The last tycoons: the secret history of Lazard Frères & Co (41 page)

On the morning train from Connecticut, Glanville confided to his old client--now a partner at Lehman--MacGregor that he was thinking of moving to Lazard and that he "trusted small firms," a phrase that became a bit of a mantra for the Lehman crowd at Lazard. "Count me in, Jimmy," MacGregor said. Woods and McFarland joined the others. With word beginning to leak out, though, Glanville needed to move quickly. Michel interrupted his August vacation and took the Concorde back to New York to negotiate with each man individually--Glanville won a 3.75 percent stake; MacGregor 2.5 percent; Woods 2 percent, and McFarland 1.45 percent. The Gang of Four also flew to Switzerland to meet with Andre. "I was very well impressed by their perfect manners," Andre said at the time. On August 8, the four submitted their resignations to Peterson, and the next day he announced the departures in the midst of a strike of New York newspapers. Peterson hoped the news would go unnoticed. But he was also extremely upset at the time about the unprecedented raid. "Peterson was not happy for a minute after we hired those people," Michel said, with some understatement. "But my personal relationship with him has remained quite good." There were rumors of "angry shouting, sealed desks, chauffeurs dismissed, lawyers hired," according to
Fortune.
To which Auletta added: "Door locks were changed, credit cards were canceled."

Michel let it be known he had trekked down to One William Street to tell Peterson what he had done. "With his big cigar, like he was on some sort of French diplomatic mission," Peterson recalled. And according to Auletta, at some point Peterson went to see Michel to warn him that Glanville was "poison." Glanville hired the ubiquitous Simon Rifkind to fight Lehman, after, according to Glanville, Peterson "cancelled the bonus of my secretary and of the other secretaries who were leaving." Other charges were leveled at Glanville as well by his Lehman partners. First, according to
Greed and Glory on Wall Street,
members of the Lehman executive committee accused the Gang of Four of attempting to buy a real estate asset from one of their oil and gas clients, without telling the firm the client had made the offer to them, a charge Glanville vehemently denied. Peterson said he called a meeting of Lehman's top partners to discuss what Glanville had done. He invited the tax partner to show the other partners the papers related to the Glanville deal. "Everybody was pretty appalled," Peterson recalled, and the committee voted unanimously, 8-0, to tell Glanville that he had to leave the firm. The following Tuesday, Michel made his pilgrimage down to One William Street to see Peterson and tell him that the Gang of Four were coming to Lazard. "And I just sat there and kind of smiled," Peterson said. "Obviously Glanville had told [Michel] nothing about this whole situation. But Glanville had undying enmity for the firm and for me and so forth. And that was my last year of contact with Andre and Michel. I virtually never talked to them again."

The second charge against Glanville, equally serious, was that he was anti-Semitic. The short, stocky Glanville was a Texan, born and bred. His father was a history professor at Southern Methodist University. Glanville graduated from Rice with a degree in chemical engineering, and then went to graduate school at the California Institute of Technology. All he wanted to do was work in the oil business, and he started his professional career as a petroleum engineer for what is now Exxon-Mobil. Lehman recruited him to be an oil and gas banker in 1959, and according to Auletta, he became a Lehman partner in 1961
(Fortune
said 1963). In an interview with Auletta, Glanville answered the charges of anti-Semitism: "It is the sort of typecasting you give to someone when you can't figure out what to say about them." Glanville's Lehman partner Lew Glucksman, a Jew and occasional ally of Glanville's, said of him: "People have said Jim Glanville is anti-semitic. That's bullshit! He was a guy with lots of strong opinions on every subject in the world."

Twenty-eight years later, the rift caused by Michel's recruitment of the Gang of Four is still palpable. Actually, the Gang of Four was really the Gang of Six because two Lehman associates--Bill Loomis and, two months later, Dod Fraser--were part of the block trade. (Ultimately, Loomis would have more impact on the future of Lazard than anyone else Michel had recruited that September day.) Sitting in his office at Bessemer Securities in Rockefeller Center, Woods reluctantly confided: "Pete is a friend of mine now, and I have great admiration for him. He wasn't then. It was a very difficult separation, so I'd rather not talk about it. It was very bitter. Let's put it this way. I came back from visiting clients. And I got a call in Tulsa. I was on my way back. I got a call in Tulsa from my secretary, in tears, because she'd been kicked out of the office and it was locked. And then we had a settlement, which I negotiated with Pete, and it was over. But there was a little scratching around. They tried to make it difficult. They were very angry. We had a significant percentage of the clients in the firm, and we were lucky enough that most of them went with us."

For his part, Felix never liked Glanville as a person but respected his effectiveness as a banker. He sided with his friend Pete Peterson on the subject of Glanville's anti-Semitism. "I mean, Glanville was a really difficult, very difficult, very rather sinister person," Felix said. "I mean he was very, very racist, very anti-Semitic." Indeed, Glanville gave his critics all the ammunition they needed about his anti-Semitism in a 1980 letter he wrote to his former Lehman partner George Ball, who had once been an undersecretary of state and was a close friend of Peterson's. (When Ball joined Lehman in 1966, Frank Altschul wrote a letter of "congratulations" to Bobbie Lehman.) Ball had authored a piece in the
Washington Post
critical of Israeli policy. Glanville wrote him: "My view on U.S. relations with Israel completely in line with yours (as they should be, as I learned from you) but I doubt if they receive much sympathy from the members of your Executive Committee. The members of that Committee are overwhelmingly of one ethnic persuasion with the exception of one gentleman who found it necessary to change his name in order to disguise his heritage"--a reference to Pete Peterson, who is Greek. "This is the same Committee that exhibited such glee over the opportunity to delete four Presbyterians from their list of partners." After Glanville's letter became public, many Lehman partners demanded that Peterson initiate a libel suit against him. "Glanville wrote one of the most blatantly anti-Semitic letters I've ever read, about how my partners' first loyalty was to Israel and not to the United States," Peterson said. "And the chairman has hidden his ethnic persuasion, which was ridiculous. Everybody knew I was Greek. So what? And it was just vile. And my partners are now absolutely furious. And they wanted to sue him for libel and so forth. I said, 'Look, in this business of an eye for an eye and a tooth for a tooth, everybody gets disfigured ultimately, and let's just forget it. And I'll call and tell Michel and I'll see if I can get a commitment from him that he totally clamps down on Glanville.'"

Peterson called Michel and asked to see him, but not in his office at Lazard. They agreed to meet at Michel's Fifth Avenue apartment "with his big cigar and so forth." They sat down together to discuss Glanville's letter. "And I recall saying," Peterson said,

"Michel, I have been in this business now for a while. I know it's a very tough business. But I assume there are levels below which we don't stoop. And somehow the questioning of the patriotism of some of the firm's partners strikes me as well below the levels that are appropriate and acceptable behavior." So I said, "I'm going to show you this letter. And then all I ask from you is a commitment that you're going to get Glanville and set him down in your office and tell him he can never, ever again do such a thing." And then he lit up that big cigar. He said, "Well, everybody knows that Glanville's a bigot, but he produces a lot of business." I said, "I thought I was having a discussion with you on another level. I know he produces a lot of business. I know he is one of the biggest producers. But I'm approaching you on a level of civil behavior." And Michel then said, "Well, he has a lot of clients." So I got up and walked out, and I don't think I ever spoke to him again."

For his part, Michel said he has always maintained a cordial relationship with Peterson.

Controversies aside, Michel had sold the Gang of Four on the wonders of Lazard. Woods recalled what he had said to them:

There was a place in the world for people, serious people with global connections who can do things on a more sophisticated, less bureaucratic, individual basis, where there will be three, or four, or five partners who you can trust to go out and represent--or maybe ten partners, if you get really lucky--who can really go out and sign up any company and have the sophistication, the knowledge of the business to actually be able to do what the client has asked you to do, in a way that the client is happy and comes back. It's that simple. Michel said to me, "We don't need money. Swiss Bank Corp. wants to put in $500 million and have Lazard be a global investment bank like Goldman Sachs, or like Morgan Stanley. I don't want to do it. We don't need to do it. We have this wonderful franchise that no one else has, and we'll nurture it. We've got partners in Paris, partners in London. They're there and they are part of Lazard. They do share business. And we've gotta fix New York. But we're going to fix it."

Woods also spoke to Michel about Felix and his role. And Michel told Woods that Felix had offered to cut his percentage so the Lehman partners could join the firm with a proper economic incentive. "And frankly, we talked about Felix," Woods said. "Felix was a wonderful partner. He never was political. He didn't give a shit. He was very pleased to have me do business. He never tried to interfere or anything. He has his guys, and those guys knew where their bread was buttered. But I wasn't one of those guys. And he was great. We had a good time."

But the new partners had to make some adjustments before the good times started. First, One Rockefeller Plaza was no One William Street. Whereas the Lehman bankers were happy to display their immense wealth both in their opulently appointed offices
and
at their homes, Lazard's offices remained shabby. "We live in cramped quarters--it's like something out of Victor Hugo's
Les Miserables
," Pizzitola told
Fortune.
Then there was the famous lack of infrastructure. Bill Loomis wrote an amusing memo to Sid Wolf, the resident Dickensian overseer, about the woeful state of the firm's photocopiers. (Many partners thought there was something poetic about a man named Wolf being responsible for keeping costs at the firm low.) "As is often the case," Loomis wrote, "I find myself on Monday morning sending out a series of tables to clients that appear to have been photocopied in Moscow in the 1920s. It is particularly aggravating after working hard to have the final product so unprofessional in appearance. A second frustration with our machines is that frequently they don't work at all. One recent week the machine on 32 broke literally every day. While I appreciate maintenance is always a problem with these machines, this one is clearly a piece of junk. It is very depressing at night to go floor to floor trying to find a machine in reasonable working order." He recommended Wolf replace the machine on the thirty-second floor with "a very sophisticated and expensive" one that could produce work that "is professional in appearance." Another Lazard banker called Wolf and asked him for a new bookcase after something fell on the old one and it shattered. "And he says to me, 'Andre wouldn't like it.' And I said, 'Sid, he's been dead for four years, buy me a new one.'"

For his part, Glanville told Cary Reich, with amazement, "The secretaries have to go outside to buy typewriter ribbons. We don't stock them here." But he drew the line of his frustration at the infamous Lazard weekend list, which Andre had instituted with a certain amount of logic. The idea was that each partner had to give Andre the number to reach him. "You don't have to say with whom," Michel once explained--with, according to Reich, "a Gallic twinkle in his eye"--"but you have to say where." Andre would distribute the list only to his
real
partner, Pierre, not to the other titular partners. Michel at least had the decency--at Loomis's urging--to distribute the weekend list around to all the partners, as a way of inculcating in them his inviolate philosophy, learned from Andre, of always being available to clients and to colleagues. "We are in a service business," he reminded everyone.

Glanville would have none of the weekend list. "Do you want to know what I do with it?" he once asked a visitor. "I put it right in there," pointing to his trash can. Glanville also did not take kindly to the micro-management of his expenses. Wolf used to produce printouts of partners' telephone calls, and then attempt to figure out which calls were business related and which were personal. The personal calls were charged to the partner's internal expense account. One day, Wolf had examined Glanville's calls and found that he made a call or two to Darien, Connecticut, where he lived. Wolf sent Glanville a bill for $1.25. The immensely wealthy Glanville never paid the bill, so Tom Mullarkey, Wolf's boss, showed up in Glanville's office to demand payment. The two had quite a row, needless to say, and never spoke again.

Woods also was surprised to find his partners a bit demoralized. "I found a group of very smart, very experienced, and generally beat-up partners, who had survived under Andre Meyer, in what must have been the most brutal environment, but enormously intelligent and capable," he said. Loomis recalled that Lazard had a reputation as a "dark place" and that "Andre Meyer was someone you would not want to work for." He explained that one of the Gang of Four told him after they arrived at Lazard, "Don't kid yourself, if Andre were running the place, we wouldn't be here." He himself "was horrified by how backward it was." He was one of only six associates, and there were no analysts (the most junior professionals, generally right out of college, who are expected to crunch all the numbers and do whatever they are told to do by the associates). "We were treated like serfs," Loomis said. "There was no communication between the partners. There were no [deal] books. Analysis was a letter."