The last tycoons: the secret history of Lazard Frères & Co (26 page)

For Nicholas von Hoffman, then a
Washington Post
columnist, the absurdity of the hearings--even without the full extent of the conspiracy being then known--was reason to pen a column replete with pointed zingers questioning the morality of all involved. One of these barbs would stick in Felix for years. "Very occasionally," von Hoffman wrote in summarizing the first two weeks of the hearings, "they'll ask a question of Felix Rohatyn, the little stock-jobbing fixer from ITT who went to Kleindienst to get an antitrust break for his wee, tiny multi-billion dollar conglomerate." Von Hoffman continued, "Kleindienst let it out that little Felix the Fixer, Rohatyn, is a Muskie adviser on economic matters. The presidential candidate's headquarters confirmed this, saying Felix had worked with Muskie on an ignoble piece of legislation which allows stockbrokers to gamble with their customers' money." He said the biggest loser of all was McLaren, who "walked into the hearing room less than two weeks ago a highly respected man," but that his "fumbling" answers about why he had reached a settlement with ITT on more favorable terms than he had first proposed were pathetic. "They don't want antitrust, not Felix the Fixer, not the troubled McLaren or Kleindienst, who says he can sleep at night," he concluded.
Felix the Fixer.
That hurt and annoyed Felix for years.

As his final testimony and the hearing itself wound down toward the end of April, Kleindienst chose to emphasize the "important" role Felix played in the settlement. He said he'd come "to regard" Felix "with a very high degree of regard."

At one point, nearing the end, Kleindienst described himself as unmovable in the face of outside pressure and influence. "I am kind of a stubborn, bullheaded guy myself," he said.

"Why did Rohatyn keep coming back if you are so stubborn and bullheaded?" Senator Kennedy wondered.

"He is a persistent little fellow himself," Kleindienst answered, to laughter. "And it did not do him any good, you know. It did not do him any good. He achieved one thing, and Mr. Rohatyn is a very bright, able man, and I think a very fine man, he achieved one thing, he got me to inquire of McLaren whether he would be willing to hear this presentation and I think, as Felix will tell you right now, that that is all he got."

"That is pretty significant the way it turned out," Senator Kennedy said. "Yes, it was," Kleindienst replied.

"It was not any small achievement," Kennedy continued.

"Yes, I agree," Kleindienst said.

Indeed, the record is crystal clear that the last words uttered in this extremely controversial, convoluted hearing, where perjury and obfuscation abounded, involved the role a diminutive refugee investment banker from New York played in settling, to that time, the largest antitrust case on record.

On April 28, the Judiciary Committee voted, 11-4, to reaffirm its support for Kleindienst's nomination, in effect ratifying its unanimous February 24 recommendation.

Kleindienst, the perjurer, became the country's sixty-eighth attorney general on June 8. Nine days later, on June 17, the Washington police arrested five burglars, organized by E. Howard Hunt and G. Gordon Liddy, as they were installing more bugging devices in the Watergate offices of the Democratic National Committee. On June 30, the Senate Judiciary Committee asked the Justice Department to reexamine the entire seventeen-hundred-page record of the Kleindienst hearings for possible evidence of perjury. So now, incredibly, three weeks after his confirmation as attorney general, Kleindienst's Justice Department was investigating the potential felonious behavior of its leader. On April 30, 1973, Kleindienst resigned as attorney general, after less than a year in office, and eventually pleaded guilty to the misdemeanor of lying at his own confirmation hearing. The controversial plea bargain saved him from jail time and from disbarment. He was the first former Nixon cabinet official to plead guilty to a crime as part of the Watergate scandal. What role ITT's $400,000 pledge and Dita Beard had in all of this was never made clear, although Larry O'Brien said later in his life that he believed the burglary of his Watergate office was done in large part because of the questions he raised in his letter to Mitchell about the connection between the ITT antitrust settlement and ITT's $400,000 pledge to the San Diego Convention Bureau. And of course, we all know where the break-in at the Watergate led. It is not crazy to see the thread that connected ITT's acquisition of the Hartford, and the ensuing fight for antitrust approval, to the Watergate scandal and the resignation of President Richard M. Nixon--and the corresponding loss of confidence in the institutions of American government. The blueprint for Nixon's cover-up of the Watergate scandal can easily be seen in the lies that Mitchell and Kleindienst uttered before the Senate Judiciary Committee--Kleindienst at his own confirmation hearing no less, a hearing he himself demanded and at which he still committed perjury--and in the clandestine, but secretly taped, conversations of Nixon, Haldeman, and Colson to try to figure out what to do if the shit hit the fan. And Felix's role in all of this, although not nefarious by the standards of the Nixon gang, cannot be overstated.

A MAN AS assiduously public as Felix is has had many opportunities over the years to buff the stories that constitute the Felix Rohatyn genome. His years spent explaining his treacherous actions in the ITT-Hartford merger are no exception. In an October 1975 profile of him in the
Wall Street Journal--
while the public ITT controversy had died down but the private investigations still raged on--he chalked up his mistakes to simple naivete. "One thing I learned from it all is that I should never talk to a government official alone, not even just to have a beer," he said. "Now when I talk to one, I make sure to have eight other people in the room with me." Some thirty years later, his own naivete remains his explanation, the story by now having acquired the Vermeer-like gloss of many of his tales. "I did something stupid," he explained, "because I think I was very inexperienced in terms of public things. I clearly was used by ITT and by the Nixon administration as part of the scenario that would get McLaren to change his antitrust position."

At the time, though, he did not think he was being "used" by ITT and Nixon. "I thought it was straight up, which is why I say I was naive, to say the least," he said, "because the notion that sort of by the normal course of events I would be invited to meet with the deputy attorney general to make an economic case with nobody else in the room, today I would find that beyond belief. So that's why I say I was really, truly naive. On the other hand, to this day, I am convinced that ITT should've let this thing go to the Supreme Court and that we would've won...that we would not have lost the decision and that ITT made a big mistake in settling and that in settling that they gave away much too much, that it was a silly case, that there was no antitrust issue, [and that] the business of 'potential entry' is nonsense." He continued: "The notion here that I would show up and brilliantly convince them that the economic case was overwhelming--I believed it, and I thought, 'Gee, isn't this exciting,' which shows how you can delude yourself in terms of your sense of importance."

As further evidence of his naivete, Felix cited his decision to appear at Kleindienst's side at the first day of the Senate hearing,
alone.
"I went down to this hearing without a lawyer," he said. "Next to Kleindienst and McLaren. And I walked into this hearing room with this mob in there, and Jack Anderson tried to interview me, and the television cameras--and I thought, 'Shoot, what am I doing here?' So I called Andre. I said, 'Get me a lawyer. I have to have a lawyer.' By lunchtime, I guess, I think it was Sam Harris or Sy Rifkind, I forget which one was there."

Still unanswered in Felix's mind, all these years later, is whether Andre may have, for lack of a better description, set up Felix to take the heat publicly for the firm's role in the ITT-Hartford mess. Why else would he not be provided with a lawyer to accompany him to these high-profile hearings? he wondered. "When I thought back on it, [Andre] was pretty relaxed about my going down to this hearing," Felix reflected. "Nobody asked me if I had a lawyer or who was gonna go with me. And I've never quite resolved...whether Andre knew anything about what was going on or whether Geneen had talked to him or something, but that is still a completely unresolved question."

Of course, Felix believes nothing good came out of the experience. "It was all downside," he said. "Kay Graham called me one day and--after--this was then or a little later, and said, 'Look, you have to get off this ITT board.' And I said, 'Well, you know, if I resign from the board, everybody's gonna think that I believe Geneen is guilty or that I'm guilty, so I can't do it 'cause I don't believe he's guilty.' She said, 'You know, you will never be able to work in a Democratic administration again if you don't.' I said, 'Well, I'm not sure that I'm ever gonna be invited in any case, but so be it.'" He also believed his career had been badly damaged by the negative publicity, which was also taking its toll on his family. He and his wife had recently separated, and his three sons were attending a French school on the East Side of Manhattan. "And they would get insulted, not only by the other kids, but by some of the teachers," he explained, adding that insults were along the line of "'Your father is this ITT man.' Because they had no clue what this was all about."

CHAPTER
6

THE SAVIOR OF NEW YORK

N
eedless to say, the relentlessness of the scandal involving ITT and Lazard was not welcome news at 44 Wall Street. Until these hearings, the firm had steadfastly--and successfully--remained out of sight. This had been Andre's strategy, and it had served him and the firm well. But by the early spring of 1972, Lazard's role in ITT's deal making and Felix's testimony in the Kleindienst hearings had put the firm on the front page. The
New York Times
and the
Washington Post,
almost alone, had been reporting about Felix's and Lazard's role in the ITT-Hartford scandal regularly in early 1972, but the reporter Michael Jensen's lengthy article in the May 28 Sunday
Times
Business and Finance section, titled "The Lazard Freres Style: Secretive and Rich--Its Power Is Felt," shined the spotlight on the firm as a whole. "The world of investment banking is powerful and secretive, but probably none of the handful of wealthy financial houses that dominate the field is quite so powerful, or so secretive, as Lazard Freres & Co.," Jensen wrote. The article proceeded to describe Andre's role at the center of Lazard and also noted his extreme preference for secrecy. A former partner told the newspaper that actually Andre was not particularly shy "but simply liked to control what was said about him."

Jensen revealed, in annotated fashion, for the first time the names of the firm's twenty-one general partners as well as seven limited partners, volunteering that they had "no voice in management." Among the partners was a French count, Guy Sauvage de Brantes, the brother-in-law of Valery Giscard d'Estaing, the future French president; the former ambassador to NATO Robert Ellsworth, who was described as being close to President Nixon; C. R. Smith, the former secretary of commerce in the Johnson administration; and Andre's twenty-six-year-old grandson, Patrick Gerschel. Felix, then forty-three, was described as potentially being "Mr. Meyer's heir-apparent."

Ellsworth was a particularly interesting and politically motivated hire. He had been a congressman from Illinois before Nixon plucked him to be ambassador to NATO. He had been friendly with Nixon and also with John Mitchell, and it was Mitchell who urged Felix to interview Ellsworth about joining Lazard. Felix agreed, and when Andre returned from Switzerland, Lazard hired Ellsworth. "Andre was impressed that I was close to the White House," Ellsworth said. Ellsworth was a Republican in a sea of Democrats at Lazard, at the very moment--given the ITT mess--Lazard needed some friends in Republican Washington. But Andre didn't really have a job for Ellsworth, and as he had no experience being a banker, there was a daily shadow dance for a substantive role. Andre suggested that Ellsworth, who because of a chronic back ailment stood behind a tall desk in his corner office, lead something called Lazard International, which was one of those periodic efforts to forge a working relationship between the London, Paris, and New York houses. "Andre didn't know what it really did, and I didn't know, either," he told Cary Reich in
Financier.
"I mean, it was actually ridiculous--the concept of having something called Lazard International. What would it do? Lazard
was
international."

Next, Andre asked Ellsworth to report to him the doings at the annual meeting of the International Monetary Fund and also arranged for him to serve on the boards of both General Dynamics and Fiat. Then they would worry together some more about what Ellsworth should do. "I'd go over to his apartment on Sunday afternoon, and we'd talk about that," Ellsworth explained. "Then he'd say, 'Now we're going to get organized. Next Sunday we'll have Felix over.' So Felix would come over and enter into the conversation, but nothing ever happened." Ellsworth quickly concluded that he was to be nothing but a high-paid promulgator of "trivial political gossip" who might help the firm influence the Nixon administration. After around three years of this nonsense, he left Lazard to go back into government as President Ford's deputy secretary of defense.