Bill Ackman and Carl Icahn Have Beef (Kobe, of Course)

AS Wall Street smackdowns go, this one’s a doozy.

In the other is William A. Ackman, 45, one of Mr. Icahn’s figurative heirs and a leading practitioner of the bruising, Icahnesque craft politely known as activist investing.

These ultrarich men battled for seven years in multiple courts, over a relatively paltry $4.5 million. That might be real money to mere mortals, but to these two, it’s barely a rounding error.

So why bother? This battle, it turns out, was more about big egos than big money — and it has left both men spitting expletives. The scrape finally ended this month, with Mr. Ackman victorious. But, before it was over, the affair occupied a Who’s Who of powerful lawyers and ran up millions of dollars in legal fees, all because of an otherwise forgettable deal the pair cut back in 2004.

“The guy is a shakedown artist,” Mr. Ackman sneers. “His word is worthless.”

Mr. Icahn says: “He’s now the young gunfighter who wants to show he beat the older gunfighter with a big reputation. He just likes pounding himself on the chest.”

In the secretive world of hedge funds, most money managers prefer to keep low. Not Mr. Icahn and Mr. Ackman. They are media hounds who court public attention and regularly star at investor conferences. Both buy stakes in companies and agitate for change. Both bemoan what they see as management failures and try to shame companies into replacing their C.E.O.’s, shake up their boards and do whatever it takes to bolster the value of their investments.

In many ways, this is a generational battle, a clash of old Wall Street and new Wall Street. Mr. Icahn may at times seem trapped in the 1980s, right down to his Gecko-esque blue shirts with white collars and cuffs. After 50 years in this game, he still seems to think that most companies would be better off if they would just listen to Carl C. Icahn.

Mr. Ackman is the smart-alecky boy wonder in a crisp modern suit and a Charvet tie. He, too, has become wildly rich, albeit without the old Icahn gruffness. After losing a battle against Target in 2009, he choked up during a speech in which he quoted Martin Luther King Jr. and John F. Kennedy.

When he first met Mr. Icahn in 2003, Mr. Ackman was virtually unknown outside Wall Street circles. It looked as if he might remain so. His world was falling apart. Gotham Partners, the hedge fund he helped to found when he was in his 20s, had just blown up. The Securities and Exchange Commission and Eliot Spitzer, then attorney general of New York, were investigating him. His investors wanted their money back.

So Mr. Ackman cold-called Mr. Icahn.

He wanted to sell Hallwood Realty, a company whose stock traded at about $60. Mr. Ackman believed Hallwood was worth $140 a share. “By reputation, I knew he was a tough guy and a difficult guy,” Mr. Ackman says. “I wanted to make sure I could collect.”

He continues: “I insisted the agreement be short. I also insisted it have a mathematical example in it, so that there could be no question about the intent of the agreement.”

That’s not quite the way Mr. Icahn remembers it. He says that he was the one who was worried, and that Mr. Ackman was under investigation and desperate to sell. (Both investigations were later dropped.)

“I checked him out,” Mr. Icahn says. “He was in trouble with the S.E.C.; he had investors leaving him. A few of my friends called me up and said; ‘Don’t deal with this guy.’ ”

Mr. Icahn says he saved Mr. Ackman’s bacon, although he puts it more colorfully. The two hammered out a contract. Mr. Icahn said he would pay Mr. Ackman $80 a share and offered a form of insurance. If Mr. Icahn unloaded his shares within three years, the two would split any profit above a 10 percent return.

Mr. Ackman wanted to bulletproof the deal. He included a provision that if the payout became contentious, the loser would pay all the legal fees. And if any payment was delayed, the contract stipulated, Mr. Icahn would owe Mr. Ackman a hefty amount of interest.

Initially, everything went according to plan. Mr. Ackman even visited Mr. Icahn’s offices to share another investment idea with him: betting against MBIA, a bond insurer that he believed was poised to collapse.

“We were rooting for Carl because we were effectively partners,” Mr. Ackman says. “And then” — expletives follow.

In 2004, Hallwood merged with another company, for $137 a share, netting Mr. Icahn a tidy profit. After waiting a few days, Mr. Ackman called to compliment him and to ask about his share.

As Mr. Ackman tells it, the older man scoffed: “First off, I didn’t sell,” Mr. Icahn told him. Mr. Icahn argued that a merger did not constitute a sale of shares.

“Well, do you still own the shares?” Mr. Ackman asked.

“No,” Mr. Icahn said. “But I didn’t sell.”

And so it went. Mr. Ackman threatened to sue. Mr. Icahn roared that he would countersue.

“Go ahead, sue me. You know what, I’m going to sue you!” Mr. Icahn shouted, according to Mr. Ackman, who says Mr. Icahn told him that he took his advice on MBIA and lost $20 million.

Mr. Icahn says that he never threatened to sue Mr. Ackman and that he held onto his bet against MBIA long enough to make money. Mr. Ackman sued in 2004, contending breach of contract.

As years rolled by, the dispute became a running joke on Wall Street. Mr. Ackman went on to open a new firm, Pershing Square Capital Management, and became an investing celebrity. He took positions in the likes of Sears, McDonald’s and, more recently, J. C. Penney. He made $1.5 billion on a bet on General Growth Properties.

Mr. Ackman’s offices in Midtown Manhattan are white marble and white leather, punctuated with odd pieces like the pilot’s ejector seat from a nuclear bomber from the 1950s. Had Mr. Icahn paid him from the start, he says, he would have shared his winning ideas. Instead, he joined with firms like Vornado Realty Trust, the big real estate company run by Steven Roth. Mr. Roth, he says, has made reams of money from the relationship.

While Mr. Ackman has moved on, Mr. Icahn, in many ways, seems frozen in time. His offices are filled with mahogany and classical paintings and sculptures. He still keeps odd hours, sleeping in and then working late. His voice is still Far Rockaway growl. He uses it to bark at corporate directors, competitors and, periodically, Mr. Ackman.

“Maybe I can be a tough guy, but I’ve been in business since 1960 and made money every year except 2008,” Mr. Icahn says. “I have never ever been in a lawsuit with anybody who trusted me with money or in a lawsuit with any employee.”

Over the last seven years, Mr. Icahn and Mr. Ackman have interacted only a few times. Mostly, it is their lawyers who have suffered the endless rounds of motions, hearings and appeals. (Mr. Ackman hired Andrew J. Levander, the criminal defense lawyer who was recently hired by Jon S. Corzine, the former governor of New Jersey, who presided over the recent collapse of the brokerage firm MF Global.)

Mr. Ackman and Mr. Icahn agree about one interaction. It was a few years ago — they disagree about the exact date — at Il Tinello, a restaurant on West 56th Street that Mr. Icahn likes.

After a lengthy, boozy dinner, Mr. Icahn made an offer: he would put $10 million in one of Mr. Ackman’s favorite charities to settle the dispute once and for all. Mr. Ackman refused, saying the money belonged to Gotham investors. The men left amicably. Mr. Ackman says he paid the bill.

Then, in late 2010, the lawsuit resurfaced as a point of conflict. Mr. Ackman received a call from a friend, David Tisch, the New York investor, wanting to know about his experience with Mr. Icahn. Mr. Tisch told him that Mr. Icahn was looking to invest about $100 million in Mr. Tisch’s new fund, Mr. Ackman says. (Through a spokesperson, Mr. Tisch says he never turned down a formal offer from Mr. Icahn and would welcome any investment in the future. Mr. Icahn says he does not recall anyone by the name of David Tisch.)

So Mr. Ackman says he told his friend what had transpired. Mr. Tisch refused Mr. Icahn’s money.

Mr. Icahn, says Mr. Ackman, called in a huff.

“Bill, you’re blaspheming me,” Mr. Icahn complained, according to Mr. Ackman.

Mr. Icahn says he does not recall any such conversation. He also notes that he is asked almost daily by hedge fund managers to make investments, so that losing out on one opportunity means little to him.

And that was it, until last month, after Mr. Icahn’s final appeal was denied. Mr. Ackman received nearly $9 million from Mr. Icahn, almost double the original amount, thanks to the accrued interest.

On the day of the transfer, Mr. Icahn called the younger man and left a message. Mr. Ackman returned the call. He never heard back.

At least until Nov. 17, when, after an inquiry from The New York Times, Mr. Icahn finally called — and let Mr. Ackman have it once again.

“He started to lecture me,” Mr. Icahn says of Mr. Ackman. “And I said, ‘I’ve been in this business for 50 years, and I’ve done O.K. without your advice.’ ”

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