The last tycoons: the secret history of Lazard Frères & Co (2 page)

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 do 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 private-equity 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. But I believe that ideas in themselves have great power, if you have a platform that has legitimacy."

Felix made the Monnet comparison often during the 1980s, the basic message being that one does not need to hold a powerful public office to introduce powerful ideas into the public debate. In 1982 he gave the commencement address at Middlebury College, his alma mater, and made Monnet the subject of his speech. "Monnet played the roles of negotiator, agitator, propagandist, tactician and strategist, which are needed to effect fundamental political change in a democratic society," he told the graduates. Four years later, Nader asked Felix whether his 1982 description of Monnet was equally applicable to himself. "Sure, absolutely," Felix replied. "It is the only role I can play. It is the only role a private citizen can play as long as you have some sort of platform. That's why Monnet was always my role model. He was never a member of government. He never held a cabinet position. He never ran for office."

Such an extraordinary comparison of an investment banker to a man of great political and economic accomplishment is simply not conceivable today (with the possible, ironic exception of Bob Rubin). Felix alone compares favorably. The aftereffects of the collapsing stock market bubble and the plethora of corporate scandals have left many observers believing that bankers are self-interested and greedy rather than purveyors of independent advice. "Investment bankers, as a class, are the Ernest Hemingways of bullshit," explained one well-known private-equity investor. Felix had few peers in the days when offering CEOs strategic wisdom was the metier of a select handful; he has none now that it is the medium of the many.

BUT THOSE WHO
knew Felix best would recognize, for all the sincerity in his voice, the irony of the moment on the eve of his confirmation as the ambassador to France. Seated before the senators was indeed a remarkable man, whose life had resulted from the alchemy of mid-twentieth-century European history--complete with a wild dash across Europe, North Africa, and South America to escape the Nazis--and the American Dream. Felix may have come as close as any man--certainly any Jewish man--in the past century to replicating, in his own, less ostentatious way, the extraordinary financial, political, and social influence that J. P. Morgan had wielded in the previous one.

But unlike Morgan, who seemed satisfied with both his incredibly great wealth and the great power attached to it, Felix desperately wanted political influence on the world stage. But he was also an accomplished enough spinmeister to claim not to seek power overtly, either. "I think power is something you can't run after," he told Nader and Taylor. But when it came to politics, Felix would have to content himself with following Thomas Jefferson's footsteps along the Rue du Faubourg Saint-Honore, in Paris, without having a prayer of following his path farther to Washington. His inability to achieve his political ambition is one of the very few failures in his otherwise charmed life. In a way, Felix had succeeded in becoming his hero, Jean Monnet.

To be sure, Felix's investment banking accomplishments are legendary. He alone can claim to have advised corporate executives on transformational deals in each of the last five decades across disparate industries. One could argue, quite rightly, that Felix invented the persona of investment banker as trusted corporate M&A adviser. Although he might find the comparison indelicate because he abhorred junk bonds, in the 1960s Felix divined the business of providing independent M&A advice to corporate chieftains in much the same way as the infamous Michael Milken conjured up the high-yield junk-bond market in the 1980s. In an utterly typical week in January 1969, for instance, Felix had many meetings, including those with Howmet, a French aerospace company where he was on the board of directors, and with Harold Geneen (CEO of ITT), Nicholas Brady (then a banker at Dillon Read and later the U.S. Treasury secretary), and the CEO of National Cash Register. On another day that week, he had meetings with both Herb Allen, the billionaire patriarch of Allen & Co., a media investment bank, and Pete Peterson, the newly appointed secretary of commerce in the Nixon administration and his former client when Peterson was CEO of Bell & Howell. The next day, after two internal meetings, he had meetings with the chairman of General Signal Corporation, the chairman of the Continental Insurance Companies, and ITT executives. Finally, there was again a meeting with the chairman of General Signal and with the CEO of Martin Marietta. His weekly schedule also noted that his son, Nicholas, had his tonsils removed.

Felix's tale is very much the affirmation of a refugee's idealized version of the American Dream. Felix's family is from the town of Rohatyn in the Ukraine, part of a region that has been conquered and reconquered for centuries. Before World War II, Rohatyn was somewhat of a Jewish enclave, especially after 1867, when Jews were granted full rights as citizens of Austria-Hungary. The 1900 census for the town shows a population of 7,201 people, with 3,217 of them Jewish. By 1939, Rohatyn still had 2,233 Jews. Today there are no Jews in the town of ten thousand, although the decrepit remains of a Jewish cemetery are still evident. A number of organizations in New York and Israel are dedicated to preserving the history of the Jewish families of Rohatyn. According to Felix, not only was his great-grandfather "the grand rabbi of the region" but "he was also a reasonably able capitalist, since, according to the stories, he owned some stables and rented them to the Polish cavalry."

At the turn of the twentieth century, his forebears moved to Vienna--probably having taken the name Rohatyn from their town of origin--where his grandfather became a member of the Vienna Stock Exchange and the proprietor of a small bank, Rohatyn & Company. He also owned several breweries. Felix's father, Alexander, worked in the breweries, and over time he managed them for his father. In 1927, Alexander married Edith Knoll, an accomplished pianist "who came from a family of wealthy Viennese merchants." Felix was their only child, born in Vienna on May 29, 1928. Although circumstances prevented him from staying in Vienna long, something of the city's musical gestalt seeped into his bloodstream. He failed to develop any musical skills but appreciates classical music and still listens to it for hours at his Fifth Avenue home, while reading or writing. His favorite composers are Beethoven, Schumann, and Brahms. And the one piece of music he "would take to a desert island, if I could only take one," would be Mozart's Mass in C Minor. "It is the music I sort of take refuge with...no matter what I'm doing and I have some time and I'm home," he said. "I find it touching. I find it remarkable."