Steven Warshaw knew he had a problem when masked men with sawed-off shotguns began patrolling the skybox seats of Moscow’s Ice Palace, home of the Russian Penguins. Warshaw’s marketing ingenuity had brought success and money to the recently rebranded hockey team, which in turn attracted the Russian Krysha—the Mob. Within a few months, three individuals affiliated with the team (its star defenseman, photographer, and assistant coach) would all be dead, two with five bullets to the head, the mark of a Mafia hit. Shortly thereafter, a bounty would be placed on Warshaw’s head. None of this was part of the original plan.
The original plan, as devised by Pittsburgh Penguins owners Howard and Karen Baldwin and Tom Ruta, was to resurrect the storied C.S.K.A. Red Army hockey club that had produced the world’s best players through the 1970s and 1980s.
By the time the Soviet Union fell, in 1991, government subsidies had dried up, and the Red Army team was bankrupt and not attracting any fans. The best Russian players had defected to the West, lured by lucrative N.H.L. contracts. The trio saw an opportunity.
In February 1993, the Baldwins and Ruta arranged a meeting with the Red Army team’s general manager, Valeri Guschin, and coach, Viktor Tikhonov. In short order, the Baldwins and Ruta (along with a few other investors, including the Pittsburgh Penguins player Mario Lemieux and the actor Michael J. Fox) purchased a 50 percent stake in the flailing team for $1 million from the Russian government, marking the beginning of a historic joint venture between the recently crowned Stanley Cup champions and the legendary Red Army team.
The team was renamed the Russian Penguins, and the hammer-and-sickle symbol—the team’s logo since its founding, in 1946—was quickly replaced with a more family-friendly penguin. The American owners agreed to spearhead all marketing efforts and install an assistant general manager to track the development of the Penguins’ prospects.
While future oligarchs were busy carving up the free market, this consortium of Americans had its eyes on monopolizing Russia’s hockey talent for the Pittsburgh Penguins’ benefit—and turning a profit, by attracting American marketing dollars to this fertile, untapped market.
The Baldwins and Ruta turned to 34-year-old marketing executive Steven Warshaw to oversee their operations. “My charge was threefold,” Warshaw, now a guest lecturer at Syracuse University’s Falk College, tells me. “Fill the arena, make a shitload of money [for the team], and bring a ton of goodwill between the nations … basically trying to knock off Richard Nixon’s Ping-Pong diplomacy with China.”
Warshaw was a marketing gunslinger. Karen Baldwin recalls, “He was so excited there were no rules over there. He could try things he couldn’t in the States.” Warshaw was also single and ready for an adventure. “I didn’t have any kids, so I had no fear … I looked at this as an opportunity to create something beautiful.”
But, as the saying goes, beauty requires pain. “I see the world through my nose. The smells of that country were enough to make you sick physically,” Warshaw says, recalling first arriving in Moscow in 1993. “The whole infrastructure was rotting … the people, garbage. No one showers. No one dental flosses. It was an olfactory nightmare for me.”
Things only got worse when Warshaw toured the team’s rink, located just over four miles northwest of the Kremlin. “The bathrooms were prehistoric … holes in the ground.” Not to mention that the few fans who did attend games would steal entire toilet-paper rolls, forcing team officials to dole out six sheets to each ticketed spectator upon arrival. At one point, a neurosurgeon moonlighted as the team’s Zamboni driver. “The country was completely backwards,” Warshaw says.
“My charge was threefold: fill the arena, make a shitload of money, and bring a ton of goodwill between the nations.”
Finally, in the rink’s basement, Warshaw spotted his first marketing opportunity. Located beneath the Mercedes-Benz showroom that occupied much of the arena’s main floor, the “Red Palace” was a cavernous strip club, its dancers’ pasties barely visible amid the billowing Laika cigarette smoke. The smell, according to Warshaw, was “primal.”
The strippers were always looking to make a few extra bucks, so when Warshaw proposed they provide fan-friendly cheerleading entertainment during the upcoming Penguins game, they agreed. “I wanted them to move in unison, to be synchronized. So I got behind one of them and was trying to show what synchronization was. They misunderstood me and started performing lesbian acts on the carpet in the middle of the ice. My Russian was not great at the beginning. It’s still not great.”
“Next game, we drew more fans,” Ruta says.
This was the first in a series of outlandish—and incredibly successful—promotions Warshaw orchestrated in the coming months, including a Yeltsin-and-Gorbachev lookalike contest and a bears-drinking-beers night (only one human index finger was lost that evening). And while entertainment was paramount, Warshaw understood the importance of providing practical sundries in drawing a crowd that was still reeling from a 70-year Soviet regime. “Every night, we had sponsors give away something: toothpaste, detergent, razors, tampons.”
Attendance, which had hovered around a few hundred per game prior to the Russian Penguins rebrand, had now catapulted to over 5,000, tops in the league.
But there was one problem: Tikhonov and Guschin “didn’t give a shit if there was one fan in the rink or 5,000,” Howard Baldwin says. Known for his dictatorial style of coaching, Tikhonov was a product of the Soviet military, joining VVS Moscow (the former hockey team of the Soviet Air Force) as a 19-year-old defenseman in 1949. He eventually rose to colonel when hired to helm the Russian Penguins. Guschin’s intimidation stemmed from his heavy drinking, though the ruddy-faced general manager also possessed the capacity to charm.
To recognize his superlative work filling the arena, Warshaw was rewarded with a new nickname from Guschin: Жопа с Ручкой (asshole with a handle). “You had to prove to them that you were part of the team, that you belonged, that you were not American,” Warshaw says. “That means go out and drink until you pass out.”
While his liver and sleep schedule took a beating, Warshaw made inroads with Tikhonov, convincing the hard-line Communist coach to shoot a TV commercial endorsing Vicks Cough Drops (the “Vik for Vicks” campaign). Eventually, Howard Baldwin says, even the Russians “realized they had to start running this as a business enterprise.”
It didn’t help that the former legends of the iconic Soviet team were destitute. “The sadness was everywhere,” Warshaw says. “One night, one of the great legends, Vladimir Vikulov, came to me begging for beer … he had literally no money left.... The government had turned their backs on them.”
Fans would steal entire toilet-paper rolls, forcing team officials to dole out six sheets to each ticketed spectator upon arrival. At one point, a neurosurgeon moonlighted as the team’s Zamboni driver.
Understanding the sanctity of pride in Russian culture, Warshaw organized a “Legends Night” at an upcoming Russian Penguins game, honoring former Red Army stars and introducing the league to its inaugural jersey-retirement ceremony. The asshole with a handle was finding his groove.
With an arena now full of raucous fans (previously, applause during games had been frowned upon) and improved relations with their Russian partners, Warshaw and the Penguins owners could now introduce more sophisticated promotions, courting big-name American sponsors including Coca-Cola, Delta, Nike, Baskin-Robbins, McDonald’s, Gillette, Nabisco, and Procter & Gamble. Nearly every inch of the ice surface, players’ jerseys, and rink boards were splashed with sponsor logos. Warshaw negotiated an exclusive national-television contract with Channel One, the world’s largest television station at the time, still state-owned today.
“We were getting encouraged by the president of the United States, Clinton,” Ruta says. “Gore came to a game and said, ‘Wow, this is a wonderful thing you folks are doing.’” The resurgent team even attracted Disney, which explored another Mighty Ducks movie set in Russia. At one point, Warshaw says, “Our exit strategy was to have Disney take us international: tours, television, movies, stores, merchandising, licensing.”
Despite all this, (armed) trouble always lurked nearby. After a Jeep-giveaway promotion between periods during one game, the winner feared he’d be killed if he drove home that night in a new car. On his way off the ice, he negotiated a $10,000 cash payment in lieu of accepting the $30,000 Wrangler. The winner had reason to be skeptical of his good fortune. Former legendary defenseman Alexander Ragulin, whose No. 5 jersey was retired and hung in the rafters that same night, was caught trying to rig the promotion.
“Anytime there’s money coming in in Russia, you’ll draw a crowd,” Warshaw says—and not always the good kind. By year two of the Russian Penguins experiment, the “crowd” consisted mostly of Russian mobsters. “The vacuum of Communism left a Wild West element,” Karen Baldwin says. The skyboxes at the Ice Palace, which before the Penguins’ arrival had served as electrical rooms and occasional squatting premises for vagrants, became the place to learn who was in trouble and who was getting screwed by local Mafia groups. “Our success made us too high profile,” Baldwin adds.
“The vacuum of Communism left a Wild West element.”
Exploiting a free market in Russia was proving to be impossible. As the team generated more revenue, more money disappeared. As for an audit trail or record of what happened to it? “We never got real numbers,” Warshaw says. “Nothing was real in that country.” (Some things were in fact real, like the sauna Guschin had built outside his office in the arena for personal use.)
Proceeds from player transfers, a substantial revenue driver for the American partners, disappeared mysteriously. Equipment Nike donated to Red Army youth programs turned up for sale at the team’s club shop. Warshaw alerted Ruta and the Baldwins of the money skimming and brazen expenditures. Their message was simple: “Let them steal a little bit. Let us know when it becomes a lot.”
The troubles weren’t limited to finances. “Russia didn’t have lobbyists. They had guys with guns,” Warshaw says. “Russia understands one thing: power.” The preferred method of solving disputes, large or small: contract killings.
“None of this was part of the original plan.”
Over a six-month period in the Russian Penguins’ second year, a series of murders rocked the team. Star defenseman Alexander Osadchy was found, bloated and lifeless, in his apartment; team photographer Felix Solovyov was gunned down in front of his home (the killer left behind his pistol, equipped with a special silencer issued only to K.G.B. members); and assistant coach Vladimir Bogach took five bullets to the head in front of his wife one evening.
As Valentin Sych, of the former Russian Hockey Federation, remarked, “We have a saying that you cannot understand Russia using your mind.” Sych wouldn’t be using his mind much longer. Like Solovyov and Bogach, he met his end with five bullets to the head (the Russian Hockey Federation listed his cause of death as “car accident”).
In June 1995, after the end of the second season, Guschin and Tikhonov flew to New York and met with the Baldwins and Ruta for dinner at Morton’s steakhouse. Over New York strips, Guschin and Tikhonov introduced their “new bankers,” who would now be involved in the partnership. “It was central casting for Goodfellas out of Moscow,” Karen Baldwin says. “The two guys didn’t say a word during the entire meal, maybe grunted once or twice,” adds Howard Baldwin. “After dinner, we knew it was game over.”
The Americans deemed continuing the venture too dangerous. They walked away without recouping their original investment. “We were a few too many years ahead of our time,” says Howard Baldwin.
Free of American partners, the new Mafia ownership recognized Warshaw’s marketing value and asked him to stay. Warshaw balked at their lowball offer: “Why would I take a job here for less money when I could go home and make more in Pittsburgh?” he asked. Because if he didn’t, they’d kill him. The price for the hit: $6,500.
Warshaw didn’t flinch. “I think you’re overpaying.”
Bill Keenan is the chief operating officer at AIR MAIL and the author of two books, Odd Man Rush: A Harvard Kid’s Hockey Odyssey from Central Park to Somewhere in Sweden—With Stops Along the Way and Discussion Materials: Tales of a Rookie Wall Street Investment Banker
