The last tycoons: the secret history of Lazard Frères & Co (123 page)

There were at least two parts to the Walking Dead strategy. First, with $1.616 billion in cash proceeds at a high valuation at stake, the thinking was that Michel and Eurazeo would not do anything to jeopardize that money--and thus the IPO--and so a bout of negative publicity and a lawsuit from former partners with 5 percent of the goodwill was to be avoided at all costs. Second, Bruce had actually allocated more than 100 percent of the firm's goodwill to the collective group of partners, and so he needed to get some of that goodwill back. (Bruce thought he would have plenty of time--at least three years--to get the overallocated goodwill back before it was convertible into the public stock.) The combination of these two points of leverage ended up working well. Bruce and his deputies negotiated one by one with the members of the Walking Dead, and in most cases settled with them--Loomis included--by buying their goodwill points back at around a 50 percent discount to the suggested IPO price.

JUST AS BRUCE
was having increasing success solving all of these simultaneous equations came shocking Lazard news. Soon after lunch on March 2, Jerry Rosenfeld, the former Lazard partner and CEO of Rothschild North America, sent the following e-mail with the words "Tragic News Item" in the subject line: "It is being reported in the 'Lazard Loop' that Edouard Stern has been murdered in his apartment in Geneva." Rarely had a simple nineteen-word message screamed more emphatically, "Tell me more!" While on the surface, Stern, then fifty, appeared to have severed all ties with Lazard after Michel fired him in 1997, the truth was far more complicated, as with almost everything in Edouard's life. As his parting gift from Lazard, Michel arranged for Eurazeo to invest $300 million in Edouard's $600 million private-equity firm--Investments Real Returns--with Edouard and his friends contributing the rest. Edouard managed the fund out of Geneva without taking much input from Eurazeo, and IRR--as it was known--was not doing too well, and there was ongoing tension as a result. Edouard, who literally had teeth like a wolf, was also in the habit of making halfhearted attempts at getting Lazard involved in major M&A assignments where he had ongoing relationships. As a way to needle Michel, he had a nasty habit of suing Lazard (and lots of others) whenever he could. Even though Michel had fired him from Lazard, because of the French partnership rules, he retained a small stake in that partnership, and when in 2000 the three houses were merged, Edouard withheld his crucial vote for the merger until he was paid off, a sum said to be around $25 million.

The news of Stern's alleged death sent the Lazard legions to the Internet for any news about what had happened in his locked penthouse apartment above a police station at 17 Rue Adrien-Lachenal, in Geneva's fashionable Rive quarter. "He was found at his Geneva home on Tuesday afternoon," a spokesman for the Geneva police said on Wednesday, March 2, the first scrap of official word. "The death was the result of a crime."

Michel heard the news about Edouard from his wife. He was traveling in Africa with Margo Walker. They had just spoken when Helene called Michel back ten minutes later to say that Beatrice had just heard the news of Edouard's death. "I called my daughter Beatrice," he said. "I didn't know he had been killed. I knew he had died. I told her what happened. At first, I thought he had committed suicide. Then she told me, 'I believe he received considerable help.'"
Le Figaro
reported that same day that Edouard had been assassinated. "He was rich, he got on people's nerves," the paper said. "His enemies could not find words strong enough to condemn his all-consuming ambition." Added Taki Theodoracopulos, the socialite columnist, "He was not only ruthless and a terrible bully, he was as close to being a monster as anyone can be and still be free to walk around in polite society."

After attending the press conference where the Geneva police confirmed that Edouard had been murdered--shot four times, in fact--and that an investigation had started, the
Tribune de Geneve
spoke with "Tina" (not her real name), Edouard's Portuguese maid, who told the paper how events unfolded. Tina had just returned to Geneva from Portugal, where she had been visiting her ill father for a few months, with Edouard's blessing. He had not wanted to hire someone else while she was away. She worked at Edouard's apartment each day in the afternoon but had not seen him in a week. "He was a discreet man," she said. "I cleaned his linen, his apartment, I knew what kind of yogurt he liked but I didn't know anything about his private life. He never spoke to me about it." At around one-fifteen on Tuesday afternoon, she received a call from one of Stern's associates at IRR. "We have been looking for Mr. Stern everywhere," the man said. "Do you have the key to his apartment?"

A few minutes later, she arrived at 17 Rue Adrien-Lachenal and went to the fifth-floor apartment, where she met Sandy Koifman, Stern's former partner, and his two assistants. Koifman remained quite friendly with Stern, and his new office was but one floor away from Stern's. Koifman had been searching for Edouard since he had missed two morning appointments, one with a former Goldman Sachs partner and one with William Browder, the founder of the Hermitage Fund, one of the largest and most successful equity funds dedicated to investing in Russia. Despite Edouard's having missed these appointments, Koifman still was not particularly worried. He had seen Edouard's new Bentley in the parking garage that morning. Koifman went off to lunch at Hashimoto, the sushi restaurant the two of them frequented. When Edouard still had not shown up after lunch, Koifman headed to Stern's apartment. He also called the local hospital and ascertained that nobody with Stern's name or his description had shown up there. "I was thinking, maybe he slipped and fell in the bathroom," he said. "I had a friend who died of a heart attack at forty-five."

Tina put the key in the lock, and when the alarm did not sound, she told herself, "Good, Mr. Stern is home." Once inside the apartment, a weird feeling overtook her. "An intuition," she said. "I felt strange," especially when she saw a pair of his tennis sneakers in front of the bedroom door. Koifman and his assistants brushed past her into the bedroom. "They had a curious expression on their faces," she remembered. She walked toward the door to look in, but they told her to stop. "It is better that you not see what is in there," they told her. "Go call the police." In great anguish, Tina went down to the apartment building's street floor and into the police station there. By two-thirty, there were swarms of police in the apartment, including detectives investigating the crime scene. The police interviewed her. "But I had not seen the body or traces of blood," she said. "The less I knew about this matter, the better."

What Koifman found in Edouard's bedroom sent a shock wave not only through Lazard but also through much of the financial world. "I went to the door, pushed it with a finger," he told the
Vanity Fair
reporter Bryan Burrough.

It opened. The bedroom is plain, a big bed--king-size, Americans would call it--nothing else. Very Zen. You see nothing laying about. Everything's in built-in closets. Just behind the door was a body on the floor, with a huge pool of blood behind the head. I have to admit, at first glance, I thought it was a piece of modern art. The French would call it Surrealist art. I thought it was something to step over, just a piece of art. I've seen weirder things in people's apartments. It took a moment--a minute, 30 seconds, five seconds, I don't know--for it to sink in that I was looking at a dead body in Edouard's apartment. It was covered head to toe in this, this flesh-colored suit--I later learned it was latex. There were no holes in the face. I don't know how someone could even breathe. You know when you walk past Macy's and they haven't dressed the mannequins yet? That was what it looked like. He was lying on his side. I couldn't see the face, the head. If I'd seen that same body in a Manhattan subway station, it would never have occurred to me it was Edouard Stern. You couldn't see anything.

According to Burrough's account of the murder, there was a thin white rope draped over the body and more ropes on a chair nearby. "It was really a nasty scene," Koifman continued. "You know that movie
Seven
? That kind of scene. It was just, you know, I don't mean to be dramatic, but it was...It was evil." Koifman spent the following six hours being interrogated by the police, and according to Burrough, he assumed that Stern had somehow died after hitting his head during rough sex.

He had no idea, though, that his friend and former partner had been heavily invested in the bizarre world of sadomasochism. It was not until two days after he found Stern's body, when the Swiss police held their press conference, that Koifman even realized Edouard had been shot.

Among former and current Lazard partners on both sides of the Atlantic, three theories quickly emerged about what had occurred. There was the Russian-eastern European Mafia theory, whereby Edouard was assassinated for trying to recover some of the money from soured investments he had made in that region. This theory was both complicated and enhanced by reports of his friendship with Alexander Lebed, a Russian army general who died in a helicopter accident in Siberia in 2002, and by Edouard's four-year affair with Julia Lemigova, a stunning former Miss Soviet Union. They had talked of marriage. In 1999, they also may have had a child together--Maximilien--who died suddenly six months later under the questionable care of an unnamed Bulgarian nanny. Had the nanny been hired to eliminate the evidence of their affair?

And of course, there was the S&M-gone-off-the-rails theory. Finally, there was concern that a series of lawsuits Stern had filed against Rhodia, a French chemical company in which he had invested--and nearly lost--$89 million, had upset many people, including the French finance minister, Thierry Breton a Bercy, who had been a director of Rhodia and a target of the suit. Koifman also discovered that a phone had been tapped in the New York office of IRR. Using the code name Operation Serrano, the DGSE, France's external intelligence agency, had Stern under regular telephone surveillance. "He was aware of men watching his apartment," a source close to Stern told the
Mail on Sunday.
"He said that powerful figures at Rhodia were trying to discredit him by investigating his private life." He told a friend the week before he died, "You will see, people will say that I am a homosexual but I don't care what people say."

Indeed, Edouard was sufficiently concerned about his own safety that he arranged in 2003 to obtain a permit to carry a gun for protection. Individuals are not permitted to carry a weapon in Switzerland, so Stern arranged for a permit in his native France, with the document being signed by Nicolas Sarkozy, a leading contender to succeed Jacques Chirac as the French president in 2007.

But it was the mafioso-hit theory that gained currency rather quickly since, through IRR, Edouard had numerous connections to eastern Europe and had lost quite a bit of money there.

But Burrough, who started reporting the story for
Vanity Fair
after the murder occurred but before it was solved, suspected that the conspiracy theorists would be disappointed when the truth was known. His intuition proved accurate, if no less stunning, when police viewed the videotapes on the surveillance cameras that were all around the apartment building and discovered that a Frenchwoman, thirty-six-year-old Cecile Brossard, was the only person seen entering or leaving Stern's apartment the night of the murder. The tall, blond, and striking Brossard was said to be Edouard's long-term girlfriend, as well as a minor artist. "And she's some kind of artist, all right," Burrough wrote. "In addition to sculptures she creates in her spare time, her principal employment appears to have been as a very expensive call girl specializing in sadomasochistic sex." In 1996, she had married Xavier Gillet, an herbal-medicine therapist twenty years her senior, in Las Vegas. They lived an hour outside Geneva, but she apparently made frequent trips to the city as "Alice," a "leather-clad dominatrix," and appeared, for hire, at local hotels. It was supposedly in this kind of setting that Brossard and Stern met sometime around 2001. Her favorite movie was said to be
A Clockwork Orange
.

Oddly, until his murder on the night of February 28, very few people--even his closest friends, including Koifman--knew that Edouard and Beatrice had been officially divorced in 1998. The immediate family kept their divorce very quiet, even from Michel. When asked, Michel said only, "Edouard and Beatrice no longer sleep in the same bed," even though they had been divorced for years. They stayed in close touch, though, and Edouard was said to be an extraordinarily giving father to their three children. "He gave them both affection and energy," Michel said. "He was close to them. And for the children it was obviously a great blow. A great blow. And for my daughter, already separated, as you know, it is a blow, too, because he's been the person she has loved all of her life. She couldn't live with him, but she always loved him." Added Annik Percival, Michel's assistant: "It is very sad for the ex-wife and the three children."