The last tycoons: the secret history of Lazard Frères & Co (12 page)

"Dear Friends," he wrote, in surprisingly articulate English,

At the time when we are about to sign a new contract, I wish to state, as representative of Lazard Paris, how much I am satisfied to see that harmonious relations exist among the partners, on the second floor. I do not doubt that in their mind, as in mine, all the questions are entirely clarified. I add, that I want them to know they have my entire confidence and that I wish to collaborate with them as fully as possible. By reason of the interests which I represent and the material and moral responsibilities which I bear, my intention is to be present, as often as possible, at the daily meetings which take place on the second floor at which the different problems concerning the House are discussed. I propose to continue to express my opinion freely there, whenever I consider that there is occasion to do so, and also to make any suggestion which seems to me useful in the interest of the House. I am sure that every one will agree to make, in the present circumstances, a very serious effort in order to reduce the overhead expenses, and that in this respect the study prepared by Singer, at the request of Altschul and Russell, will be specially taken into consideration. It is entirely understood that the final decisions concerning the management of the firm, as well as the responsibility for these decisions, remain in the hands of the New York partners as, indeed, has never failed to be the case in the course of recent years.

Although he was somewhat cryptic, Andre had made it abundantly clear that as the sole representative in New York of the Lazard ownership interests in the New York and Paris firms, and given his power under the new partnership agreement, he intended to freely exercise his authority regarding how the New York firm should be managed and operated. Exacerbating this decision were, no doubt, the obvious facts that the British firm was controlled by Pearson, the Paris firm was basically defunct, Andre was now living in New York, and he had no choice--given his drive to succeed and to be relevant--but to seek to resurrect the firm as a whole from its New York base.

If Andre's December 9 memo was essentially a signal of intent, a month later he unloaded both barrels on Altschul. In a three-page, single-spaced letter, written this time in French, he told Altschul in no uncertain terms that the time had come to liquidate General American, Altschul's baby. He reminded Altschul that "for more than a year" he tried to convince him that General American had to go. "On a practical level, unfortunately, the facts have proven that I wasn't wrong," he wrote. He referred to a September 1941 General American board meeting where he had hoped Altschul would push for a winding up of the fund. "Purely out of a spirit of conciliation and friendship, that day, I made the mistake of not insisting any further," he continued. "Since then, at the end of last October, we have resumed that conversation without any specific decision being taken." The outbreak of war, Andre wrote, provided him with any number of additional, new reasons to push now for the "immediate liquidation" of the fund. "My wish would be that, with your quick mind, you would take yourself the initiative of the liquidation, you who are the Corporation's dominant personality," he wrote. "In all sincerity, I would like to convince you, as I have tried to do so in the past, of the necessity of such action. To face events straight on, to not nurture vain and often thwarted hopes, has never diminished anyone, on the contrary. To refuse, in 1942, to take unjustified risks with others' money in a firm which has outlived its economic necessity doesn't seem to me to incur the slightest loss of prestige for anyone. On the contrary, it's evidence of common sense and also evidence of strength." Andre explained he had been thinking about this decision "for a long time" and was sharing his views out of his loyalty as Altschul's "friend" and because of his "duty" as a "Paris associate."

On the small chance that somehow Altschul had missed the message, in the closing Andre smacked him with a two-by-four. "I hope that this time I will have succeeded in convincing you, and that it's out of conviction that you will act," he concluded. "I also believe that, due to my personal obligations, you ought to know my point of view, black on white. It is very painful for me, I must tell you in all honesty, to be constantly associated with the responsibilities of a firm whose difficulties and dangers I have witnessed for so long."

The upshot of Andre's missive was that Altschul was no longer in charge. This was a bitter pill that the dignified Altschul had no choice but to swallow. Yes, he had helped Andre get to the United States, and helped get him settled. And Altschul invited Andre, once here, to Overbrook Farm for weekends, where he met such socialites as Marietta Tree, the first woman to serve as U.S. ambassador to the United Nations. He also helped get Andre's son Philippe into both Deerfield Academy and Harvard. And he wrote to the State Department in January 1943 to see if he could obtain an emergency visa for Andre's nephew Michel Weill, then stuck in a Spanish prison.

But professionally, by the beginning of 1942 Altschul was under siege. Andre was hurling thunderbolts at him from the thirty-second floor. He still had no word from Pierre David-Weill, a potential counterbalance to Andre. He then received, in February 1942, a surprisingly sharp rebuke, out of the blue, from his friend Sir Robert Kindersley, head of Lazard Brothers. As a matter of courtesy, he had sent Kindersley an announcement of the end-of-year personnel changes in the New York partnership. For some reason, Kindersley became offended and wrote Altschul that he would have preferred to receive a "private letter" from one of the New York partners rather than to "have been treated merely as an ordinary member of the public." Altschul waited six weeks to reply, no doubt to allow time for things to cool down. He responded cordially, thanking "Bob" for his "very appropriate reproof." He added: "I suppose that our failure to advise you of the changes in the New York firm was due in the first instance to our feeling that with so many major problems confronting you in this war-torn world, minor matters of this sort would have lost temporarily much of their interest. Beyond this, the change in personnel has in itself been less important than the gradual shrinking of our sphere of activity. This raised, and continues to raise, major questions having to do with the future which can hardly be dealt with satisfactorily at this distance, at this time." He told Kindersley he hoped that a visit from "Pierre before long" would allow for "an opportunity to take common counsel with him" and help clear up the outlook for the future.

Pierre's arrival in New York, though, in May 1942, did not moderate Andre's increasingly aggressive behavior toward Altschul. True, Pierre David-Weill and Altschul were friendly and shared a certain air of sophistication and aristocracy, especially in contrast to the more cerebral and scrappy Andre. "Pierre used to refer to Andre always very correctly," Marietta Tree once said. "But I had a feeling that although he admired him, he trusted him and he counted on him, I'm not sure he liked him." Nevertheless, Pierre and Andre were united as owners; in their eyes, Altschul was nothing more than a well-compensated employee. For Andre's part, while assimilating as best he could into New York society--he would wear a three-piece suit on visits to Overbrook Farm--he also started confiding to his friends among the other European emigres, "In one year, I will be the boss."

And that is precisely what happened. Altschul had devoted himself to the firm for close to thirty-five years--acting selflessly in the face of the possible liquidation of New York and London in 1919, anonymously leading it through the franc crisis of 1924, sticking with it during the near bankruptcies in 1931 and 1932, shepherding it through the choice between investment banking and commercial banking, and staying resolute after the Nazi seizure of Lazard in Paris. He had gone far beyond mere loyalty to use his substantial familial and political connections to secure safe passage to the United States from war-ravaged France for both of his powerful senior partners, Pierre David-Weill and Andre Meyer--two prominent Jews, no less. He had even done the impossible and secured immigration visas for Pierre's family. But despite this, Pierre and Andre, together, put the dagger in Altschul's back.

On December 16, 1943, a little more than a year after Pierre's arrival in New York, Lazard Freres & Co. announced that Altschul would be "retiring," effective December 31. The announcement also said that both Pierre and Andre would become individual partners in New York and that Lazard Freres et Cie would remain a partner in New York. As a parting gift, Altschul remained president of his beloved General American Investors. Per Andre's dictum, Lazard completely divested its interest in General American soon after Altschul's departure from the firm. After the split, Altschul moved his office to 40 Wall Street and spent a considerable amount of time at the Council on Foreign Relations trying to change the world. Lazard moved to 44 Wall Street.

The reasons for the coup are easy to conjecture about but difficult to know for certain, as all parties to the dispute have long since passed. Patrick Gerschel, a former Lazard partner himself, said the matter of Andre and Pierre taking over from Altschul was put to a vote of the partnership. Altschul was voted out, even though only one of the New York partners voted against him. The highly truncated official history of Lazard, published in 1998--on the occasion of the firm's 150th anniversary--makes only a passing unkind reference to the incident, stating that when Andre and Pierre arrived in New York they found a firm "that had become, in a word, pedestrian. But within a few years the two partners from France had begun to remake the Firm, bringing in new partners and new alliances on Wall Street and in business."

Altschul's late son Arthur, a longtime partner at Goldman Sachs, spoke at least once publicly about his father's fate in practical terms. "I don't think the control was
ever
in my father's hands," he said. "I believe it was always in the hands of the French partners. And anytime the French wanted to take control, they had it in their power to do so all along." Privately, though, Arthur Altschul was positively livid about how Andre and Pierre had treated his father. In the 1980s, when on vacation at a luxurious estate in Italy, he ran into the future Lazard partner Robert Agostinelli, who knew Arthur when they were both at Goldman Sachs. Agostinelli remembered the chance encounter, around the time he had announced he was leaving Goldman for Lazard:

He looks at me, and he says, "How dare you go to work at that place? Don't you know what they did to my family?" And he said, "My father was there, he was loyal, my family was loyal to these people, we had understandings with them. We had no legal obligation to take them in when the war started. And they were rude. They left their firm in the hands of caretakers. We brought them in because we're decent people, and the next thing I know is that they're submitting papers to my father, and he's out on the street. We were big members of the Brahmin Jewish families in New York. We were proud people. We had made their name better than it was. And those guys just came in--and Pierre David-Weill just was under the thumb of Andre, a tricky, sneaky bad guy. You're a Goldman guy. How could you go to these people?"--I didn't know any of it.

Frank Altschul obviously felt betrayed by his partners. But somehow, in public, he managed a stiff upper lip. Four days after the official announcement of his departure, he cabled Robert Kindersley in London: "Many thanks for your friendly message transmitted through Pierre. Stop. Feel sure new set up is most sound and promising New York firm has had in many years. Friendliest seasons greetings to partners and families." In January 1944, Altschul recommended Pierre for membership in the Recess, an exclusive Wall Street social club on the twenty-first floor of 60 Broadway, with a dining room overlooking New York harbor. He also recommended Andre for the same club in March 1945. In October 1944 he wrote a four-paragraph letter to David David-Weill, then in his seventies, wishing the firm's patriarch well and telling him he had thought of him often during the war. He also spoke of his own departure from the firm, putting the best possible spin on it under the trying circumstances. "You no doubt are fully informed about the termination of my long relationship with the firm," he wrote. "As you know, this represented the realization of a desire that circumstances had implanted in my mind almost seven years ago. My only regret is that, as I suppose was inevitable, misunderstandings have arisen which have clouded friendships that I valued." He never received a reply.

In May 1945, Altschul went to Paris. From there, he wrote a gut-wrenching two-page letter in French to Andre about what he had come to learn about the weeks leading up to the death of Jean Gaillard, Michel's half brother. The facts are gruesome: The Nazis captured Jean and sent him to Dora in 1943. Once there, he was immediately forced to work, for between twelve and eighteen hours a day, digging an underground tunnel for seven months without being allowed to come to the surface. The Nazi guards brutalized him and forced him to sleep inside the tunnel. Around May 1944, many of the prisoners, including Jean, were allowed to come aboveground for the first time in many months. But Jean soon developed a heart ailment, which left him feeble. He was given a new job having something to do with electrical work. In this role, he occasionally had the chance to play chess and work out mathematical problems with his fellow prisoners, many of whom, like Jean, were professors and intellectuals. On April 6, 1945, Jean was forced to go by train from Dora to Ravensbruck, another concentration camp, northeast of Berlin. En route, he developed dysentery. Altschul wrote: "The trip was abominable, with 130 men squished together in each car of the train like animals, with nothing to eat, and forced to stand for nine straight days. Few made it to the destination. I don't need to tell you about atrocities that occurred on this train but, suffice it to say, that about 80% of the passengers on the train died before reaching Ravensbruck." Although he almost died, Jean somehow survived and was dumped on the steps of the infirmary at Ravensbruck. He was said to have died in the infirmary on April 15 or 16. A fellow prisoner who escaped Ravensbruck and returned to Paris conveyed these awful--but still officially unconfirmed--details to Pierre David-Weill. But there remained a "very, very tiny glimmer of hope" that Jean had somehow made it to a hospital in an area away from Ravensbruck that the Russian army controlled.