Eclectic Traveler from Tinseltown to Cyberspace
San Diego Business Journal
by Liz Harman, Staff Writer, November 14, 1994


Lee Stein always seems to be where the action is.

In 1980, he began working as a business manager to rock stars like Rod Stewart and movie stars like Gene Hackman.

He invested in real estate during the boom years, but sold his holdings just before the crash in real estate prices in the '95.

Today, he's become a banker in cyberspace - president of a firm that has created a Secure and efficient system for anyone to buy or sell information through computers.

"I like to play on the leading edge," says Stein, 40, a soft-spoken but intense man with a Steven Seagal-style ponytail.

The leading edge is how Stein and others describe the system put together by his company, First Virtual Holdings Inc.

"We keep hearing we're going to be in the information age, but there was no way to do commerce on it," he says.

So, First Virtual creates a payment system for users to buy and sell information on the Internet, the global computer network that has grown to more than 20 million subscribers in 120 countries.

Unlike existing on-line systems such as Compuserve or Prodigy, users don't have to be an existing subscriber to the service to make credit-card purchases. First Virtual requires no previous relationship between buyer and seller.

According to an article in the New York Times, it may "herald a shift comparable to the transition a generation ago, when members-only department store credit cards gave way to use-anywhere cards like Visa or Mastercard."

The system brokers sales between buyer and seller, using a series of electronic or E-mail messages. Buyers use credit or debit cards to pay for transactions in a system that security experts have so far been unable to penetrate, Stein says.

First Virtual's system charges customers $2 and sellers $10 to register. The seller also pays 29 cents, plus 2 percent of the sales amount on each transaction.

The service started in mid-October, signing up its first customer, a merchant in Helsinki, Finland, within hours.

The company expects online books, newsletters and video games will be just a few of the products that can be sold.

"The potential is unlimited," Stein says. First Virtual, for example, is in discussion with multinational publishing firms. Even the U.S. government is already looking at selling documents over the system.

First Virtual's corporate structure is as unique as the product it sells.
A "completely virtual corporation" as Stein describes it, it has no real estate or actual offices. Incorporated in Wyoming, its toll-free phone lines are answered in Oregon, while its computers are in Ohio.

"No two people (in the company) have the same zip code and, for awhile, no two people had the same area code," Stein says. Stein, who created the firm in conjunction with three leading computer scientists, or "Internet gurus," as he calls them, communicates with his partners electronically.
Even the company's business cards have E-mail addresses, rather than street addresses. Stein's journey from financial adviser to the stars to cyberspace entrepreneur began in Philadelphia where he was horn and raised.

The son of a children's summer camp director, Stein was attending law school at Villanova University when he saw a Merv Griffin show between classes. The guest was Hollywood producer Allan Carr, who talked about his business manager.

A career as a business manager sounded "pretty cool," recalls Stein, whose ndergraduate degree was in accounting.

Soon after graduating from law school in 1978, he was "knocking on doors" in Hollywood. "I was pretty highly trained," he says. "And there was no downside. All somebody could say was no."'

Before long, Stein created his own company and signed his first client, Bo Goldman, an Academy Award-winning screenwriter for "One Flew Over the Cuckoo's Nest" and later a Golden Globe winner for "Scent of a Woman."
Another client was a then-little-known rock band called "Men at Work." Within six months of signing with Stein, the group had a hit album that sold millions of copies.

Other clients like Stewart and Hackman followed.

Asked to talk about his famous clients, several of whom, like musician Peter Gabriel, are friends as well, Stein politely refuses. "They're like everybody else," he says. "They just have a talent that's different from other people's."
Stein does say, however, that many stars "have a tougher life than people imagine."

"They're only as good as their next album or screenplay," he says. "It's a very competitive and unforgiving environment. They really never know when their careers are going to be over, no matter how big a star they are."
In his own life, Stein's success has been tempered by illness, first his wife's, June, and then his own.

Stein was beginning his entertainment practice in Beverly Hills. His wife, then ust 24, was already the tax director for a $500 million trucking company in San Francisco, when she was stricken with severe back pain. As it worsened, she learned she had anklosing spondylitis, a degenerative inflammatory disease of the spine.

Doctors said she faced the possibility of permanent fusion of her spine and would need to bear children soon, if she ever hoped to have them. The two stopped commuting between the two cities and June Stein moved to Beverly Hills and became a partner in her husband's business.

But the couple refused to accept the prognosis and began exploring alternative remedies, including practices from the Far East. Some remedies were just "kooky California" ideas, but primarily through yoga, she was able to conquer the disease, Lee Stein says. Eventually, the two would also study meditation in Kathmandu with a Tibetan lama, as the experience with June's illness led them to re-order their priorities to health and family.

By the mid-1980s, the couple sold their entertainment business and moved to San Diego. Through a client, Stein had become involved with the Seaport Village development, where he served as president and CEO through most of the 1980s. Stein continues to represent a few clients, in ventures where he participates as an equity partner.

"We couldn't be all things to all people," says Stein, adding that the "quality of life" in San Diego was what attracted them to the area.

Stein travels frequently on business. But he works out of his home in San Diego, an arrangement that allows him to spend more time with his wife and three children. One favorite family activity is working on a large organic garden where the Steins grow much of their own food.

In 1991, those priorities of health and family were reinforced when doctors told Stein he had an inoperable brain aneurysm. The aneurysm could have worsened, but instead it healed on its own. Stein is reticent to talk at length about how the experiences of his and his wife's illness affected them spiritually. He will say there seemed to be "some lessons we were to learn by and incorporate into our lives."

The couple, for example, has set certain standards for the business enterprises they undertake. Projects have to "be fun, help people, and make money." The couple's goal has been "to try and operate from the highest level of integrity we can find."

Stein "is a very deep thinker," says Richard Burt, a San Diego attorney who has represented Seaport Village for more than 10 years. "He's not your average cutthroat businessman. He certainly has a lot more interests in life than making a buck." One of those interests is technology. A self-described "techno-junkie," Stein was on his way to New York City when he began asking questions of a fellow traveler who was using a wireless device to communicate with the internet. The traveler turned out to be one of the computer scientists with whom Stein started First Virtual.

Since moving to San Diego, Stein has also contributed his financial expertise and ties with the entertainment world to a long list of groups and organizations. As chairman of the San Diego Stadium Authority, a post he's held since 1991, he was able to make a quick phone call that led to tile Eagles rock band adding San Diego to their recent concert schedule. The performance garnered $227,000 for the city.

Recently, Stein and other city officials also announced a refinancing plan aimed at funding millions of dollars in improvements to the stadium in order to sign the Padres and chargers to long-term leases. He's been active on the boards of directors for the Greater San Diego of Commerce, the Scripps Foundation for Medicine and Science and the American Cancer Society.
As head of Seaport Village, he also instituted a New Year's Eve fireworks display that has became an annual event for many families.

"It's nice to know you had a hand in starting something that looks like it's going to be a tradition in San Diego," Stein says.

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