The last tycoons: the secret history of Lazard Frères & Co (51 page)

The
Journal
piece even went so far as to state, without qualification, that Felix was no longer "as influential at Lazard as he once was." This observation had started to appear with some regularity in the media during the early 1980s. True, as competition among investment banks for M&A business had intensified, Lazard missed some deals that in the past the firm would rarely have missed. So competitors felt freer to take the occasional potshot at Felix, albeit always anonymously. And certainly, some partners inside the firm would not have been unhappy to see Felix take a nick here and there, despite how fabulously wealthy he was making them all. In truth, though, Felix had lost none of his power and influence at Lazard. He was still by far the firm's dominant rainmaker. Furthermore, his decision to fix his stake of the profits at 6 percent, far less than he was entitled to, meant that his partners all got paid more than they deserved. And this fact alone made his behind-the-scenes manipulation of people and events at Lazard as effective as ever.

Indeed, if there was even the slightest doubt about the length of Felix's shadow at the firm, and beyond, in the second half of 1984 two slavishly fawning cover stories in national magazines about him--and him alone--definitively put the lie to all the wishful, envious thinking among his competitors and partners. But all the attention on Felix probably made them all the more envious and wishful. In the first article, Felix allowed the best-selling financial writer David McClintick to follow him for ten days as he jetted around the United States, France, and the Middle East. The resulting piece in the
New York Times Magazine
was titled "Life at the Top: The Power and Pleasures of Financier Felix Rohatyn." Even though McClintick confessed that Felix "was very reluctant to allow this reporter to travel with him, and agreed only after two days of fitful ruminating," what followed was a breathless account, in diary form, of the world according to Felix.

Here, in living color, was the Jewish refugee Felix cavorting "in a tan wool jacket, a navy crew-neck sweater, a white shirt with open collar and light beige corduroy slacks" at the Rohatyns' annual Easter egg hunt at his Southampton spread with the Gotbaums, Kissingers, Paleys, and Oscar de la Rentas. Every so often, the host would excuse himself to take a call from Leslie Wexner, then as now the founder, chairman, and CEO of Limited Brands, the large retailer. When McClintick started following him around, Felix was in the midst of advising the Limited on its hostile $1.1 billion bid to acquire Carter Hawley Hale Stores.

The Limited deal became the leitmotif of the piece. There was Felix flying to Los Angeles to testify in some Limited-related legal proceeding. When that didn't happen, he turned around and flew back to New York, where he collected Liz, and together they took the Concorde to Paris. In the Concorde lounge, they chatted up Philip Beekman, the president of Seagram, about some unexplained trading in the shares of Colgate Palmolive and wondered if Seagram was about to make a bid. Both Seagram and Colgate were Lazard clients. The Rohatyns declined the pre-takeoff champagne cocktails but went for the fresh caviar and a glass each of iced vodka. Felix was going to Paris to speak with the French president, Francois Mitterrand, a close friend. Once there, he shared with him some informal and unofficial advice about what was going on in the United States. Then Liz joined them for lunch. Afterward, they visited a Pierre Bonnard art exhibit. A stroll around the city was canceled so Felix could return to the Hotel Lancaster, off the Champs-Elysees, to participate in a conference call about the Limited deal. There was a visit, the next day, to have coffee with his mother and stepfather at their spacious apartment, just off the Place du Trocadero.

Afterward, the Rohatyns were tracked as they flew to Jerusalem for a withering procession of meetings to help raise money for the Israeli Museum, where the Dead Sea Scrolls are kept. There were visits with Teddy Kollek, the mayor of Jerusalem, and a banquet at the Knesset. At each event, the Rohatyns were treated like royalty. (Liz, after all, had once appeared alongside the future First Lady Jacqueline Bouvier in an East Hampton, New York, fashion show.) Various sightseeing tours were canceled for the ubiquitous calls back to New York for the Limited. But there was time for a visit to Yenon, a settlement of about six hundred Jews from Yemen, about an hour southwest of Jerusalem. The Rohatyns were introduced to the village elders with much enthusiasm. And then the dancing began, with Felix and his bride quickly joining in with the hora, a traditional Israeli wedding dance. No doubt exhausted himself, McClintick observed: "A week and a day after his frequently interrupted Easter egg hunt, five days after a quick trip to Los Angeles and back, barely two days after arriving in Israel from France and 24 hours before he must board an all-night flight from Tel Aviv to New York, the world's most eminent investment banker is dancing like a teen-ager." As they say in the biz, you can't buy that kind of publicity.

The Limited would eventually fail in its effort to win Carter Hawley Hale. But given his continuing concern about his fellow bankers' behavior in this and other hostile deals, he used the
Times Magazine
platform to rail, once again, against his chosen profession. "I guess I'm getting to be like a friend of mine, a very successful defense contractor, who says to me, 'It's more and more difficult for me to run my business because I don't believe in the defense budget.' Sometimes it's getting more and more difficult for me to do the things we do, because in the last analysis, I don't think that's what I want on my tombstone."

What he did want on his tombstone, of course--former U.S. secretary of the Treasury--was also a topic of discussion between Felix and his muse. "This is my time," he told McClintick when asked about his interest in a cabinet position. "There's going to be an enormous amount of financial engineering required to redo the national and international financial systems that have grown out of control and are going to have to be put back together. It won't necessarily be me, and I truly don't yearn for it, but it'll be people like me"--and then he made his pitch. "There are going to have to be people involved in public policy who understand financial structures, and who understand the relationship between financial structures and the real world. There are lots of people who understand financial structures but who don't understand the real world, and vice versa. At least I've had experience with both." The
Times Magazine
article followed on the heels of the publication of his collected essays and speeches, which itself spurred a wave of media focus on Felix from
CBS Morning News, The MacNeil/Lehrer NewsHour,
and, according to McClintick, the possibility of
Time
putting him on the cover. (It never happened.)

Then, as if all that were not enough, four months later, in December 1984, Felix appeared on the cover of
Institutional Investor,
the industry trade magazine, doing his best imitation of Fred Astaire. Felix appeared in white tie and tails, top hat and dancing stick. "Felix: The Making of a Celebrity" the cover screamed. Finally, in one neat package, was the Felix phenomenon captured in all of its deconstructed complexity: the consummate deal maker, the media manipulator, the social doyen, and the frustrated wannabe high-level political appointee. Clients and rivals weighed in on his supremacy as a corporate adviser. "I am satisfied with the counsel Felix gave us," commented Leslie Wexner, despite the Limited's failure to win its prize, "and I would use Lazard again for other acquisitions"--something Wexner did repeatedly from then on. "You can't underestimate the longevity factor," said a competitor from Lehman Brothers. "Felix has been doing deals since I was in second grade." And there was the requisite homage from one of his partners. "His mere presence at the firm helps me wherever I go in the world," purred Lou Perlmutter. "I may bring in a new client, but the fact that he's one of my partners is very important."

The competitive daggers were out in full force, though, when it came to commenting on the surfeit of Felix's fawning press coverage. One competitor chirped: "When he sneezes, the
New York Times
gets a cold." The iconoclastic
Washington Monthly
was quoted wondering just how Felix does it: "What is it about Felix Rohatyn? Is it an elixir that wafts from his pores? He has become the 1980s version of Henry Kissinger, the powerful figure whose mere presence stupefies usually capable journalists." The answer is simply, like Kissinger, Felix worked--and works--hard at carefully managing his persona, working far harder at it than he leads anyone to think he does. And hard and time-consuming work it is, too. He benefited immeasurably, of course, from his understanding with Michel that he
alone
would be the public face of Lazard. He wooed reporters with pithy quotations and unalloyed access. Among the all-time favorites was his description of what would happen to New York City if the city's officials didn't get serious about the looming fiscal crisis: "Bankruptcy is like stepping into a tepid bath and slashing your wrists. You might not
feel
you're dying, but that's what would happen." He also socialized with leading reporters, columnists, and editors, inviting them for meals at the Four Seasons, the Regency Hotel, Elaine's, "21," or his Fifth Avenue apartment to discuss the weighty issues of the day.

He also made good copy, since he seemed willing to take contrarian and controversial positions, on the record, whether about public policy or the investment banking profession. But he also kept after reporters, working them relentlessly with a combination of charm and exactitude to convey his views until the moment of publication made his further effort irrelevant. Felix's mastery of the media was a potent and effective cocktail that pushed his profile higher and higher. With tongue firmly planted in cheek, the
Institutional Investor
editors put together "The Felix Index," which tracked Felix's press notices and assigned them points depending on whether they were mere mentions--1 point--or a major cover story or profile: 20 points. The chart rises from a score below 10 in 1970, when ITT's hostile deal for Hartford started, to something like 150 in 1984, with the rash of cover stories and the publication of his book. Felix took it all in stride. "Certainly over the past ten years I have had an extraordinarily supportive press," he said. "I've gotten beaten up on occasion, but that has been the exception."

Perhaps no banker ever, not even J. P. Morgan in his day, had lavished on him the amount of favorable ink that Felix now garnered. The irony, of course, was that all of this publicity and political positioning came at the outset of Reagan's second presidential term--and there was never even the slightest chance Felix would be part of a Republican administration, let alone one as conservative as Reagan's. And as had been cataloged endlessly, Felix was increasingly bored with doing deals and, apparently, had little ambition to make more money than he already had. The reaction inside the firm to the Felix publicity parade was predictably schizophrenic: on the one hand, having Felix and Lazard featured so prominently was great for business, which meant that all partners would benefit financially; but on the other hand, there was increasing resentment, as the firm grew, over the fact that no one seemed to recognize that Lazard was becoming far more than just Felix. There was also a general sense that perhaps enough was enough. "I have compared him to a great fish," Mayor Ed Koch said at the time. "A great fish that leaps from the ocean into the brilliant sunshine so that everybody can see his beautiful golden scales. And that's all right, that's reasonable.
But every day?
"

BUT EVEN AS Felix continued to preen, there was no challenging Michel. The creation of Lazard Partners not only solidified his control but also gave him an added patina of authority for having pulled off the unexpected. A few months after the ink was dry on the Lazard Partners deal, Michel maneuvered Ian Fraser out as chairman of Lazard Brothers. He looked Fraser "straight in the eye" and told him, as if he weren't even there, "Ian Fraser is a brilliant deal maker but he is a lousy administrator," and then threw in for good measure that "next time we must have a good manager." John Nott, the defense minister in Margaret Thatcher's government and during the Falklands War, succeeded Fraser. Michel also seemed content, for the moment, to allow Felix to get the public glory while he added to his already enormous wealth.

And there was no arguing with the firm's performance under Michel's leadership. Lazard was making lots of money, and so were its partners. The
Wall Street Journal
reported Michel made $50 million in 1983, and that his net worth was north of $500 million. This fact, along with section 4.1 of the partnership agreement, made Michel's power absolute. But Lazard was still not functioning, from a management point of view, the way other, more professional, less idiosyncratic Wall Street firms were. Hiring was haphazard. Mentoring and training were nearly nonexistent. Internal financial controls were archaic at best. Every important decision--compensation, partnership percentages, promotions, senior-level hiring--required Michel's sole approval and sign-off. For all practical purposes, Michel had pretty much retained Andre's "sole proprietorship" approach to running the firm, even if there was now a velvet glove on the iron fist.