Cohan the last tycoon; the secret history of lazard freres co (2007)

CONTENTS Cover Page Title Page Dedication CHAPTER / "Great Men" CHAPTER / "Tomorrow, the Lazard House Will Go Down" CHAPTER / Original Sin CHAPTER / "You Are Dealing with Greed and Power" CHAPTER / Felix the Fixer CHAPTER / The Savior of New York CHAPTER / The Sun King CHAPTER / Felix for President CHAPTER / "The Cancer Is Greed" CHAPTER 10 / The Vicar CHAPTER 11 / The Boy Wonder CHAPTER 12 / The Franchise CHAPTER 13 / "Felix Loses It" CHAPTER 14 / "It's a White Man's World" CHAPTER 15 / The Heir Apparent CHAPTER 16 / "All the Responsibility but None of the Authority" CHAPTER 17 / "He Lit Up a Humongous Cigar and Puffed It in Our Faces for Half an Hour" CHAPTER 18 / "Lazard May Go Down Like the Titanic!" CHAPTER 19 / Bid-'Em-Up Bruce CHAPTER 20 / Civil War CHAPTER 21 / "The End of a Dynasty" Afterword Acknowledgments Notes Copyright TO DEB, TEDDY, AND QUENTIN CHAPTER "GREAT MEN" Even among the great Wall Street firms Goldman Sachs, Morgan Stanley, and Merrill Lynch Lazard Freres & Co stood apart, explicitly priding itself on being different from, and superior to, its competitors For 157 years, Lazard had punched above its weight Unlike other Wall Street banks, it competed with intellectual rather than financial capital and through a hard-won tradition of privacy and independence Its strategy, put simply, was to offer clients the wisdom of its Great Men, the finest and most experienced collection of investment bankers the world had ever known They risked no capital, offering only the raw Darwinian power of their ideas The better the idea, and the insights and tactics required to achieve the result contemplated by it, the greater was Lazard's currency as a valued and trusted adviser and the larger were the piles of money the Great Men hauled out of the firm and into their swelling bank accounts The lucky few men yes, always men at Wall Street's summit have always been portrayed as ambitious and brilliant on the one hand and unscrupulous and ruthless on the other But the secret history of Lazard Freres & Co., the world's most elite and enigmatic investment bank, twists parts of this conventional wisdom into knots of unfathomable complexity The Great Men chronicled herein amassed huge fortunes to be sure but they refused to admit to anyone, least of all to themselves, that their pursuit of these riches led to relentless infighting Instead they spoke, without irony, of being part of a Florentine guild and of advice whispered to heads of state and to CEOs of the world's most powerful corporations, while all the time attempting to preserve the mythical special idea that was Lazard They also, to a person, craved an equally elusive chimera: the assurance that somehow, despite everything, they alone had remained virtuous But starting in the mid-1980s, the wisdom of Lazard's Great Men strategy began to show its considerable age, especially when Lazard was compared with its better capitalized and more powerful and nimble foes The firm's numerous strategic missteps were exacerbated by the increasingly titanic generational struggle inside Lazard between the likes of Felix Rohatyn and Steve Rattner superstar investment bankers and pillars of New York society as well as by the bizarre behavior of the increasingly isolated and bitter Michel David-Weill, the French billionaire who controlled Lazard and fomented the struggle from his imperial lair And at the climactic moment, Bruce Wasserstein, the supreme opportunist, came along to pick Michel's considerable pockets The decades of internal turmoil and paternalistic management led ultimately to the once-unthinkable: a Lazard Freres free from its founders, as a publicly traded company just like any other, its operational flaws and obscene profitability open to the world its special cachet lost forever The story of Lazard has always been one of internecine warfare, calamity, and resurrection, proving definitively that the forces of "creative destruction" in the Austrian economist Joseph Schumpeter's famous observation are alive and well to this day in American capitalism OF ALL LAZARD'S Great Men, none was greater than Felix George Rohatyn Felix was considered by many to be the world's preeminent investment banker He was the man who saved, first, Wall Street and then New York City from financial ruin in the early 1970s For some thirty years at the end of the twentieth century, he had unofficially presided over Lazard Freres, helping to transform it into Wall Street's most prestigious, enigmatic, and mysterious investment banking partnership But on one of those impossibly close days in our nation's capital, in the summer of 1997, Rohatyn found himself at the end of his tenure at Lazard, testifying before a Senate subcommittee in hopes of obtaining ratification of his appointment to a position he had long maintained was beneath him "It is a great honor for me to appear before you today to seek your consent to President Clinton's nomination of me to serve as the next American Ambassador to France," the sixty-nine-year-old Felix told the Subcommittee on European Affairs of the Senate Foreign Relations Committee "It is also a very emotional experience, for many reasons I am, as you know, a refugee who came to this country from Nazi-occupied Europe in 1942 As long as I can remember, going back to those very dark days, being an American was my dream I was fortunate to achieve that dream, and America has more than fulfilled all of my expectations To represent, at this time, my adopted country as her Ambassador would be the culmination of my career; to have been nominated to represent my country in France, a country where I spent part of my childhood and with which I have had a lifelong relationship, both professional and personal, seems to me more than I could ever have hoped for." In truth, the thick-browed, beaver-toothed Felix had for more than twenty years campaigned relentlessly for more, much more With absolute clarity of mind, he knew he deserved better than an ambassadorship, a position he once likened to that of butler Felix was the Great Man of Lazard, Le Corbusier of the most important mergers and acquisitions, or M&A, deals of the second half of the twentieth century, the ultimate rainmaker and corporate confidant, who year after year singlehandedly generated hundreds of millions of dollars in fees for himself and his partners, thereby controlling his colleagues through a delicious combination of fear and greed After all, who could possibly afford to disobey a man who put so much money into his partners' pockets while taking far less than he was entitled to? When Felix called or wandered through Lazard's spartan offices in One Rockefeller Center, his partners snapped to attention, dropped whatever they might be doing, and acceded to his every wish As his deal-making prowess continued unabated over the years, he had somehow also found the energy to volunteer his precious time and incomparable insights to solve two of this country's major financial crises of the second half of the twentieth century First, in the early 1970s, he worked round the clock to cobble together solutions that stanched the bleeding caused by the "back-office crisis" afflicting many of the largest old-line Wall Street brokerages Through a series of nail-biting and courageously conceived mergers, Felix prevented the meltdown of a large part of the securities industry Second, he is credited with almost singlehandedly devising the financial rescue package that saved New York City from bankruptcy in 1975, standing tall against President Gerald Ford and his incendiary refusal to help With these matters resolved satisfactorily, Felix became Hamlet, the lone voice, the Democrat in exile during the fallow years of Ronald Reagan and George H W Bush, exhorting the party faithful to action through his regular dispatches in the tony pages of the New York Review of Books , creating what became nothing less than the Rohatyn Manifesto He courted the great intellectuals and leaders of the day in his genteel salon on Fifth Avenue and at his annual Easter egg hunts at his Southampton manse He was the epitome of the Great Man By the time of Bill Clinton's election in 1992, he not only wanted desperately to be secretary of the Treasury but believed he had earned it Maybe he even was owed it Indeed, some believe he had wanted the post as early as the Carter administration Had Jimmy Carter been able to win another presidential election and had Felix been less critical of Carter in his writings, speeches, and interviews, he might have had a shot But in 1980, Carter lost in a landslide to Ronald Reagan So Felix had waited stoically through the two Reagan terms and that of the first Bush for the return of a Democrat to the White House His moment had finally arrived, along with Clinton's, in November 1992 Felix vigorously lobbied for the Treasury secretary post, through the clandestine channels that exist for such genteel advocacy and by manipulating the levers he had pulled for years with the dexterity of a maestro: his legendary orchestration of the notoriously fickle troika of corporate chieftains, New York society, and the press was the envy of every investment banker and corporate lawyer on the planet And yet Felix's considerable efforts had fallen short, for reasons that begin to reveal the many nuances and contradictions of one of America's most powerful and least scrutinized men When Clinton came to see Felix in his diminutive, picture-lined Lazard office during the election season of 1992, the Napoleonic Rohatyn received him coolly and enigmatically, having for some reason failed to fully perceive the Clinton juggernaut He chose instead to lend his considerable prestige to the third-party candidate H Ross Perot, the Texas billionaire and founder of EDS Corporation, who was his former client Felix had first met Perot in the early 1970s at the urging of John Mitchell, Richard Nixon's first attorney general Mitchell thought Perot would be helpful to Felix in solving the New York Stock Exchange crisis Felix then brokered a deal whereby Perot invested what turned out to be close to $100 million in DuPont Glore, a failing old-line brokerage Perot's investment at the time represented the largest amount of money ever invested by a single individual in a Wall Street firm DuPont Glore failed anyway, and Perot lost his investment Yet his friendship with Felix blossomed Felix served on EDS's board of directors and advised Perot on the sale of EDS to General Motors He rewarded Perot's loyalty by supporting him through much of the 1992 presidential campaign a point Felix tries to parse today, in hindsight But Perot's presidential aspirations were predictably unsuccessful, as were, not surprisingly, Felix's own to become secretary of the Treasury after Clinton's election Even though many important and influential people believed Felix to be immensely deserving, through a combination of hubris, bad luck, and political miscalculation he didn't get the prize Clinton turned first to Senator Lloyd Bentsen and then to Robert Rubin, the former co-CEO of Goldman Sachs a man twenty years Rohatyn's junior with nary a trace of his civic accomplishments or reputation But Rubin had been doing something that Felix had not been willing to do, that Felix had felt uncomfortable doing: Rubin had raised millions of dollars for Clinton and for the Democratic Party There are rewards for that kind of thing In his memoir, In an Uncertain World, Rubin makes no mention of perceiving any competition with Felix for the Treasury job But he does recount, with some frustration, Felix's Great Man status and his preeminence as a banker Rubin had hurt his back just prior to a board of directors meeting for one of his clients, Studebaker-Worthington, at which Rubin and Goldman were to play the dual role of board members and investment bankers Rubin recounted how he attended the Saturday board meeting, at the request of the CEO, Derald Ruttenberg, lying flat on his back, as the board met to consider whether to sell the company "I thought," Rubin recalled, "If I don't go, he'll hire Felix Rohatyn the renowned investment banker from Lazard whom Ruttenberg had also mentioned I couldn't walk for more than a few yards at the time, or even sit, but I went to Ruttenberg's office and lay on his window seat We got the business, though much to my dismay, Ruttenberg gave Felix part of the fee (It's more than twenty-five years later, but I still remember the amount.) Ruttenberg said he wanted Felix to be satisfied, given his importance in the world." His importance in the world Rubin, as capable of flattery as the next monumentally successful investment banker, was simply and matter-of-factly acknowledging Felix's canonical position among the power elite of merger advisers, a rare breed of peacock the brightness of whose plumage had been known to fade from year to year Regardless of the decade, Felix has been a constant atop the leader-board of M&A advisers Even today, at seventy-eight, his diplomatic career complete, he still advises powerful CEOs on their most important deals and receives millions of dollars in fees for his work At Lazard, Felix had come to personify the firm's unique and uniquely successful business strategy of employing the smartest and most experienced investment bankers to offer ambitious corporate CEOs sagacious insight on how to deals, and nothing more No loans No underwriting of debt or equity (or barely any) No published research No questionable off-balance-sheet financing "vehicles." Only Great Men offering advice to the world's business leaders There was a good deal of myth to this legend, of course, since as with any large group of people, the 80-20 rule applied to Lazard as well with Felix among the 20 percent of the partners who produced 80 percent of the revenues But unlike his mentor, the tyrannical and legendary Andre Meyer, Felix found offering advice to clients exhilarating and he was bored by management responsibilities He often described Lazard as simply "a group of important people, giving important people advice." Felix was proud to be solely an adviser whose wisdom was sought out internationally for cogent, insightful advice on mergers and acquisitions: nothing more, nothing less and not a trace of apology for not being the top underwriter of junk bonds (a product he railed against) or equity offerings No frustration with not being a privateequity investor The Big Boys, a 1986 book by Ralph Nader and William Taylor, referred to Felix as "the interstitial man," someone who gets in the middle of things Raymond Troubh, a former Lazard partner, was one of many people quoted by Nader and Taylor about Felix "Felix is enveloping the world," Troubh confided "He is sort of the Henry Kissinger of the financial arena He is stepping into politics as Kissinger is stepping into finance But I don't think his [public role]was a calculated decision He never said, 'I'm going to be prominent on the public scene.' He wanted to be a great investment banker That brought him into the eyes of the kingmakers in different arenas, in New York and Washington, and from then on his ability pushed him I equate him with Kissinger, who I think is an outstanding example of a combination of brilliance, power and will to win I put Felix in the same basket, exactly the same basket." In his own interviews with Nader, Felix deflected the Kissinger comparison in a way that betrayed his hidden insecurities "Oh, because we are foreign born," Felix allowed "Because we are negotiators Also, we are friends But Henry has wielded levers of power that I haven't come close to." In his response to Nader, Felix conveniently overlooked one important trait he shared and shares with Kissinger: an insatiable desire to control all that is written about him Accordingly, Nader also dubbed Felix "the Teflon investment banker" for his ability to generate impressive amounts of fawning publicity that ignored some of his more questionable judgments For years, Felix preferred to think of himself more in the mold of his hero, Jean Monnet, today a relatively obscure French economist, but essential to the creation of the European Common Market Monnet never held a post in any French government "But he accomplished a great deal," Felix told William Serrin of the New York Times in 1981 "I don't flatter myself into thinking I'm Jean Monnet Two points were communicated: AE, February 22, 2001 "Another bizarre affair": Ibid "The idea was that Lazard could use": Interview with FGR, January 3, 2005 "So Felix is back": Lazard chat room on Vault.com, April 26, 2001 "Isn't Felix in his early 70s?": Ibid., April 27, 2001 "Even with his return": Ibid., April 27, 2001 "I think bringing Felix back": Ibid., April 27, 2001 "Seems like Felix is": Ibid., May 10,2001 "Felix is truly the best": Richard Emerson on Vault.com, June 21, 2001 "We see the writing on the wall": Lazard chat room on Vault.com, March 15, 2001 "Due to the fact that MDW": Ibid., March 16, 2001 "In the next two weeks": Ibid., March 17, 2001 "There are rumors of layoffs": Ibid., March 19, 2001 "First of all": Ibid., March 20, 2001 "Lazard's reputation": Ibid., March 31, 2001 "Imagine being in the middle": Ibid., March 31, 2001 "I got a call from Bill Loomis": Ibid., April 2, 2001 "It is shit": Ibid., April 1, 2001 "Everyone at the firm knows it": Ibid "First, you had this level of expectations": Interview with a Lazard partner "By March, he was saying": Interview with a Lazard partner Project S: AE; and interviews with Lazard partners "The day we go public one way or another": AE, around February 22, 2001 (undated entry) "Who owns Lazard": AE, March 18,2001 "shabbily dealt with": Ibid "If Loomis goes ahead": Ibid "cope with the 'rumours'": AE, April 24, 2001 "it had been a rotten day": Ibid "on a friendly basis": Ibid "honorably consider alternatives": Ibid "The difficulty I had with David": Interview with MDW, January 31, 2005 "My first loyalty is to Michel David-Weill": Interview with David Verey, May 31, 2005 "very touched by that": Interview with MDW, November 30, 2005 "Your essential qualities": Bruno Roger to Adrian Evans, May 11, 2001 "He lost control of the situation completely": Interview with a Lazard partner "We need to have more vibrant incentives": WL speech, May 25, 2001 "A house divided against itself": E-mail correspondence between WL and Adrian Evans, June 26, 2001 Michel had three messages for him: E-mail correspondence between WL and Adrian Evans, July 6, 2001 "With that, I went to bed": Ibid "if others wish to put themselves": Ibid "Perhaps it was an illusion": AE, July 12, 2001 "both publicly and privately": Ibid "we have to work together": Ibid "EAT BEFORE READING": Adrian Evans e-mail, July 20, 2001 "This will be colorful, if 'disturbing'": Ibid "$70 million is unlikely to be": Lazard partner e-mail, July 21, 2001 "lecture on Paris' feeling of isolation": Evans e-mail, July 21, 2001 "When you say to partners": Interview with Bruno Roger "To imagine Michel becoming involved": Evans e-mail, July 21, 2001 "We need to be honest in our assessment": WL to MDW, July 23, 2001 "And that was the only future": Interview with a Lazard partner "I would say that I started": Interview with a Lazard partner "ridiculous to float or sell now": Interview with a Lazard partner "We might prefer restructuring": Ibid "So nothing will happen": Ibid "You suggest that we 'fire' Tom": WL e-mail to MDW, July 31, 2001 "angry, quarrelsome" one: AE, August 2, 2001 "The guy was the manager": Interview with MDW, December 1, 2004 "I think he was losing confidence": Ibid Summer 2001 efforts to hire Bruce Wasserstein: Interviews with MDW, FGR, WL, and a spokesman for BW "unproductive and highly dangerous": AE, August 29, 2001 "we speak with them all the time": Ibid Two meetings in Biarritz: Interview with MDW, November 30, 2005 "they are dying to something": AE, August 29, 2001 "Personally, I am not against it": Ibid "were all the same": Ibid "You would be bribed to stay": Ibid "I would not work hard": Ibid "There was my knowledge": Interview with MDW, December 1, 2004 "I mean, even though they went to talk": Interview with a Lazard partner "Felix would've done it": Ibid "It's unclear how far the Lehman discussions got": Interview with Ken Wilson, January 18, 2005 "with pleasure": Interview with MDW, November 30, 2005 discussions between the two firms: Interviews with Lazard bankers; and WSJ, November 7, 2001 two-paragraph agreement: Interviews with MDW and WL "Because I am an eternal optimist": Interview with MDW, September 15,2004 "I spent the rest of the day": Vernon Jordan sermon to the First Congregational Church in Atlanta, September 23, 2001 "The curious thing with me": Interview with MDW, September 15, 2004 "I was not totally against a deal with Lehman": Interview with MDW, November 30, 2005 "Look, you know I never participated": Ibid "There are five of us stuck here" and story of partners flying back to the United States in MDW's jet; Interview with a Lazard partner "I have long been concerned and articulate": WL e-mail to Adrian Evans, September 23, 2001 "joking" and "happy": Interview with a Lazard partner "Very interesting, very odd, very puzzling": Interview with a Lazard partner "Fundamentally, if you shut down Capital Markets": AE, October 16, 2001 "menacing monotone" and "To be perfectly frank": Ibid "Every time we have this discussion": Ibid he fired Tashjian: Interviews with Lazard partners "Gratuitous violence": Interview with a Lazard partner "a watershed event": Interview with MDW, December 1, 2004 "In a partnership": Ibid "I reached the conclusion": Interview with WL, June 30, 2005 "At that point I knew": Interview with Ken Jacobs, October 27, 2004 "So here I am in a situation": Interview with WL, June 30, 2005; and WL e-mail to Scott Hoffman, October 21,2001 "His advice was to hold on": Interview with WL, June 30, 2005 "Maybe you were once a banker": Ibid "This was an impossible situation": Ibid "I thought about it on Sunday": Ibid "Otherwise, I just get tarred": Ibid.; and WL e-mail, October 20, 2001 "goes far enough in NYC": Marcus Agius e-mail to WL, October 22, 2001 "I must also tell you": Interview with WL, June 30, 2005 "You are a great partner": WL e-mail to Adrian Evans, October 23, 2001 "work with clients and focus": Lazard press release, October 24, 2001; and WSJ, October 25, 2001 "If Michel had to offer them the olive branch": Daily Deal, October 24,2001 "He was so much in David-Weill's shadow": Euromoney, November 2001 "People don't have a long time": Interview with MDW, December 1, 2004 "was a catastrophe": Interview with a Lazard partner "Turning back the clock": Interview with MDW, September 15, 2004 "never been able to keep": Bloomberg, October 24, 2001 "the high-profile departures": "Men Overboard," Economist, November 3,2001 "A change is required": AE, November 8, 2001 "basically whatever we want": Ibid "He argued that he increases": Ibid "Is this better or worse": Ibid "The deal is on": Ibid "Well, I've got to say": Interview with MDW, November 30, 2005 sold his eponymous firm: Numerous press reports "That's utter baloney": Vicky Ward, "Lazard's Clash of the Titans," Vanity Fair, April 2005 "It's classic Bruce": Interview with a former Wasserstein Perella partner "he should be free to leave": WSJ, November 15, 2001 "old news": Interview with a Lazard partner "unfinished business": Interview with SR, September 14, 2001 "Before Bruce ever got into a discussion": Interview with a Lazard partner "Who would take this job?": BusinessWeek, November 12, 2001 WL call to Fuld: Interview with WL; and WL letter to Fuld, November 8,2001 "Dear Lenny": WSJ, November 15,2001 "After 25 years of stewardship": MDW memorandum/press release, November 15, 2001 "I am delighted to join Lazard:" Ibid "To take a firm with potential": BW on The Charlie Rose Show, January 4,2006 "great firm," "intergenerational transition," "Classic small business problem": Ibid "It was obviously a deal": Interview with a Lazard partner "One of the most interesting things": Bruce Wasserstein, Big Deal (New York: Warner Books, 1998), and Harvard Business School Bulletin, October 1996 "Well, I had two thoughts, not reactions": Interview with MDW, November 30, 2005 nothing short of suicidal: Interviews with Francois Voss (January 31, 2005) and other Lazard partners "I knew the accounts of the Wasserstein firm": Interview with MDW, January 12, 2005 "It is very difficult to manage a private firm": Interview with MDW, September 15, 2004 "Both are considered brilliant bankers": WSJ, November 16, 2001 joint telephone interview: Ibid "People should worry about customers": Financial Times, November 16,2001 "There is no sharing": BusinessWeek, November 16, 2001 reaction within Lazard: Various press reports "inherited a ship with a mutinous crew": NYT, January 4, 2002 "off on the same duck shoot": Economist, December 5, 2002 "Clearly Michel knew what he had to do": Interview with a Lazard partner Chapter 19 Bid-'Em-Up Bruce "Bruce is very creative": People, June 25, 1990 "His PR machine was working": Interview with Lynne Killin, March 2, 2006 "female pioneer in corporate America": New York, November 18, 2002 "little like Penn and Teller": Phoebe Hoban, "The Family Wasserstein," New York, January 4, 1993 "Morris was an extremely gentle": Interview with a Wasserstein family friend "They were in the ribbon business": Interview with Ivan Cohen, January 23,2006 "We should all be as happy": Ibid Information about Abner Wasserstein: ARC of Monroe County Web site and other press reports "Bruce was a genius": New York, November 18, 2002; and Vicky Ward, "Lazard's Clash of the Titans," Vanity Fair, April 2005 "One day, this is going to be mine": "Dressing Up Lazard," Bloomberg Magazine, February 2003 "Sweetie, he's a play unto himself!": Pamela Wasserstein at Wendy Wasserstein's memorial service, March 13, 2006 "It had a major effect on him": Paul Cowan, "The Merger Maestro," Esquire, May 1984 "He was always the sort of kid": Ibid "When I was a kid": L J Davis, "Wall Street's Wonder Boys," NYT Magazine, January 28, 1990 The headlines and "The funny thing about the whole situation": Bruce Wasserstein, "Never Trust a Naked Editor," Publick Occurrences, Michigan Daily, January 19, 1967 "He had a tremendous intellect": Interview with Harvey Wasserman, December 22, 2005 "First you pick a department": Bruce Wasserstein, "Raw Power Beats System Every Time," Michigan Daily, April 8,1966 "Let's put it this way": Interview with Killin, March 2, 2006 "Commuting by bicycle between the two schools": Harvard Business School Bulletin, October 1996 a collection of thirteen essays: Bruce Wasserstein and Mark J Green, eds., With Justice for Some (Boston: Beacon Press, 1970) "He damned well better have": Interview with Killin, March 2, 2006 "He always had a lot of fish to fry": Interview with Ralph Nader, June 27, 2005 "I remember him saying": Interview with Killin, March 2, 2006 collaborated on another book: Mark J Green with Beverly C Moore Jr and Bruce Wasserstein, The Closed Enterprise System (New York: Grossman, 1972) his thirty-four-page: Bruce Wasserstein, "British Merger Policy from an American Perspective," Yale Law Journal 82, no (1973) "almighty lucre": Interview with Nader, June 27, 2005 Bruce keeps a framed copy: Interview with a friend of BW "First of all": Interview with Killin, March 2, 2006 "So she was making fun of my rocks": Ibid "We were doing taxes": Ibid "I remember reading about all the fees": Institutional Investor, June 1987 "I don't think I was at the meeting": Ibid "When the M&A effort at First Boston": Wasserstein, Big Deal 549 "The structure of the deal was so complex": Davis, "Wall Street's Wonder Boys." written the blueprint: Bruce Wasserstein, Corporate Finance Law: A Guide for the Executive (New York: McGraw-Hill, 1978) "The deal business is unfortunately replete": Ibid., p "He has great ambition and great confidence": Interview with a friend of BW The Bruce brand got a boost: Robert Metz, NYT, May 2, 1980 "heavy-set and blond": NYT, April 21, 1981 "Wasserstein is best at figuring out": Tim Metz, WSJ, April 21, 1982 "Simon and Garfunkel": L J Davis, "Slightly Tarnished," New York Times Magazine , January 28, 1990 "I spotted this tall": Interview with Clarence Fanto, February 4, 2006 "Overweight and chronically rumpled": Cowan, "Merger Maestro." "Of course that is a good thing": Ibid "What I'd like to think of as the hallmark": Institutional Investor, June 1987 "transform Wall Street": WSJ, November 6, 1986 "There was a swirl of controversy": Institutional Investor, June 1987 "These collapses will be long": Carol Loomis, "The Biggest Looniest Deal Ever," Fortune, June 18, 1990 "Blood is everywhere": Forbes, February 5, 1990 "He didn't see that": Ward, "Lazard's Clash of the Titans." "Bruce had incredible leverage": Fortune, March 14, 1988 "I thought Wasserstein was out of line": Ibid "If you shoot him": Ward, "Lazard's Clash of the Titans." "It was smoke": Fortune, March 14,1988 "lowered both his eyes": Michael Lewis, Liar's Poker (New York: W W Norton, 1989), p 226n "The memo came in": Interview with Mike Biondi, December 2, 2005 "I was really pissed": Ibid "Wasserstein was embarrassed": Fortune, March 14, 1988 "Chuck's obviously reading from a script": Interview with Biondi, December 2, 2005 "They can make a few phone calls": Los Angeles Times, February 3, 1988 "I'm in Boston": Interview with Dan Okrent, January 7, 2006 "I didn't give a shit": Ward, "Lazard's Clash of the Titans." "For 18 months we were golden": Ibid "fraud upon the board": Newsweek, July 10, 1989; and Forbes, August 7,1989 "Macmillan shareholders received a spectacular price": Newsweek, July 10,1989 "What advantage would Wasserstein": "Bid-'Em-Up Bruce," Forbes, August 7, 1989 "right up there with the best": Newsweek, July 10, 1989 "It was the first time I'd ever really": Interview with Fred Seegal, April 18,2005 "All at one time": "Bid-'Em-Up Bruce." "carefully cultivated image": Ibid "Mr Wasserstein has found himself": WSJ, December 11, 1989 "was the principal architect": Ibid "I don't think the company is worth": WSJ, July 11, 1990 "The minute we came back from lunch" and the story of Edwin Bohl: Donald Barlett and James Steele, America: What Went Wrong? (New York: Andrews and McMeel, 1992), p 29 "I'd like to thank all of you": WSJ, January 11, 1990 "The idea was to get the deal done": WSJ, February 11, 1991 "Wasserstein knowingly failed to stop": Forbes, February 5, 1990 "It was like playing three-dimensional chess": NYT, April 2, 1988 "The financing was not done on a timely basis": BusinessWeek, October 2,1989 "Campeau is said to have raged": Davis, "Wall Street's Wonder Boys." "People invent a simple, convenient fiction": Ibid "What he was always best at": Joe Nocera, "Barbarian's End," GQ, May 1991 fifty-five-hundred-word excerpt: Bryan Burrough and John Helyar, "Inside History's Biggest Takeover," WSJ, January 4, 1990 "Consequently, they know": Bruce Wasserstein, letter to the editor, WSJ, January 11, 1990 "show of fighting back": Interview with Bryan Burrough "Kravis had to know the damage": Nocera, "Barbarian's End." "Requests for interviews get shunted": Christopher Byron, New York, February 5, 1990 "in a slump": M, Inc., September 1990 "second opinion on price and structure": WSJ, November 27, 1990 "didn't want to disturb Ovitz": Ibid "All in all, the incident made": Nocera, "Barbarian's End." "Nietzsche's whole posit": Interview with a friend of BW "He was very decisive": Interview with a friend of BW "is just another acquisition for Bruce": Interview with a friend of BW "He did this against the advice": Ward, "Lazard's Clash of the Titans." "History has shown": Interview with a friend of BW "Bruce on the investment side": Ward, "Lazard's Clash of the Titans." "All of a sudden, I read": Davis, "Wall Street's Wonder Boys." "If you think I'm bitter": Interview with a former partner of BW "brutal": Ward, "Lazard's Clash of the Titans." "Claude is very charming, and very funny": Ibid Chapter 20 Civil War "I don't care about it": Sunday Telegraph, November 18, 2001 "He's so pompous": Interview with Jon Wood, February 1, 2005 "The politics are over at Lazard": Numerous press reports, including WSJ, November 13, 2002 "Anyone who says that": Sunday Telegraph, November 18, 2001 "What's that French song?": Ibid "He introduces himself": Interview with a Lazard partner "It was deflating": Interview with Ken Jacobs, October 31, 2005 "It was a big deal": Ibid "That was the collapse": Ibid After Loomis calmed Tashjian down: Interview with WL, MDW, and other Lazard partners "The problem with Lazard": Landon Thomas Jr., "Will Lazard Make It?" New York Observer, December 10, 2001 "publicly humiliated": AE, undated notes around December 2001 "is a disaster": Ibid "Okay, now I'm the boss": Interview with a Lazard partner "He had no choice": Interview with a Lazard partner complained about the "hold" music: Interview with a Lazard partner new management team: Lazard press release, January 3, 2002 "according to Lazard calculations": NYT, January 4, 2002 "new fandangos": WSJ, January 3,2002 "BW will take over from MDW": Summary of "Lazard LLC Third Amended and Restated Operating Agreement." "Heads of House": Ibid "you will lose all the A-2 goodwill": Scott Hoffman to recipients of the third amended agreements, January 10, 2002 "In thinking about the end game": Memo circulating among Lazard partners six bankers from DKW: Numerous press reports, including WSJ, January 10,2002 "With super rich contracts": Lazard chat room on Vault.com, February 17,2002 Details of Weinstock, Herenstein, and Santana's departure: Lazard Debt Recovery GP et al., plaintiffs, vs Michael A Weinstock and Andrew J Herenstein, defendants (CA no 19503), as filed and adjudicated in the Court of Chancery in the state of Delaware, and Weinstock and Herenstein, plaintiffs, vs Lazard Debt Recovery GP et al., defendants (CA No 20048), also in the Court of Chancery "I've never sued anybody": Interview with MDW, December 1, 2004 "And then within minutes": Ibid "People are cheap at the moment": Financial Times, December 6, 2002 "No more politics": WSJ, November 13, 2002, and numerous press reports "I'm gone": Interviews with Lazard partners "Historically, people had talked about the business": "Dressing Up Lazard," Bloomberg Magazine, February 2003 "He's the only guy": Interview with Al Garner "After this, no corporate financier": Financial News, July 21, 2002 "Recent layoffs of MDs were necessary": Lazard chat room on Vault.com, July 27, 2002 "Morale is pretty low": Ibid., August 3, 2002 "some of the plushest used by any investment bank": Daily Telegraph, May 3, 2004 malfunctioning telephone system: Financial News, July 6, 2003 "Instead of a dimly lit waiting room": "Dressing Up Lazard." "Michel was torn about that": Interview with a Lazard partner "Bruce was on a spending spree": Interview with a Lazard partner "Liquidity doesn't last forever": Interview with a Lazard partner Details of Intesa's 2002 investment in Lazard and its unwinding in 2006: Numerous press reports, including WSJ, September 10, 2002, and Lazard public filings "We have a spiritual ethos": Financial Times, December 6, 2002 "When you look across Wall Street": Ibid "Some people see talented people as difficult": WSJ, November 13, 2002 "reinvested extensively in our future": Mike Castellano memorandum, January 30, 2003 "good year" in 2002 "in a difficult environment": Ibid "memorandum capital deferred compensation": Ibid "Bullshit capital": Interview with a Lazard partner "Michel wasn't going to watch": Interview with a Lazard partner Communist revolution in the right ventricle: Interview with David Verey, November 10, 2005 Details of Lazard's controversial hiring of the Merrill Lynch bankers and the lawsuit that followed: Supreme Court, State of New York, New York County, Merrill Lynch, petitioner, and Lazard Freres & Co et al., respondents (index no 600867/03), February-April 2003 Also Lazard's countersuit (index no 601159/03) Also NASD arbitration no 03-01-01484 "So what? There are lawsuits all the time": Interview with a Lazard partner "I'm very appreciative that Hancock": WSJ, September 30, 1993 "to one last deal": "Dressing Up Lazard." "I wish I had Lazard's asset management franchise": Financial Times, December 6, 2002 Lazard Asset Management IPO idea: Numerous press reports, including Financial Times, February 6, 2003, and December and 5, 2002 "What can I to get you to stay?": Institutional Investor, February 12, 2004 "Norman Eig misread": Financial Times, February 6, 2003 "What happened at LAM": Institutional Investor, February 12, 2004 "Bruce came in and they started to talk": Interview with Ken Wilson, February 3, 2005 "worst business meeting he ever had": Interview with a Lazard partner "sleazoid": Interview with Wilson, February 3, 2005 "it's just generally known": Ibid "It has to be considered brilliant": Daily Deal, December 16, 2003 "What you gain": Newsweek, February 23, 2004 "It basically goes to confidence": Ibid "maddeningly vague": NYT, December 18, 2003 "Certainly, if you look at it": NYT, December 22, 2003 "It's really weird": New York Observer, December 22, 2003 "A lot of them are big ego trips": NYT, December 18, 2003 "At best, the magazine": Ibid "approximately $2.0 billion": Wasserstein & Co Web site "Mr Wasserstein has stated": New York Observer, January 5, 2004, p "I think that Bruce was surprised": NYT, December 18, 2003 "just to be clear, Media Maneuvers": Yvette Kantrow, Media Maneuvers, Daily Deal, January 9, 2004 "everybody, i am happy to announce": E-mail from Adam Moss to staff of New York, July 14, 2005 "There's a view at the big firms": WSJ, November 13, 2002 "after twenty-five years of blowing cigar smoke": Financial Times, February 20, 2004 "The capital partners are concerned": Interview with a Lazard banker "You can understand that the capitalists": Financial News, January 2004 "You'd go to a board meeting": "The Taking of Lazard," BusinessWeek, November 6, 2006 "cordial": Interview with MDW, January 12, 2005 "Bruce has done a decent job": New York Post, February 23, 2004 "If you hire a brash": Matthew Lynn, Bloomberg.com, February 25, 2004 "Mr Wasserstein is head of Lazard": Financial Times, March 8, 2004 "ungentlemanly tussle": Financial Times, March 5, 2004 "hyperkinetic": BusinessWeek, February 24, 2003 "I am gratified by the relationship": MDW in Eurazeo 2003 annual report "If Lazard goes back to delivering": Daily Telegraph, March 9, 2004 "Because we have not highlighted": Mike Castellano memorandum, March 12, 2004 "Lazard management is currently leading": WSJ, April 2, 2004 "window dressing": Interview with MDW, November 30, 2005 "we have been told that this year": Financial Times, April 3, 2004 "all votes on issues": Ibid "There were differences over the timing": Press reports, including Dow Jones newswires, of the Eurazeo meeting, May 5, 2004 "According to the financial statements": MDW memorandum, May 11,2004 "With regard to the notice": BW memorandum, May 14, 2004 "This is Michel's greatest nightmare": Interview with a Lazard partner "muscle memory": Ibid "Mr Wasserstein is more interested": Economist, February 26, 2004 Lazard had started interviewing underwriters: Investment Dealers' Digest, May 24, 2004 "besieged" by bankers: Financial Times, June 16, 2004 "We are listening and evaluating": Financial Times, June 16, 2004 "We expect significantly": Ibid "If he doesn't come up with a plan": Ibid "An IPO could solve one of": WSJ, June 17, 2004 "Even if Lazard does one day plump": Financial Times, June 16, 2004 "put aside" their "long-standing differences": Le Monde, June 25, 2004 "the two men agreed": Ibid "He yearns to be an industrialist": Financial Times, October 9, 2004 Steve Golub's role as intermediary: Interviews with Ken Jacobs (December 6,2005) and Steve Golub (October 31 and December 2, 2005) "When we first started out": Interview with Golub, October 31, 2005 "Not good": Jeffrey Sonnenfeld, WSJ, July 14, 2004 "No firm decision has been made": WSJ, August 20, 2004 buy the combined 36 percent: Emily Thornton, "The End Game at Lazard," BusinessWeek, August 26, 2004 "David-Weill is one of the wiliest": Bloomberg News, August 27, 2004 "crazy": Interview with a Lazard partner "It's a mess": Ibid "We don't want to go from having a king": Financial Times, October 4, 2004 "Rumpled, ruthless, Bid 'Em Up Bruce": New York Observer, September 20, 2004 Bruce gave a presentation: Press reports (see WSJ, September 27, 2004) and interviews with Lazard partners "The public is going to be along": WSJ, September 27, 2004 "There are several issues": New York Observer, September 20, 2004 "People fearful for their jobs": Interview with a Lazard partner "We are not going to sign under duress": Financial Times, October 3, 2004 "I would completely agree with that": Sunday Telegraph, October 10, 2004 "We're paying Michel out at a premium": WSJ, October 4, 2004 "He was shocked and not very excited": Interview with a Lazard partner "serene ambience": Financial Times, October 6, 2004 "floating a company like Lazard": Ibid "I remember being surprised": Interview with MDW, January 31, 2005 "They are all at a canonical age": Le Nouvel Observateur, October 14, 2004 "Now he has to consult": WSJ, October 6, 2004 "Many of us are already rich": October 6, 2004 "For Bruce it's a great deal": Interview with a Lazard partner "Bruce seems very sure of himself": Financial Times, October 9, 2004 "the firm is in a complete state of disarray": NYT, October 5, 2004 "putting lipstick on a pig": NYT, October 3, 2004 "We have informed the capitalists": BW to Lazard partners, October 5, 2004 "I'm wedded to history": Business-Week, November 6, 2006 "It is less a charm offensive": Sunday Telegraph, October 10, 2004 "He draws energy": Financial Times, October 9, 2004 "When you hire an investment bank": Financial Times, October 7, 2004 "As far as I'm concerned": Sunday Times, October 17, 2004 "The people who are suffering": WSJ, October 13, 2004 "After having consulted with my partners": MDW e-mail to BW, October 22, 2004 "If I just say no": Interview with MDW, January 12, 2005 "Michel tried to find a successor": Interview with Jean-Claude Haas, February 1, 2005 "strong belief in the future of Lazard": MDW e-mail to BW, October 21, 2004 "satisfied that enough of the partners": Financial Times, October 21, 2004 "I was very pleased to learn of your decision": BW e-mail to MDW, October 21, 2004 Chapter 21 "The End of a Dynasty" "Everyone then knew this was a stress sell": Interview with a Lazard banker "Frenchman who was prepared": Vicky Ward, "Lazard's Clash of the Titans," Vanity Fair, April 2005 "Absolutely But Wasserstein had the money": Interview with Jean-Claude Haas, February 1, 2005 "The conditions are not seen as that important": Times (London), October 22,2004 "just trying to what is best for the firm": Financial Times, October 23, 2004 "blessed with the psychological trait": WSJ, December 7, 2004 "We have to be as unselfish": Ibid "an extra steel beam and a cement support": Ibid "better, more intimate relationship": Interview with MDW, November 15,2006 "very good about the letters I wrote in May": Ibid "I feel good about my letters, too": Ibid "the history of ambiguity": Ibid "There are clearly two different points of view": Ward, "Lazard's Clash of the Titans." "an act of faith": Interview with Jean-Claude Haas, February 1, 2005 Lazard's financial performance: S-1 document, December 17, 2004 "So we're at the beginning of a resurgence": BW lecture at Yale University School of Management, September 29, 2005 "His timing as always is exquisite": Bloomberg, December 17, 2004 "I'll be stunned": Interview with Damon Mezzacappa "First of all, I think Bruce": Interview with FGR, January 3, 2005 "I was wrong": Interview with FGR, October 17, 2006 "I'm very uncertain it will occur": Interview with MDW, January 12, 2005 "The tax part was only": Financial Times, December 20, 2004 managing directors to sign so-called retention agreements: Lazard Ltd S-1 "I'd sure hate to be": Lazard chat room on Vault.com, December 24, 2004 "following the hiring of new senior management": Lazard Ltd S-1 "These provisions [in the buyout agreement] are inappropriate": Correspondence between various Lazard partners, January 14, 2005 "They believe in a strong attack": Ibid "Which is just not right": Interview with a Lazard partner "He was found at his Geneva home": Swiss press reports, March 2, 2005 "I called my daughter Beatrice": Interview with MDW, April 12, 2005 "He was rich, he got on people's nerves": Le Figaro, March 2, 2005 "He was not only ruthless": Evening Standard (London), June 10, 2005 "He was a discreet man": Tribune de Geneve, March 3, 2005 "I was thinking, maybe he slipped and fell": Bryan Burrough, "The Man in the Latex Suit," Vanity Fair, July 2005 "Good, Mr Stern is home": Tribune de Geneve, March 3, 2005 "I went to the door": Burrough, "Man in the Latex Suit." "He was aware of men watching": Mail on Sunday, April 24, 2005 "And she's some kind of artist": Burrough, "Man in the Latex Suit." "Edouard and Beatrice no longer sleep": Interview with MDW, January 12,2005 "He gave them both affection and energy": Interview with MDW, April 12,2005 "It is very sad": Conversation with Annik Percival, May 31, 2005 "Edouard was very upset": Burrough, "Man in the Latex Suit." They had also discussed: Tribune de Geneve, October 18, 2006 "I'm never going to see her again": Burrough, "Man in the Latex Suit." "Only two people know what happened": Ibid "I don't think you negotiate": Ibid "He presses a button": Paris Match, March 24, 2005 "A million dollars is expensive": L'Express, May 9, 2005 "Some people are always Machiavellian": Interview with MDW, April 12,2005 "but as my father used to say": Ibid "She is a desperate woman": Press reports Eurazeo sold its IRR stake: Press reports and Eurazeo's 2005 annual report price range for the equity: Amended S-1, April 11, 2005 "hedge funds": Interview with Steve Golub, December 2, 2005 "the firm lost money in each of the last three years": Amended S-1 "I am flabbergasted, I have to say": Interview with a Lazard partner "There is a clear pattern of greed": Interview with Ken Wilson, April 11,2005 "All this raises the question:" Economist, April 14, 2005 "Add it all up": BusinessWeek, April 25, 2005 "one of the most complicated things": Ibid "Bruce Wasserstein joined Lazard three years ago": Thomas Tuft, Lazard IPO road show, New York Palace, April 27, 2005 "The threshold issue when you're thinking about Lazard": BW, ibid "Lazard is a very special place": Ibid "The more complicated the structure": Reuters, April 29, 2005 "How awful is this Lazard IPO deal?": Jim Cramer, "Lazard IPO No More Than a Buy-Off," RealMoney.com, May 2, 2005 "It was a complicated deal": Interview with Wilson, May 17, 2005 "Given the change in the debt market": Financial News, May 5, 2005 "Goldman priced right through the static": Interview with Ken Jacobs, December 6, 2005 "Bruce had all the cards": NYT, May 5, 2005 "I was associated with Lazard for 45 years": MDW press statement, May 4,2005 dinner at Per Se: Interview with Tom Tuft, February 6, 2006 Lazard IPO first-day trading: From NYSE.com "When you see it trading near the offer price": Bloomberg, May 5, 2005 "It's too high-profile of a deal": Ibid "belly flop": Red Herring research report, May 6, 2005 "However, a deal that is so transparently": William Wright in Financial News, May 9, 2005 "There are numerous negatives": "King's Ransom for Lazard," Barron's, May 9, 2005 "Goldman obviously went way out on a limb": Bloomberg, May 25, 2005 "left us with a little bit of a black eye": Interview with Wilson "Bruce got his $25": Luis Rinaldini, Bloomberg, May 23, 2005 "doctor who botched a brain surgery": Andrew Ross Sorkin, NYT, May 29,2005 "I was just very gratified": Interview with Tom Tuft, February 6, 2006 "The trading decisions were made": Ibid Lazard involvement in Fidelity probe: Numerous press reports, including NYT, May 5, 2005, and Lazard Ltd public filings Details of institutional ownership of Lazard shares: Lazard Ltd reports as filed with the SEC "would give him almost unlimited power": Financial Times, June 3, 2005 "Gerardo is a really talented guy": "The Taking of Lazard," BusinessWeek, November 6, 2006 "The loss of Mr Braggiotti": Ibid "I presented my resignation": Bloomberg, June 8, 2005 "This firm is held together with Scotch tape": Crain's New York Business, June 13, 2005 "material adverse effect" to "Lazard has reiterated": Lazard Ltd press release, June 14, 2005 "He was the dealmaker at Mediobanca": Press reports "This would effectively be rebuilding the links": Bloomberg, November 8,2005 "He's putting together a powerful machine": Ibid "Look, I'm sure they're not happy": Interview with MDW, November 30,2005 "For me, the IPO fits into": Le Figaro, June 30, 2005 "The real challenge that they face": Brad Hintz, research report, Sanford C Bernstein, August 2005 bought 119,500 additional Lazard shares: BW, Lazard Ltd., Form filing, August 29, 2005 "a certain phase in the history": e-mail correspondence with Marianne Gerschel, June 27, 2005 "I will be leaving Lazard effective tomorrow": Bernard Sainte-Marie e-mail to Lazard employees, August 31, 2005, and from press reports "It's obscene what's going on here": Conversation with Annik Percival, January 14, 2005 Afterword "It is now clear that we are effectively": BW statement on Lazard Ltd earnings call, November 9, 2005 total compensation from Lazard of $14.2 million: Lazard Ltd 2005 proxy statement as filed with the SEC Lazard priced a $638 million: Lazard Ltd public filing with the SEC, December 6, 2006 Bruce refused in late 2005 to publish: Interviews with MDW, Guy Rougemont, Ken Jacobs, and Scott Hoffman "It hurt me a little": Interview with MDW, November 30, 2005 said to have paid around $4 million and, for another $4 million: Interview with a friend of BW Camp Seahorse: Interview with a friend of BW Gulfstream jet: Lazard Ltd public filings "His belief in his own ability": Interview with a friend of BW Felix and his wife: Interview with FGR, October 17, 2006 "He's fine": Financial Times, August 3, 2006 "He just wants to be in the center of the action": Ken Auletta, "The Raid," NY, March 20, 2006, p 140 "He leads his whole life": Interview with a friend of BW "The Lazard Report": February 1, 2006, released publicly February 7, 2006 "TWX is at the center of the storm": Ibid., p "Time has not been friendly to Time Warner": BW speech at St Regis Hotel, February 7, 2006 "There are no compelling reasons today": Ibid "If Dick Parsons indeed has the secret super-spicy sauce": Ibid "What you think of the new Lazard?": Conversation with Ken Jacobs, February 7, 2006 "landed with the deafening thud": David Carr, NYT, February 13, 2006 "We were disappointed": Doug Mitchelson, Deutsche Bank analyst, in Financial Times, February 9, 2006 "Taxes fully understood": Auletta, "Raid," p 143 "what may turn out to be the biggest proxy fight": Bloomberg, February 16,2006 Ten days later, it was all over: various press reports "No one who really has been around": Cox News Service, "Conversation with Dick Parsons," May 19, 2006 "For reasons that remain inexplicable": Andrew Ross Sorkin, "The Adviser Who Became the Activist," NYT, February 26, 2006 "the trustee for the future of Lazard": Andrew Ross Sorkin, NYT, January 15, 2006 "Had he won": Sorkin, "Adviser Who Became the Activist." PUBLISHED BY DOUBLEDAY Copyright (c) 2007 by William D Cohan All Rights Reserved Published in the United States by Doubleday, an imprint of The Doubleday Broadway Publishing Group, a division of Random House, Inc., New York www.doubleday.com DOUBLEDAY and the portrayal of an anchor with a dolphin are registered trademarks of Random House, Inc Title page photograph courtesy of Inmagine Library of Congress Cataloging-in-Publication Data Cohan, William D The last tycoons : the secret history of Lazard Freres & Co / William D Cohan. 1st ed p cm Lazard Freres & Co. History Banks and banking New York (State) New York History Bankers New York (State) New York Biography Banks and banking France History Bankers France Biography I Title HG2613.N54L39 2007 332.660944 dc22 2006025303 eISBN: 978-0-385-52177-2 v1.0 ... Altschul confided a twinge of regret that the house of Morgan, instead of the house of Lazard, seemed to be garnering the lion's share of the accolades for the success of the rescue plan "Of course... that the David-Weills used the occasion of the deaths of Andre and Michel Lazard to consolidate their control over the firm On the other hand, in the late spring and summer of 1931, as a result of. .. April meeting of the Bank of England's Committee of Treasury when Archie Norman excused three members of the committee from the meeting and "then gave to the other Members of the Committee information,