrays to the staff's hair.

"They absolutely were petrified of failure," Don Rubell says.

The first day, seven people checked in. Fifteen stayed on the second day. Within a month, most of the rooms were full. Many of the customers were traveling businessmen, and they repeatedly refused to let the woman bellhop carry their bags up to the rooms.

"I'd see the girl with the key and some guest with all the luggage," Steve says. "That was the only thing where I was ahead of my time."

For a time, the kitchen was not operational. Morgans improvised room service by transferring takeout from a nearby deli onto fancy china. One morning, the deli mistakenly delivered an aristocratic Englishman's breakfast directly to the room. The Englishman buzzed the front desk to complain that he had been handed his meal in a cardboard box.

"It was frightening," Quinn says.

As Steve struggled to get the hotel running smoothly, his father fell ill. Steve knew what institutional food is like, and he brought dinner to the hospital every evening. Steve says, "He likes to eat at six o'clock, my father. He's a normal guy."

Soon Steve himself was looking less than healthy. He began losing all his body hair, and he remembers, "Calvin said, 'Are you going for chemotherapy?'" Steve's brother referred him to a specialist, who conducted a series of tests. As he awaited the results, Steve flew with a woman friend to the Caribbean.

"I thought I was dying," Steve says. "I thought, 'You don't lose all your hair for nothing.'"

On the island of Mustique, Steve had to forgo hamburgers. He says, "It was all fish, and I hate fish. I was out of my mind." Finally, Steve's brother called and said the tests showed that the hair loss was the result of a nervous disorder.

"He said, 'You're going to live,'" Steve says. "I still hated Mustique."

Steve went back to running Morgans. Ian was down at the Palladium. He had to jockey hundreds of tons of steel as 38 of the 45 new columns hit obstructions. The detailed plans that arrived piecemeal from Tokyo had to be translated, and the contractors often outpaced the design process. Ian remembers, "They'd say, 'How big should it be?' We'd say, 'Oh, about this big.' They thought we were out of our minds."

When Steve came by the Palladium, he sputtered at the sight of five $47.50 an hour electricians lounging on a fire escape. Inside, he felt something wet hit his head and he looked up to see the ironworkers christening a new beam with urine.

"Steve screamed, 'What are you doing?'" associate Michael Overington says. "They just kept pissing on the steel."

On another occasion, Steve found Ian pondering color schemes for the club. Ian looked up and remarked that Steve's new jacket was an interesting blue. Steve remembers, "Ian said, 'Hey, let me have that jacket,' and he cut a piece of it."

At Ian's suggestion, Norma Kamali shot a fashion video at the site. She watched Ian race through clouds of dust and around mounds of rubble. She remembers, "I'd say, 'You sure you're going to open?' Ian would say, 'No problem.'"

With Kamali, Ian went to see Einstein on the Beach at the Brooklyn Academy of Music. He returned three times to study the stage effects. He says, "I would look at the audience and hear not a rustle. No nothing. And he did it with lighting that didn't blink or throb."

On other evenings, Ian went to gallery openings. He felt a charge in the room when some artists appeared. He says, "I never really got into fine arts and ballet and stuff like that....I began to realize that people weren't looking at the art. It was a social scene. I started saying, 'Steve, there's something going on with the art.'"

At the Whitney Biennial, Steve and Ian both admired Kenny Scharf's fanciful transformation of the bathrooms and telephones. They commissioned Scharf to do the same at the Palladium. Keith Haring started work on a mural. Francesco Clemente agreed to do a fresco. He spent hours contemplating the space in the company of Steve's teenage nephew, Jason.

"Jason'd come home and I'd ask, 'What happened today?'" Don Rubell says. "He'd say, 'Well, we looked at a wall.'"

The lighting designer Paul Marantz urged Ian to use video. Ian called an engineer who had once won an Academy Award for technical effects and had him build two 9,000 pound banks of monitors. Ian then arranged for such artists as Laurie Anderson and David Salle to make tapes.

"There were videos there that I didn't like, but they were done by artists," Ian says. "The more artists you get, the more credibility you get, and you can run with it."

Each new project had to get financial approval from Alan Cohen. These included suggestions from Steve that were geared more to fun than to art, Steve says, "'Aesthetic.' I got that word from the SAT's. 'Aesthetic' and 'abysmal.'" Cohen okayed Steve's plan for a $15,000 volleyball setup. Cohen rejected a notion that Steve had picked up in Coney Island.

"I wanted bumper cars," Steve says.

When Steve placed help-wanted ads in several artsy publications, more than 4,000 people applied for 200 positions. A rumor spread that Steve wanted a bizarre look, and hordes of odd characters began coming to the weekly cattle calls.

"We had a number of green Mohawks," says assistant Heather Warshaw.

In small batches, the applicants were led into a room. Steve encouraged them to banter among themselves, aid he watched how they interacted. He later shuffled Polaroids of his tentative selections until he had the right mix of faces. He was precise, down to which cigarette girl had the best look for which floor.

"Style sells," Steve says.

As the construction neared completion, Cohen took several colleagues through the club. He says, "I was feeling like a real creative genius myself." Other visitors included Peter Sudler, the former prosecutor who had handled the Studio 54 case.

"He said. 'This time, don't f??? it up.'" Steve says.

On good terms with the pair, Sudler said he found no legal fault in the Palladium's strategy to obtain a liquor license. While the Division of parole had restored Steve and Ian's rights to hold such a permit, the State Liquor Authority still seemed certain to resist. Steve and Ian became salaried "management consultants" to the club. As such, their names did not have to appear on the application.

"We wanted to do something [the SLA] couldn't fight," Steve says.

Subsequently, a rival club backed a lawsuit charging that Steve and Ian were in fact at least part owners. The judge reserved decision. Ian suggested that the incident only benefited the Palladium. He says, "A nightclub has got to be a little bit Behind the Green Door. Controversy. If the Rainbow Room had that, it'd be the biggest place in New York."

In keeping with this more temperate era, the invitations for the opening of the Palladium were simple white cards. Calvin Klein and Bianca Jagger were joined on the mailing list by such businessmen as Brian Haynes and Phil Pilevsky. The admissions policy at this club promised to be a bit different from that at Studio 54.

"God forbid a banker doesn't get in," Ian says.

During the final hours, a crew hurried to finish the top floor bar. Ian had the furniture draped with white cloth in the style of Cocteau's Beauty and the Beast. The painter Jean Michel Basquiat had just appeared on the cover of the New York Times Magazine, and Ian hired him to brush two quick murals.

"It's like the emperor's new clothes." Ian says. "Who's going to say it's not good?"

At 8 p.m. on May 14, security men in coats and ties admitted the first people through the black velvet ropes in front of the Palladium. The people went through an entranceway based on a Japanese postcard and across a carpet of a blue selected at the expense of Steve's jacket. They then went up a staircase of 2,400 lights inspired by the glass blocks set in the sidewalks of Soho. Finally, the people entered a huge chamber supported by steel beams that had been properly christened by ironworkers. There they encountered a slight man in an Armani tuxedo. He wore a black and white painter's hat over hair that was just beginning to grow back.

"Hi," Steve said.

A white light blazed, and a television reporter held out a microphone. Save smiled and parroted what would become the standard spiel.

The Palladium is uptown meets downtown.

The artists are the rock stars of the eighties.

"Okay?" Steve said.

When Steve could, he stole over to the sofa when his mother and still ailing father were sitting. Don Rubell arrived with his family, and Steve went to the bar to get drinks. As he waited, he was embraced by the performer John Sex.

"Excuse me," Steve said. "I got to get this to my brother."

In three minutes, Steve was kissed by nineteen people. He said, "I hope nobody has diseases." A photographer asked to get a picture of him dancing. He said, "Dance? I don't know how to dance."

Until about midnight, Ian hid with Kamali in the D.J. booth. After she left, he finally ventured into the top floor room. He stood at the end of the bar in jeans and a white shirt, fidgeting with a rubber band. He later said, "I was like, 'People, what are all these people doing in here?'"

Weary of the tuxedo, Steve changed into chinos. He continued to smile and fetch drinks and play the host until the last guests were ready to leave. Just before dawn, he was found standing on East 14th Street.

"I think it's time for me to get some sleep," Steve said. "I have to work tomorrow."

By late morning, Steve was busy at the hotel. He went back to the club in the afternoon. He called a staff meeting and chided a waitress for handing Barry Diller a bottle of Cristal champagne as though it were a nip of beer. He instructed the bartenders to be more prompt in serving notables. Several cigarette girls complained that the Azzedine Alaia high heels hurt their feet.

"I want to keep the look," Steve said.

A bartender requested permission to wear a hat.

"I have to see the hat," Steve said.

A busboy approached Steve with an expectant look.

"Hi, you want to wear your dress?" Steve said.

On the third night, the waitresses were serving champagne with aplomb and the bartenders were jumping at the sight of a famous face. Steve took Halston and Baby Jane Holzer on a tour of the club. He started with Kenny Scharf's basement lounges.

"What a nice toilet," Halston said.

"Jane, look at this wall," Steve said.

"Oh, I love this wall," Holzer said.

At the downstairs bar, a woman asked if she could cash a traveler's check. Steve studied her identification and said, "You're prettier than this picture." Steve then turned to a woman bartender.

"I like your hair better down," Steve said.

From the D.J. booth, Steve had the volleyball net lowered. He threw out huge balloons, and the dancers batted them back and forth. He said, "Isn't that really great?" Moments later, the crowd seemed to lose interest, and he had the net raised. He paused to watch the men and women dance on.

"If I was as good looking as these people, I wouldn't be successful," Steve said.

A few nights later, Spyros Niarchos celebrated his thirtieth birthday in the top floor room. Three cigarette girls carried in a huge cake, and a trio of strippers danced on the bar. Blanca Jagger said she approved of the heterosexual atmosphere.

"Gay, it's an empty life," Steve said. "Everybody gay is getting married."

As the party broke up, a man in a tuxedo came up with a joint. Steve smelled marijuana for the first time since the club opened. He said, "I'd feel much better if you'd put that out."

On June 11, the palladium threw a party for Madonna. Ian decided the waitresses should wear wedding gowns. An iron beam in the top floor room was draped with white cloth and entwined with roses.

"Beautiful," Steve said.v

"Cheap too," Ian said.

At one point, Ian paused to meet with a graphic designer who was working on a card for special customers. Ian said, "We're not going to call it a membership card, because that gets the State Liquor Authority aggravated. So we're not going to call it anything."

Then Ian hurried down to the lobby to check the lighting. He stooped to pick a speck of paper off the carpet and raced back upstairs to ensure that the six?-foot-tall letters spelling WELCOME HOME MADONNA were hung evenly. Steve had to pester him into pausing to eat some deli food.

"Don't touch the pickles," Steve said. "It'll kill your stomach again."

After Ian gulped down some soup, he arranged payment for 46 musicians and dancers. He was rushing on to something else when assistant Heather Warshaw said she wanted to go home and change.

"Me too," Ian said.

"I don't have any stake in this place," Warshaw said.

"Me neither."

"Oh, yeah. I forgot."

Around midnight, Steve escorted Madonna to the top floor bar. Ian arrived to report that everything was set. He found Steve soaked in sweat and struggling to disperse a crowd.

"I can't hold 'em back much longer," Steve said.

"You're ready when?" Ian asked.

"I want her to have another drink or two," Steve said.

At 1:30 A.M., Steve brought Madonna down the back stairs. Madonna said, "Ste-e-e-eve, I don't want my picture taken. Steve took her into Ian's office, and she said, "I don't like being put in a room."

On cue, the curtain rose and a band started playing. Steve led Madonna onto the stage, and rose petals cascaded from the ceiling. Ian stood in the shadows, jiggling his knee to a nervous rhythm several beats faster than the music.

"That's done," Ian asked.

The following afternoon, the two partners went for a drive in Steve's Mercedes. Four years after their release from prison, they were running a hugely profitable hotel and a club with a projected annual net of $10 million. Banks that had once refused to grant them checking accounts now seemed ready to back projects that would dwarf the others.

"You sort of got to make yourself happy, you know what I mean?" Steve said.

As a summer shower fell, Steve pulled over. For a moment, he and Ian fell silent and stared through the rain streaked glass at what just may be the site of their skyscraper. Then these two young men who now want to erect the biggest and most beautiful building in the world drove off to have lunch at Gray's Papaya on Broadway at 72nd Street.

"The best hot dogs in the city," Steve said

"I'm gonna have two," Ian said.