The last tycoons: the secret history of Lazard Frères & Co (63 page)

He decided that to survive at Lazard, he had "to engineer a way to get out from under Felix's thumb." In 1980, he got a call from Art Newman, then a partner at Ernst & Young, asking him to get involved with the financial restructuring of the White Motor Company, one of the largest American truck manufacturers. White, based in Cleveland, had recently filed for bankruptcy. Supino saw restructuring-advisory assignments as his ticket to getting away from Felix. He grabbed the opportunity and created one of the best restructuring practices on Wall Street. He forged a successful career at Lazard, away from Felix. Felix's initial response to Supino's decision? "David, I don't understand why you are working in the cancer ward." Supino described Felix as "a very insecure person" who "is the ultimate user. Once he has no use for you, he tosses you aside like yesterday's stinking fish."

Luis Rinaldini also knew this to be true about Felix, although since he is still a working banker he is more diplomatic about it than Supino, who has retired from Lazard. Upon joining Lazard as an associate in 1980, Rinaldini quickly perceived that Felix was always looking for bright, hardworking, ambitious associates to work for him. "He wasn't interested in explaining things to people," he said. "He wasn't interested in training anybody, he wasn't interested in mentoring people. He just wanted someone who could read his mind. So when he said, 'Have you thought about that?'--like Radar on
M*A*S*H--
I said, 'Yeah, here it is. Weren't you going to ask me about this analysis?' We just clicked and we got along and I ended up working on most of his things."

It wasn't quite that simple, though. Rinaldini recalled that Felix would often ask three or four people to do the same task. "I never really knew if this was on purpose or because he was not sure of where to go and was just starting four people going to see what they would come up with or because he had forgotten he'd given it to three guys and gave it to the fourth guy or because he was just actually starting four hares running just to see which one would run the fastest. But it was very sort of capitalistic in that sense. There was a bid and an ask, and if the bid and the ask were right, he'd buy." He seriously doubted that Felix did this in a haphazard way, if only because he was so brilliant and so hands-on. "He could tell you the numbers," Rinaldini recalled. "He could memorize. He had a great memory. He'd look at it once and memorize it. You'd go into his office with one analysis, and then come back with another, and he'd find a mistake. The EPS was $1.15 in the last presentation, and now it's $1.17 in this presentation, and he'd say, 'I thought this was $1.15, how could that happen?'" This being the days before computers were prevalent--not that Felix used a computer anyway even when they were--Felix "would literally take out his slide rule and check your numbers" and find the mistakes.

Mostly, though, Rinaldini credits Felix with teaching him that, like the rich, "CEOs are different" from you and me. Felix's partners found him to be the most astute CEO "psychiatrist" they had ever seen. "What he really did is he managed the amount of information and the way it was communicated to the people he talked with," Rinaldini said.

The only other person I saw who had the same kind of natural talent for doing that was Steve Rattner in the sense that you could see the change when he got on the phone. Because so-and-so was on the phone, Felix kept it concise. He edited well. He didn't bring in all this extraneous shit. What I call this is synthesis. You take 170 different inputs and you don't discard 167 of them and say what matters are these three, you say, taking it all together, these are the things that matter--this matters, this matters, and this matters, we've taken everything into account.... It's kind of like Felix being Radar for them. And they say, "Fabulous, that's what I need. I need a guy who can cut through all these financial equations...and tell me what matters for the decision I am trying to make."

In the wake of Jaquith's falling-out with Felix, Rinaldini became Felix's new wingman. "He was Felix's butt boy," was the way the partner Ken Wilson described him. "He kind of treated him like dog meat." The Time-Warner merger, the GE-RCA deal, MCA's purchase of Geffen Records, the sale of SeaWorld to Anheuser-Busch, the sale of MCA to Matsushita, the infamous RJR Nabisco sale to KKR--all these, and more, fell to Rinaldini to execute. He was completely under Felix's spell, a phenomenon Wilson found absurd coming from a firm such as Salomon Brothers. "I was really shocked, a senior guy like Luis doesn't seem the guy who'd be running around, you know, at Felix's beck and call," he said.

But like those before him, after some ten years at Felix's side, not surprisingly Rinaldini began to chafe and feel increasingly frustrated. "The only issue I had with Felix ever is that Felix was not able or willing to transfer his clients on to the younger people," he explained. "So I would talk to him about that and say we ought to have a lunch with Jack Welch, or on this Warner stuff, let's pick two or three areas where I can take charge. Otherwise, you don't advance." Like other homegrown Lazard bankers, he found that when he became a partner and was expected to bring in business, he was at a loss about how to do so, having worked for Felix all those years. What Supino knew intuitively, Rinaldini learned the hard way. "Clearly when I was made a partner, I wasn't ready for the commercial side," he recalled. "I could certainly act like a partner, talk to any CEO in the world, go to any board meeting. I knew I wasn't ever going to embarrass myself.... I'd learned how to behave in grown-up company, but pitching new business and getting out, getting hired on my own without the Felix crutch, was very hard work." It dawned on Rinaldini that "even though I was having a fabulous time" working for Felix on all of these landmark deals, "I kind of had to find a way to break off and do things on my own. And that was actually difficult because I was so involved with all of the things that he did that I probably didn't do it very elegantly and I was clumsy about sort of breaking away from things."

His frustrations with Felix came to a head at a dinner Michel held for a small number of partners in 1991 at his apartment at 820 Fifth Avenue. The idea for the dinner had been to clear the air of the frustrations felt by some of the younger partners toward the older partners, the thought being that the older partners, such as Felix, needed to begin relinquishing control of some coveted accounts so that the junior partners could develop commercially. Rinaldini, who grew up in New Rochelle, cultivated an image as a "fiery Argentine" after his father, a doctor, moved the family to Argentina when Luis was in college. Rinaldini is a fierce and well-regarded "gentlemen's" polo player and once commissioned a six-foot-by-four-foot oil portrait of himself--costing upwards of $30,000--wearing his polo uniform and holding his mallet and helmet. At Lazard, Rinaldini was known to be emotional and capable of losing his considerable temper. There are stories of associates nearly being hit by one of his absurdly wide Gucci loafers after he chucked it in a fit of pique.

The dinner started out innocently enough with a discussion about how to help younger partners develop better commercial instincts, a subject Rinaldini had some strong opinions about. But he wasn't the only one who had these feelings. Others did, too. As the Chateau Latour flowed at the dinner table, Damon Mezzacappa voiced his concern that the discussion hadn't yet been frank enough. The group moved to the living room, and the debate sharpened. "I think Luis had one drink too many," Mezzacappa remembered. "And he went off on a tirade. He attacked Felix a little bit and used a bunch of four-letter words, something we never did in the presence of Michel, frankly out of respect. Felix was sitting there. And well, that was the end of Luis."

Rinaldini unloaded on Felix all of his pent-up frustrations during the past ten years. According to those who were there, it was a painful moment to endure. "It was difficult for me to get out from under Felix because every time I tried to go out and do things on my own, I'd get five things handed to me that I had to do," Rinaldini recalled. "And they were important. So I was kind of living under the gun and pressure from Felix that you've got to do this, this, and this. The firm wasn't doing anything to help on this front, and you can't complain when you get to play for the Lakers, but you've got to understand there were pressures involved, too. It's not all fun and games. I mean, there was zero career development, to put it in the simplest terms. I kept saying, 'So, what am I going to do? Go to battle with Felix?' I mean, fuck it. First of all, it would be horrendously stupid, and second, I would lose. So why do I have to make that choice?"

In retrospect, Rinaldini thinks he was being too forceful an advocate for change before Michel and Felix were ready to change, if ever. "I think for both Michel and Felix that was kind of too cosmic," he said. "It was like, 'What are you talking about? Go back to fucking work!'" For his part, Felix said he had no recollection of the evening or the incident whatsoever. Immediately after the dinner, though, he took Rinaldini off all of his deals. Rinaldini spent another ten years at the firm doing what deals he could on his own before leaving to join First Boston in London.

Jeffrey Leeds, a former vice president at Lazard who worked for both Felix and Steve on many deals during his six years at the firm, has an entirely different take on his time working for Felix. It was a more charitable view of what it was like working for one of the legends of investment banking, and it is a view shared by many of the younger nonpartner bankers who felt under less pressure from Michel to originate deals and fees. "Felix's view," Leeds explained, "would be, 'Excuse me, what do you mean by loyal? You're right I don't have this sense of politics within the office. I'm just trying to do great work here, work that's interesting. And if I ask you to work on this project with me, it doesn't fucking mean that we just got married. I'm sorry but nobody told me that was the deal.' He had no interest in mentoring. When I worked for him, as I said to him recently, 'You weren't nice, you weren't charming, but I fucking learned a lot.'...But I didn't really feel like I was owed anything. Some of these other people may have felt they were owed something."

Younger bankers at the firm referred to Felix as "the Franchise" and would exclaim--perfectly seriously--"What a Franchise!" after Felix's role on an important deal became known. Leeds elaborated: "I think it was clear to those of us who worked there that there was a hierarchy of talent and productivity. And other people on Team Lazard would score touchdowns, but that was only after Felix had carried the ball to the one-yard line or they would fake it to Felix and someone else would have an open field to carry the ball and they would spike it as if it were them. But you take Felix off the team, you suddenly find that you're going nowhere and all there is is a cloud of dust."

STEVE RATTNER, WHO was at the emotional partners' dinner at Michel's apartment, didn't speak up. Rinaldini's concerns were not his concerns. He had his own clients. And they were hiring him and Lazard to do deals, lots of deals. Bankers at all levels were increasingly cognizant of Rattner's growing importance inside the firm. He had no intention of haphazardly stumbling into Felix's orbit; if he and Felix were to work together, it was going to be on Steve's terms and as close to equals as could be managed. Steve was able to pull it off because his deal-making prowess stood in bold relief to that of almost anyone else, and particularly when compared with Loomis's less than robust contributions. Felix had assigned Loomis to, among others, ITT, International Paper, and Leslie Wexner and the Limited, but increasingly, the often difficult Wexner was taking his business elsewhere. Ironically, in earlier years, Loomis had ridden his singular success with the Limited to a Lazard partnership. In truth, only Felix and perhaps Ira Harris were bringing in as much business as Steve.

And the more junior bankers were clamoring to work for him, a sure sign in the Darwinian canyons of Wall Street that Steve was gathering some serious momentum. One of those, Peter Ezersky, had come to Lazard as a vice president from First Boston in 1990 as an M&A generalist. He arrived at Lazard exceedingly well informed about what it took to succeed there. "Kiss up, crush down" was how the junior bankers described his approach. By the first quarter of 1992 he was quietly discussing with both Rattner and Loomis his desire to join Steve's media group. In March the matter was coming to a head. Loomis decided to put his thoughts on paper. It is not clear how helpful he was to Ezersky as he wrestled with the prospective move. "As a generalist who is both exceptional and just below the level of partnership, you find assignments complicated by your role vis-a-vis some of our partners in relationships which are complicated by their nature. Specifically, the partners only partially involve you in decision-making while leaving you fully to deal with the result.... As a positive incentive, you correctly observe that Steve Rattner combines remarkable ability, good communication and advice, a willingness to delegate, when appropriate, and important business." Loomis conveyed his bias toward having Ezersky stay a generalist. Still, he said he would support Ezersky in his switch "provided that you think about it for a couple of weeks and have one more conversation" with Michel since "you are close enough to the point of consideration [for becoming a partner] that it would be foolish from your personal perspective to change your role without his support. And from the firm's perspective, you also have an obligation, in such case, to explain the sources of your frustration in a candid and explicit manner with specific examples for illustration. You should not silently leave us with the unpleasant while you escape to the pleasant.... And you are Lazard, so you share responsibility with the rest of us." Wow. What a heavy trip to lay on a young banker simply endeavoring to pursue a new area of interest. In short order, Ezersky had his conversation with Michel and moved to join Rattner in the media group. The buzz around Lazard was that the inhabitants of the two corner offices on the thirty-second floor had begun to take serious notice of Steve's commercial success and the tilt of the firm toward him.