How did everything go wrong at Marvel Entertainment (former stock symbol MRV) when Ronald O. Perelman was chairman and principal owner-- from 1989 until he filed for bankruptcy at the end of 1996?

Comic Wars reveals how Perelman built a complicated structure of holding companies to control Marvel, aggressively expanding America's leading comic books publisher by acquiring subsidiaries at very high prices: Fleer and SkyBox sports trading cards, an Italian sticker company, and a comics distributor called Heroes World.

Didn't that increase the old Marvel's debt?

Yes, to stunningly high levels. The debt to major banks, led by Chase Manhattan, rose to over $600 million. Comic Wars shows how Perelman's reputation as a big borrower -- notably in his bold and contested takeover of Revlon -- made him a great customer for the banks. They habitually said "yes," even to finance the acquisition of Marvel's expensive subsidiaries.

When did the banks realize that the loans wouldn't be repaid?

When Marvel lost money, for the first time since Perelman took it public. That was in 1995. He tried to reorganize the company, in a way that could be highly beneficial to him but not to other stockholders or bondholders, but they rebelled -- so he filed for Chapter 11 protection in Bankruptcy Court in Wilmington, Delaware in December 1996.

Why was Marvel losing money?

Because the expansions were so expensive, it was hard for Marvel to keep up with debt repayments to the banks. The Major League Baseball strike shattered the enthusiasm of fans, so baseball card sales plummeted after 1994. Basketball cards didn't sell well, either, and the NBA was charging a high royalty fee that Marvel had agreed to pay -- unrelated to sales levels.

The big crisis, however, was the fact that the craze for collecting comic books suddenly died down. Perelman had his management print more and more titles -- even four different covers for each issue, hoping to create "collectors' items" -- but the tricks stopped working.

Didn't Perelman's management know how to keep comics popular?

No. His senior people didn't read the comics, and they never had. Comic Wars shows how Perelman, since boyhood, read corporate balance sheets -- but not comic books. And Marvel's most loyal fans started to hate Ron Perelman as the villain who ruined the comics' quality. Mom and Pop comic-book stores bitterly remember being impoverished by his attempt to monopolize the market through his distributor, Heroes World.

As principal owner, Ron Perelman must have suffered worse than anyone from Marvel's failure?

Not exactly. When Marvel was still flying high -- in 1993 and 1994 -- he was clever enough to have his holding companies sell junk bonds. Known as "Marvel high-yield zeroes," the zero coupon bonds had a face value of nearly $900 million.

Comic Wars reveals that Perelman is now being sued by a trust representing former Marvel shareholders and unsecured creditors (using New York City attorney Edward Friedman), charging that Perelman pocketed $553.5 million in "unjust enrichment" from the junk bonds. Perelman's privately held company, MacAndrews & Forbes, denies the allegation.

Based on the hundreds of court documents and financial records -- many thousands of pages in all -- that I've pulled together, I'd estimate that Ronald Perelman profited from his eight years in charge of Marvel to the tune of $280 million.

The company failed. Perelman and his people shrug and claim they did their best; but his critics say the junk bonds meant that his business m.o. is: "Heads I win, tails you lose."

MacAndrews & Forbes, being a privately held company, doesn't say much -- does it?

Only when Perelman and his chief aide, Howard Gittis, feel that talking is worthwhile; and that's not often. But Comic Wars takes us inside the secretive conglomerate's headquarters -- the unmarked Venetian-style palazzo known as The Townhouse -- at 35 East 62nd Street. The Townhouse has a lot of clout on Wall Street.

The cover of your book is a comic-book rendition of Ron Perelman in a fistfight with Carl Icahn. Why Icahn?

When Icahn saw Marvel faltering, he tried to move in and grab the company. First, he bought a lot of the Marvel junk bonds -- noticing that Perelman had pledged all of his common stock as collateral. Then, when Perelman tried to restructure the company in 1996, Icahn adamantly refused to give the required approval. Perelman defiantly filed for Chapter 11, and Icahn then battled in the Bankruptcy Court.

Comic Wars describes the cut and thrust of high-paid corporate lawyers fighting at every hour of the night and day, several times reaching tentative agreements in this roller-coaster case -- only to find the deals disintegrating in the courtrooms of the Wilmington judges, Helen Balick and Roderick McKelvie, who themselves were colorful, distinctive, and often in disagreement.

Perelman walked away with his profits, throwing in the towel. In June 1997, the judges awarded Carl Icahn control of Marvel Entertainment. He appointed himself Chairman and tried to run the comic books company -- a field he knew nothing about -- for six months. Comic Wars gives a rare, inside look at his style and personality. Frequently terrifying his business opponents, he insisted that the rough tactics he used at TWA, U.S. Steel, Texaco, and Nabisco would work at Marvel.

In December 1997, Judge McKelvie gave up on Icahn and appointed a Trustee to run the company instead.

What does Icahn say now?

Basically, as a lover of poker and baseball metaphors, he says that he played his best hand but "knew when to fold," and that he has "a great batting average" -- so why focus on his failure with Marvel?

Because this failure is one of his least favorite topics, he had most of the principals in the case sign an agreement -- in the final settlement in 1998 -- not to take part in the writing of any book about the Marvel bankruptcy fight. Getting this story was no easy task.

It's obvious that Marvel survived -- the Spider-Man movie's opening on May 3 of this year is getting plenty of publicity. So how did the comic book company recover?

That's a really untold story of guts and determination. The heroes of the story are two Israelis who've lived in this country for over thirty years. Isaac (Ike) Perlmutter and Avi Arad now control Marvel, which has a new NYSE ticker symbol (MVL).

Perlmutter, a businessman specializing in "dollar-store" merchandising and then in buying collapsed companies such as Remington Products (the shaver maker), found himself owning Toy Biz -- a failing toymaker with a license to make many items based on Marvel Comics characters. He became intrigued by what Ron Perelman was doing at Marvel and proposed an unusual semi-merger: Perelman's Marvel getting a substantial share in Toy Biz, while Toy Biz got a perpetual license to make Marvel toys without paying any license fees -- a huge saving for a toymaker.

Perlmutter, an inveterate cost-cutter, met his fellow Israeli -- Avi Arad -- because Arad was a toy designer who had made millions in royalties on his creations. Ike was haggling with Avi, but then instead plunged into partnership with him. They are an "odd couple": the very conservative Ike generally in tie and jacket, while the highly artistic Avi favors leather outfits and motorcycles. Ike loves creative financing and doesn't know the Marvel characters; Avi loves story-telling creativity and is bored by numbers.

In many ways, Avi Arad replaced Stan Lee as Marvel's greatest booster. As Comic Wars recounts, Lee joined the company sixty years ago and was the dynamic, nuclear core of Marvel's amazing rise -- as part of the American cultural scene -- in the 1960s when he co-created Spider-Man and other characters that took the popular entertainment world by storm. His "Marvel Universe" comprised over four thousand characters: properties that an entertainment conglomerate could exploit financially.

Stan Lee -- though never speaking bitterly about Marvel, even in the Ron Perelman years --moved to the West Coast, moved on to other projects, and agreeably collects a generous salary from Marvel while being required to do little.

Comic Wars contains the uproarious details of the long and exhausting fight for control of Marvel -- and for the very survival of Spider-Man and the other characters -- but in the end the judge in Wilmington let Toy Biz take over Marvel. As in any bankruptcy, the key ingredient is to get the lenders' assent. That meant that Ike, Avi, and their lawyers had to reach agreement with Chaim Fortgang -- the killer lawyer hired by Chase Manhattan and the bank syndicate to squeeze as many millions as possible out of this hopeless mess.

Fortgang collected a fee of about $18 million. But he's had negative coverage in the business press lately. Wachtell, Lipton, Rosen & Katz reportedly lost patience with his aggressive behavior and derisive remarks, and thus one of New York's leading bankruptcy attorneys has been fired.

So, is the new Marvel succeeding?

It looks that way. It's now called Marvel Enterprises. It doesn't own the baseball card or sticker companies anymore, and a pretty conservative management -- hand-picked by silent and publicity-shy Ike Perlmutter -- vows to decrease debt, rather than borrow and expand as Ron Perelman used to do.

The stock, MVL, has quintupled in the past year as the fear of another bankruptcy fades. As well as publishing the Spider-Man, Hulk, Fantastic Four, X-Men, and other comic books, the new Marvel still dabbles in toys but is focused on "licensing". Comic Wars shows how that is a high-margin business, where Marvel has very little overhead and simply enjoys revenue-sharing and royalty checks from movie companies, pyjama and lunchbox manufacturers, and others that want to use Marvel's iconic characters.

The key to MVL's current success is that Avi Arad loves the Marvel heroes. He knows their stories backwards and forwards. He's pretty much given up designing toys, and now he lives in Los Angeles and serves as executive producer for all the movies based on Marvel characters: the current Spider-Man and Blade 2, next year's Incredible Hulk (now being shot by director Ang Lee) and X-Men 2, and more than a dozen others now in the Hollywood pipeline.

You're an expert on foreign affairs and intelligence -- especially in the Middle East? Why did you write Comic Wars?

I happened to meet some of the people involved in this fight, and the story was so amazing -- so funny, so full of characters and passion -- that I couldn't resist. It turned out that the skills of an experienced investigative journalist were needed to ferret out the truth. The losers were very reluctant to say anything about the Marvel battle, and the winners insisted that they have their hands full trying to resuscitate the business.

In addition, the bankers and lawyers didn't want to offend future clients. But one of the factions that insisted on knowing the truth was the loyal troupe of Marvel comics fans. They wondered why quality suffered in the 1990s, why the company went bankrupt, and how Marvel managed to get itself back on its feet -- heading for what could be greater triumphs in movies, television, the Internet, video games, and comics.