The last tycoons: the secret history of Lazard Frères & Co (65 page)

In taking this unusual step, Loomis became preoccupied with how it would be perceived by the other partners, as the list of partner percentages circulated each January was proof positive of whose star was rising and whose was falling. "As importantly, I want you to know before you review your list further with other partners," he continued. "This should not appear in September as an apparent outcome of any particular conversation. My decision is, in fact, independent of conversations and events this fall." In truth, Loomis's decision was hardly voluntary; he was shoved aside by the firm's more powerful partners, whom he had systematically alienated. "There was a cabal that came after him," one partner remembered. "I think Rattner was a part of that. Mezzacappa was definitely part of it. And Felix was part of it.... They thought he was a do-nothing partner who took a lot of money out of the place."

Not the slightest inkling of this Sturm und Drang filtered down to the rank and file in the firm. Which is probably as it should be. Certainly, the associates knew the firm was basically dysfunctional, not as a commercial enterprise to be sure, but rather as a social community. Internal calls to peers would often go unreturned. There was little cooperation among the three houses. Partners always seemed to be angry at one another or rarely spoke. Partner meetings were infrequent and accomplished little. There was a widespread feeling among the bankers that Loomis played favorites, promoting his acolytes at the expense of those less attentive. "There absolutely was a cult of Bill," Kim Fennebresque said, in a typical rendering of the "FOB" phenomenon. "I had drunk the Bill Loomis Kool-Aid big-time from the day I got there, and I thought everybody did, but it turned out that Bill had engendered some enmity, which surprised me." Mezzacappa thought Loomis's habit of playing favorites drove some good people to leave the firm. "I think Bill does have qualities of leadership," he said. "But he punished people who didn't support him, which was an extraordinarily mean thing to do if you are a leader. I remember when Bill took over banking there were certain guys who were in and certain guys who were out. Just extraordinary. You can't do that."

Habitually, like a swallow to San Juan Capistrano, Michel returned to Manhattan from Sous-le-Vent after Labor Day. His return signaled the start of the annual groveling about compensation. That was to be expected. What was unusual in 1992, though, was the terse, Kremlinesque memorandum Michel distributed to the banking group on September 22. "Steve Rattner and Kim Fennebresque have accepted, after consultation with Felix Rohatyn, to take on responsibility for coordinating the Banking Group," the memo began. "Obviously this will be done in concert with Felix Rohatyn and Bill Loomis as well as myself. Bill Loomis has agreed to take on additional responsibilities regarding the coordination of the 3 Houses and international business, which is increasingly important to us. Bill will also devote more time to developing business. Because both Steve and Kim will continue to work with clients, it will be important for everyone to give them their fullest cooperation. I hope and expect that we will thus all meet the challenges of a relatively difficult period."

Although plenty amorphous, this news shot through the firm like a bolt of lightning. In the imperious Lazard partnership, the always inscrutable and enigmatic Loomis was one of the few relatively accessible authority figures. Not only had he had a hand in hiring most, if not all, of the junior bankers then at the firm, but he also seemed to be one of the few partners who at least gave an impression of caring for them. But even this was a mirage. Whether it was Rattner, Fennebresque, or Loomis running banking didn't much matter: pay for midlevel nonpartners continued to be relatively low compared with other Wall Street firms, and the grunts that passed for performance reviews were equally disappointing. Indeed, in 1991 more than one associate received no performance review at all from Loomis and was able to calculate the amount of his annual bonus only by grossing up for taxes his bank account balance after it was spit out of a Rockefeller Center ATM machine one late December day. "What the fuck was that all about?" Fennebresque remembered wondering at the time.

Indeed, there was always a Kafkaesque quality to the annual performance reviews, which merely added to the firm's iconoclasm. Unlike other investment banks, Lazard never asked junior bankers (let alone partners) for a written self-assessment of performance in any given year, nor was it ever clear to the junior bankers whether the partners had ever been asked to put performance assessments in writing. Certainly, no such evaluations were ever shared. Rather, year after year the heads of banking always told at least one associate the same thing: You are doing an excellent job, but unfortunately you are working for the "wrong" partners--a message taken to mean that there were Great Men at Lazard, and not so great men, and that the poor soul had better figure out a way pretty darn quick to start working for the Great Men if he was ever to have a chance of becoming a partner. Of course, he had very little control over whom he worked for or on what assignments, and so was left with a bit of a political Catch-22, Kafka-style.

For his part, Steve took the news in stride. He recalled that after Felix "decided he was going to decapitate Bill," there was a "big leadership vacuum," and since "I had done a couple of big deals, they asked me to head banking. I said I wasn't going to do it alone. Kim was very close to Bill and Bill wasn't happy. I figured having someone with another set of relationships within the firm doing it with me would be a good thing." He had not known Fennebresque very well at all up to that point, although now they are the best of friends. "While I wasn't sure whether we would work well together, I felt that having a partner in this venture was more likely to lead to success than not. I think I was right about that but not right enough to make it work."

Fennebresque was positively stunned by--and considerably wary of--the news that his good friend Loomis had been demoted and that he had been asked to take his place. "Someone told me Loomis was going to be out as head of banking, and I was so not plugged in I said, 'Pffft. Not a chance,'" he said. "I said it totally unencumbered by the facts, but I said it with some conviction because it was unimaginable to me that Bill would be out. But at one point, Michel called me into his office and said, 'We're going to make a change. Bill is going to go back to being just a banking partner, and I've asked Steve Rattner to run banking, and he has told me he won't do it unless you do it with him.'" Fennebresque asked Michel if he could think about his answer; Michel gave him the rest of the day. He said he wanted to think about the new assignment because "I didn't want to do it. I didn't want to do it. I had been in management before."

He knew Steve a little bit by this time. He had first met him when Steve was thinking about leaving Lehman and Fennebresque interviewed him at First Boston. And Maureen, Steve's wife, had known of Kim from her days working at First Boston "because I was a colorful and funny guy," he said. But for Fennebresque there was also the problem of his friendship with the now-deposed Loomis. "I used to go by and see him every day, literally," Fennebresque said. "Just to smoke cigars and bullshit together. For all the acolytes and sycophants around Bill, I was his best friend in short order." And there were concerns that Felix didn't particularly like Fennebresque and resented the way Loomis had engineered his arrival at the firm. "I mean, what the fuck?" Fennebresque said. "I went to see Bill, and he said, 'Kim, I told Michel I didn't want to do this anymore. I told him this a month and a half ago.' And of course, I didn't know all the intrigue that led to that, but he said, 'I don't want you to give this a second thought. This is a good opportunity for you, and you should do it. I want you to do it. You have my blessing.'"

Fennebresque said he quickly left the building without speaking with Steve for fear that Michel would call him back and insist that he take the job then and there. He met his wife and another couple for dinner.

I was unbelievably morose at dinner, and no one could figure out why, and my friend said, "What's wrong? What's the matter with you?" I was just stunned. I was stunned by being there just eighteen months. I was shocked by Bill. The whole thing shocked me. It made no sense to me. So I told my friend what happened, and he said, "That's great!" I said, "No, this is the beginning of the end of my time at Lazard." He said, "Why?" I said, "Because it's not the kind of firm, especially in banking, where management takes you anywhere. The guy who runs the firm has his name on the door. I'm not getting his job. I'm going to have this job, and then I'm going to get thrown out or thrown back into the population or leave because I'm miserable or something. But this dog is not going to hunt, and I don't want to do it."

Despite his better judgment and instincts, what choice did Fennebresque have? Michel wanted Steve to take the job, and Steve wouldn't take it without Kim, so Michel basically insisted that Kim take the job. Not only had he been at the firm a brief time; he had not really produced much business, either. "Steve Rattner was a luminary and I wasn't," he said. He knew there would be a rash of undefined envy, especially from the Loomis loyalists. ("Kim used that position to aggrandize himself to an extent" was the typical refrain of one partner close to Loomis.) There was also the difficulty of the job itself. "I thought managing the Lazard partners was like herding cats," he said. "I described it once to someone as when you are the managing partner of the banking group at Lazard, your job is to throw chum in the shark tank and try to stay in the boat." And then there was the matter that although the press release read that Steve and Kim were co-equals, such was not even close to being true. "I had zero illusions about that," Fennebresque said. "It was Batman and Robin. But Steve Rattner, to his credit, for which I will be undyingly grateful, always played it like we were equals."

Since no one expected banking to change much regardless of who ran it, the two aspects of this unexpected news (unless you had been privy to the confidential memos) that really got people talking were, first, the acknowledgment of Rattner's continued meteoric rise and, second, just who the heck was this guy Fennebresque, anyway? Rattner's rise into this thankless role was not surprising given how much business he was bringing in; he exuded confidence and connectedness, and there was that inevitability to him. Steve had learned at Morgan Stanley the kinds of things the best firms did to get that way, and he was prepared to try to implement some of those at Lazard. "Virtually every reporter thinks he'd be a great editor and wants to be an editor because he thinks it's more interesting," Steve said. "And virtually every banker thinks he should be running something. I was not any different in that respect. I didn't have huge ambitions, but I had been a banker for ten years at that point, and there was clearly a vacuum of leadership at the firm."

Fennebresque was a different story. He seemed nothing more than a (most un-Lazard-like) stereotypical 1980s "Master of the Universe" banker: the tall, lithe, articulate Fennebresque, with a wicked sense of humor and permanently slicked-back hair, had spent fourteen years at First Boston, where, he said, "Bruce was king the whole time," referring to Bruce Wasserstein, the firm's M&A rainmaker. But behind that facade was not only a remarkably decent person but also one whose confidence had been badly shaken during the market meltdown. He had been named one of First Boston's fifteen "franchise partners." But in November 1990, First Boston fired him. "I got fired partially because I had a big mouth and partially because the place was hemorrhaging and coming apart and they wanted some blood and I was senior blood so they took me out," he explained. He was forty years old, married, with kids--and terrified. When First Boston went private in 1988, he had been strongly urged to buy stock in the firm using a seven-figure loan from the company. The value of the stock quickly decreased, but the loan was still payable. He was in financial distress. "Everyone was dying," he explained. "Every morning you'd pick up the paper and read that Merrill Lynch was laying off five thousand more people. It was awful. A terrible time to find a job." He had been looking around for something new for only a short time but was increasingly depressed about his future.

Thanks to some behind-the-scenes communication between his wife and Loomis's, though, Loomis called him that November and invited him to lunch at the China Grill on West Fifty-third Street. They discussed Fennebresque's plight. When he got home that night, he found a long handwritten letter from Loomis waiting for him. "The letter was unbelievably touching," he recalled. But he still thought there was little chance of his being hired at Lazard; after all, Lazard was an M&A shop, and Kim had focused on financing LBOs at First Boston--plus, he was unemployed. Two weeks later, Loomis called and told Fennebresque he had been speaking to Michel about him. "I wonder if you would like to come by and see him and spend half an hour?" Loomis asked. "I told him you were someone he should know and he's someone you should know." He told Loomis of course he would come by and see Michel but thought, "I need a courtesy interview like a hole in the head. I'm looking for a job and this is a bad time to find one and I can't waste my time. But Bill Loomis has been unbelievably kind and I'm going." As he walked across Fifth Avenue in front of Saint Patrick's Cathedral from First Boston's office on East Fifty-second Street, he ran into George Shinn, then chairman of First Boston. He greatly admired Shinn--"The only hero I've had in business," he said--but hadn't seen him in a few years. They had a conversation about Fennebresque's new forlorn status during which Shinn told him everything would be fine, even though things at that moment looked particularly bleak. "I was raised Catholic," Fennebresque explained. "I am no longer a Catholic, but as my wife says, 'Once you are a Catholic, you are always superstitious.'" He walked into Michel's office at the appointed hour "and I sit on his couch and he's sitting in his chair and there's a big, not elegant--especially for a man who is the personification of elegance--hardware store kind of clock on the wall. And I sit down at 4:30 and the clock starts going around and around and the next thing I know it's 7:05 and I say to myself, 'Here I am, an out-of-work stiff, spending two and a half hours with Michel Fucking David-Weill. What's this all about?'"