The last tycoons: the secret history of Lazard Frères & Co (62 page)

Success and happiness at Lazard flow from similar characteristics. By and large, the partners who are most successful here on a sustained basis combine individual talent with a natural or acquired tendency to present Lazard to major corporations rather than using our franchise to rise or fall as individuals. Success as an individual is only an indirect and cumulative result. We can't do this without seeking out those who have something different to say or who can contribute a judgment before the die is cast. Similarly, there is a correlation here, among partners and associates, between the causes of success and happiness, as those seem most at ease who are most inclined to consult with others frequently and casually. A more solitary approach has an increasingly unattractive risk/reward ratio internally...and externally. And it diminishes the personal privilege of being part of a partnership.

Once again, Loomis had produced a document the likes of which had never before been seen around the firm's threadbare hallways. In his professorial tone he had created a gumbo, with one dollop of positive reinforcement and a whole lot of opaque scolding. How this went down with his partners is tough to know for certain, but it would be hard to think it too dissimilar to castor oil. The document never made it to the nonpartners. Furthermore, there was not even the slightest perceptible change in the way the partners acted, approached new business, or worked with the junior professionals. Lazard remained as quirky, as dysfunctional, and as successful as ever.

Much of this absurdity was celebrated in a little-read October 1991 profile of Michel--"It's Good to Be the Emperor"--in
M, Inc.,
Felix's friend Clay Felker's short-lived successor to
Manhattan Inc.
The heavily edited piece, written by Suzanna Andrews, celebrated both Michel and the firm and pointedly did not look under any rocks. "Today, Lazard is arguably the most profitable and powerful mergers house in the United States," the article purred. "In Europe, where it owns huge stakes in major continental corporations, Lazard is the most feared bank. And now, on the eve of the European economic integration next year, Lazard Freres is the investment banking firm in position to garner even more riches and more power. As Lazard's power has grown, so has the mystery surrounding David-Weill, its all-powerful eminence grise." The article portrayed the dapper Michel standing in his Paris office in front of the priceless portrait of his grandfather by Edouard Vuillard, the family friend.

Felker gave Michel plenty of ink to convey his oddly charming quirkiness and aphorisms. "Every firm over the years basically developed their identity," Michel said of investment banks. "At least it's a great belief of mine that the walls speak to the people that are inside the walls, and that you can change everybody but they still speak the same language as in the past." Michel was celebrated for appearing to give his partners freedom to do their jobs, without the bureaucracy of Lazard's larger competitors. Much was made of his desire to collect bankers unlike others on Wall Street. Felix the immigrant. Steve the former
New York Times
reporter. Bill Loomis, who wanted to write in the style of Somerset Maugham. Luis Rinaldini, the former architect for Philip Johnson. "We have an emphasis on being individualists," Felix said. And supposedly everyone got along just fine. "It's like a family," Rinaldini said. "You know this brother is a drunk, this one works hard. You know that this sister is artistic and this one isn't."

But the reality, touched on only briefly in the piece, was far darker. Michel had collected around him a unique group of people at once brilliant and insecure, hugely ambitious yet deeply risk averse, all of whom were willing to trade obeisance to Michel for nearly risk-free wealth. Michel tended exceedingly well to the proper care and feeding of his high-strung thoroughbreds. Felix, of course, was Exhibit A of this phenomenon. Lazard was "my home," he said. But as Andrews discovered, he proved highly sensitive to questions about this fact. She asked him about his supposed ten-year rolling employment contract with Michel. "The question touches a nerve," Andrews wrote, "because Rohatyn refuses to answer me and ends the interview." But, a fine reporter, she asked Michel about the contract. "Felix has always had an immigrant's mentality," he said. "He's always very concerned about security. So we have conversations or arrangements so that he feels that he is definitely at home." But others saw this odd dynamic between Felix and Michel as symptomatic of the firm's manic nature. "The place is totally overwrought," one competitor observed. "I'm sure you see this kind of thing at the entertainment companies, but by the standards of finance, it's off the scale."

And Michel was behind it all. "I am the resident psychiatrist," he said. "You know that I am a great believer that the faults of people are very often more determining than their qualities. I look very carefully when I have somebody. I say, what is his fault? Where is the break in his personality which will motivate him?" What was his own weakness? Andrews wondered. "I don't mind at all that anybody is as good as me," he responded. "But I don't like when people are better." In truth, Michel was highly motivated by his ability to say no to other people, both socially and professionally. "I am equidistant from people," he once famously told Anne Sabouret, a French journalist who in 1987 wrote a book about Lazard. Michel told Sabouret he looked for ways to limit his "perimeter of suffering." Surrounding himself with expensive art and other tangible signs of his wealth was one way to rejuvenate after his days at his Lazard office. "I really need this confrontation with beautiful things to maintain my balance," he said. "It gives me back my sense of joy of living." To Andrews, he confided that another way he limited his perimeter of suffering was to be mostly alone. "It's not bad to be isolated," he said. "I think a lot is taken out of you by the urge to conform, and I never had that. I had no urge to conform. I was not with other kids. I was not part of a group."

This sense of being apart informed the way Michel and Felix directed the firm professionally, too. Felix, of course, was a leading critic of the Wall Street fads of junk bonds, bridge loans, and advising corporate raiders, a source of huge but unsustainable profits at places like First Boston and Drexel Burnham in the 1980s. Michel defended Felix and the firm's decision to keep away from most of the faddish behavior, a variation of the ability to just say no. "We pride ourselves that we don't have to do anything," Michel said often. "It's an illusion that you have to rush into anything."

When Michel did emerge from his cocoon, it was usually in the company of women. "My friends are mostly ladies," he told Andrews. "I do not like men socially that much. At work they are interesting. But in life women are more interesting." Atypically on Wall Street, Michel often spoke to his partners about the need to bring to deals the tactical skills of a woman. "Michel always says that you need a certain degree of femininity to be a good investment banker," explained Robert Agostinelli. "You have to be intuitive and sensitive. You know, men don't often get a lot of things." Added Michel: "Men very often lose all sense of proportion." Andrews described Helene Lehideux, Michel's wife and the daughter of a once-prominent French banking family, as "a beautiful woman who in many ways is as socially reserved as her husband. But when she summons,
le tout Paris
responds." A "Parisian socialite" told
Women's Wear Daily,
"She has a way of getting everyone to show up." In keeping with Felker's purpose of lusciously laminating Michel's image, no mention was made of his longtime affair with Margo Walker, a woman well known in the exclusive world of Locust Valley, Long Island, where Michel owned a weekend estate. Andrews would reveal the affair between Michel and Walker to the general public in her next, explosive article about Lazard just over four years later.

CHAPTER
12

THE FRANCHISE

O
n Java, the most populous island in Indonesia, there is a fable about a beautiful but deadly tree--known as the upas (the word means "poisonous" in Javanese)--that emits such noxious odors that nothing around it can grow. A Dutch physician who visited the island in 1783 and claimed to have seen the tree firsthand wrote of it: "Not a tree nor blade of grass is to be found in the valley or surrounding mountains. Not a beast or bird or living thing, lives in the vicinity." No less an authority than Erasmus Darwin, grandfather of Charles, repeated the tale eight years later.

The effect of the upas is a useful metaphor to describe the fate of many, if not all, of the partners who toiled away in anonymity for Felix while he became an investment banking legend. His modus operandi was to have at least one, more junior, partner work for him on all of his important deals and be responsible for coordinating the larger team that did the actual deal execution--due diligence, crunching the numbers, putting presentations together, staying up all night, and so on--while he wisely focused his energy on coaxing along the principals and wowing the board of directors. But the landscape is littered with frustrated bankers who worked for Felix--no doubt thinking it was a ticket to stardom, only to be disappointed to find there appeared to be no limit to Felix's own ambitions. "[Felix] has been cutting people off at the knees for years," one man told
New York
magazine in 1996. "Anyone who has gotten close to him has gotten fucked."

One of the best-known examples of this phenomenon is the well-documented story of the former Lazard partner Peter Jaquith. A graduate of Andover and Dartmouth, Jaquith joined Lazard in 1970 after having been an associate at Shearman & Sterling, the Wall Street law firm. He worked for Felix on many deals, including those for Seagram. "He was my chief lieutenant," Felix told the
New York Times
in a lengthy profile of Jaquith. "When transactions needed financial and legal structuring, he worked on that." Jaquith was one of Lazard's best-paid partners and accumulated a fortune, with all the requisite toys, of some $20 million at one time. But according to the
Times
article, which chiefly described his sad descent into drug addiction and destitution, Jaquith began to resent his "secondary role" at Lazard. He remembered a closing dinner in 1981 for a Seagram deal, held at the "21" Club, where Edgar Bronfman, the Seagram CEO, singled him out for public congratulations. Bronfman's father had been the man who, more than twenty years earlier, had advised Felix to get out of foreign exchange and work on mergers at Lazard with Andre.

Felix, sitting nearby, was not happy. "I think Felix was jealous," Jaquith explained later. "Right after that, he took me off the account." What's more, after the Seagram dinner, Jaquith claimed, Felix increasingly shut him out of other deals. Fed up, he left Lazard in 1985. Felix rejected Jaquith's assessment. "I was happy with his work and sorry to see him go," he told the
Times.
After Lazard, Jaquith had successive jobs at Forstmann Little, at Bear Stearns, and even at his own investment firm, Tilal, an acronym for "There Is Life After Lazard." His own arrogance and addictive behavior contributed mightily to his professional and personal demise. Finally, after years of struggle, at the end of 1997 he broke his addiction to alcohol and crack cocaine. He tried to return to Lazard. He made an appointment with Michel and went to see him at his new office in 30 Rockefeller Center. "We met at his office, and I told him I knew some of his executives had left and he might need someone," Jaquith explained. But of course, it was not to be. Michel wrote him a letter, saying, "As you may know, we have always had a policy of not rehiring people who have left"--which wasn't exactly true. In editorializing about this scene, the
New York Observer
wrote, "Mr. David-Weill apparently lacked the empathy to reach out even a little--not necessarily by hiring Mr. Jaquith, but certainly he could have done something that would give his former colleague some support. Mr. David-Weill may have inherited a fortune, but he seems to have squandered a more valuable asset: his character." Jaquith now lives alone in a small apartment in Pasadena.

There are other, far less dramatic examples of the frustrations felt by partners who worked for Felix. David Supino, like Jaquith a former associate at Shearman & Sterling, also worked briefly for Felix. He recalled a deal early in his career at Lazard when Felix's client Charles Revson wanted to buy a small private company in Boston. Felix asked him to go to Massachusetts and perform the due diligence. Once there, Supino understood that the CEO wanted a higher price for his stock than he wanted the other stockholders to receive. With his legal background, Supino quickly realized "this was illegal." He reported the discussion to Felix. "Felix took in what I was saying, and the next day I was taken off the case," he remembered, explaining that the deal never happened.

Supino, who speaks fluent French, also worked with Felix on a number of early Franco-American, cross-border deals. He recalled that Felix made it very clear that Felix alone would speak to the CEO and Supino would not. Once when the CEO called Supino and Felix was not around, word got back to Felix about the conversation. "That's the way Felix liked to run things, and if in fact you departed from that stratification of duties, then he got very upset," he said. "I remember one time he called me up and he said he had heard I had talked to [the CEO] and he said, 'How could you do this? It is terrible.' He was yelling at me." Supino concluded that working for Felix was "very difficult because it was unrewarding. He never wanted you to get any credit with the client or for that matter within the firm. What I observed working for Felix was that Felix had a track record of having young partners or senior associates work for him and for one reason or another they fell out with him. He dismissed them from working for him, and thereafter their careers were stalled." While Supino found the assignments "interesting" and "exciting," he decided that working for Felix was "a dangerous position for me to be in at the firm" because it was "at best a dead end and at worst a death sentence."