The last tycoons: the secret history of Lazard Frères & Co (72 page)

But that was sufficient to suggest that Felix was getting antsy at Lazard, leading to a palpable and discernible shift within the firm: after years of anticipation, the end of the Felix era was at hand. And Lazard bankers were no longer able to ignore just how formidable Steve had become. He sensed it, too, no doubt, and gave up his head of banking position in 1994 in favor of being a senior "deal guy" without any administrative duties. He even replaced his longtime assistant, Cathy Mignone, with Sally Wrennall-Montes, the taller and more attractive assistant of Christina Mohr, one of his less powerful partners. Ken Wilson took over from Rattner as the fifth head of banking at Lazard in six years, which suggested to the professional rank and file that the feuding was perhaps making Lazard unmanageable. When Felix decided not to take the World Bank job, he virtually ensured that, as painful as it was for all involved, his white-hot resentment of Steve would intensify throughout the year.

For his part, whether intentional or not, Steve knew just what to do to make Felix crazy. He continued to elevate his intellectual profile by writing "thought" pieces for the
New York Times.
And then Steve and Maureen started to raise their social and political profiles as well. As a first step, the Rattners and their four towheaded children--Rebecca, the twins Daniel and David, and Izzy--moved across Central Park from the funky and elegant Dakota on Central Park West to the ninth floor of the highly exclusive 998 Fifth Avenue. For this privilege, they paid close to $10 million--what looks like a steal nowadays. The McKim, Mead & White-designed building, built in 1912 as the first luxury apartment house on Fifth Avenue above Fifty-ninth Street, is exceedingly exclusive even by Upper East Side standards. The building once was home to the Astors, the Guggenheims, and the Nobel Prize-winning statesman and lawyer Elihu Root, who was the first fancy to move from downtown to 998 Fifth, paying rent of $25,000 per year. The full-floor apartments are huge, at about five thousand square feet. Michael Wolff, Steve's former colleague at the
Times,
unable to contain his jealousy after a visit there, wrote of the Rattners' apartment: "The elevator opened into a massive foyer that in turn opened into an even larger anteroom (all of these rooms were the size of other people's two-bedroom apartments) that opened into the main gallery running in front of Central Park and the Metropolitan Museum of Art. The room was a careful, muted, just-so green affair, with much elaborate and detailed plasterwork." He failed to mention the apartment's marble.

Among their new neighbors was Joseph Perella, an accountant's son who, like Steve, had risen to the very top of the investment banking profession, first at First Boston, then at Wasserstein Perella. When Perella split with Bruce Wasserstein in 1993, Lazard heavily recruited him to come to the firm. But in the end, Perella chose Morgan Stanley. When the Rattners applied to get into the building, a Lazard partner's wife wrote an unsolicited letter trashing Steve and Maureen. Nonetheless, the Rattners were approved. (In addition to their home on Martha's Vineyard, they own a horse farm in North Salem, New York, in the upper reaches of Westchester County, that they bought after selling their home in nearby Bedford, for $7.8 million, to a partner at the Blackstone Group, where they had moved after selling their home in Mount Kisco.)

Steve was a large donor to his alma mater, Brown University, and had joined the Brown board of trustees. He also was on the board of trustees of Channel 13, New York's public television station (and later became the chairman of the board after Henry Kravis stepped down). Since he had amassed an impressive collection of contemporary prints and the Met was across the street, he joined Michel on that board, too. His friend Arthur Sulzberger Jr. invited Steve to join the board of Outward Bound, which he did for a time. He became a member of the prestigious and highly selective Council on Foreign Relations. The council has been the most powerful private organization in U.S. foreign policy since it began in 1921, with the help of the former Lazard partner Frank Altschul. Felix is also a member. Steve is on the board of directors of the New America Foundation, a Washington-based public policy institute that has as its mission "to bring exceptionally promising new voices and new ideas to the fore of our nation's discourse." He has served on a number of public commissions and committees, including the International Monetary Fund Advisory Committee, the President's Commission to Study Capital Budgeting, and the International Competition Policy Advisory Committee.

And true to her word, Maureen sought to devote her time and energy to public service as well. Until 2006, she was the national finance chair of the Democratic National Committee and, according to
her
biography, is an "active national and international human rights advocate." She serves as a U.S. government representative to UNICEF and as the chair of the Leadership Council on Children Affected by Armed Conflict. The couple, among the very top Democratic Party fund-raisers, became very close to the Clintons, especially during the second term. They once stayed in the infamous Lincoln Bedroom at the White House. They were frequent guests of the Clintons at Camp David. They have given hundreds of thousands of dollars to Democratic candidates around the country and to the party itself, according to public records--other reports put their giving for the Democrats in the millions. The Rattners caused a momentary fillip in the fall of 2005 when they publicly announced their support for the reelection of New York City's mayor, Michael Bloomberg, a Republican, whom Steve believes is the best mayor since La Guardia.

Steve also continued to attract--or to court, depending on your point of view--publicity. In September 1995,
Broadcasting & Cable
magazine featured him in a two-part interview on the state of media and telecom mergers. "The subject is so provocative, and his treatment of it so comprehensive and valuable, that the editors are publishing the Rattner interview in two parts, this issue and next," the magazine purred. The magazine's cover photograph showed a confident and inscrutable Steve, collar unbuttoned on his Paul Stuart shirt, Hermes tie knotted handsomely. The interview conveyed that Steve could be at once
extremely
chatty and remarkably astute--as one might expect--about the doings in the media and telecom industries. He made a number of bold--and correct--predictions: that intense competition among telecom service providers would lead to a financial bloodbath, that cable and radio broadcasting would see further consolidation, and that video on demand would be a powerful force. "Why would you go to a video store if you could call up, five minutes before you wanted to watch it, and get any number of movies to start when you wanted, to play, pause, fast forward, rewind?" he mused. Remember, this was 1995. The interview, which mentioned Lazard not at all, further incensed Felix, although, except for professional jealousy, it is difficult to discern why. He called Michel at home one weekend morning to complain after the appearance of the
Broadcasting & Cable
interview. "Oh, Felix, go back to bed," Michel reportedly responded.

But the publicity coup de grace came in October 1995 when
Vanity Fair,
again, featured Steve in an article about the top fifty members of "the New Establishment," without putting on the list anyone else at Lazard, including Felix. Sandwiched between Esther Dyson (information newsletter guru) and Gordon Crawford (famed media and entertainment investor), at number 43 on the list, was Steve, pictured half smiling with his arms crossed confidently. (He has since fallen to number 99 out of a list of 100.) "There are lots of young, hotshot investment bankers on Wall Street, but in the telecommunications-and-media business Steven Rattner is the hottest shot," the magazine gushed. But in a mere 250 words there was much to feast on for Rattner's growing number of enemies inside Lazard. Among the most incendiary were these: "He keeps secrets like a priest and has a way of putting older men at ease" (neither was true if Felix was to be believed). "He has a Rolodex to kill for, and the guest lists at his Martha's Vineyard parties boggle his clients' minds, helping him win business and press. He flies his own plane, is investing in a disco on Martha's Vineyard with his pals Strauss Zelnick, Dirk Ziff and Carly Simon, and has an expensive art collection, but says money doesn't drive him." And the piece de resistance: "Sniping colleagues say Rattner doesn't like to share his deals with Rohatyn, even though Rohatyn brings Rattner in on his." Even though this wasn't completely true--Rattner brought Felix into the McCaw Cellular deals, for instance--the two men stopped speaking completely. "That last article," Felix said later, without the slightest sense of irony, "was bad for the younger people here"--not that he had ever shown one whit of evidence that he cared about Lazard's younger bankers. "It hurt morale. People who yearn for publicity and exposure don't realize how dangerous it is in terms of business. Clients do not want us to go public on their deals."

Some of the qualities that made people perceive Steve as having a cool side--aloofness, elitism, lack of a common touch--seemed all to be operative in some of the interactions he has had with his neighbors on Martha's Vineyard, one of the two very pricey, hard-to-get-to, and breathtakingly beautiful islands off the southern coast of Massachusetts. Just after Steve started at Lazard, in April 1989, he and Maureen bought a 1930 shingle-style home with five bedrooms on close to thirty-two waterfront acres on Obed Daggett Road in West Tisbury. The purchase price was $1.99 million, which "sounds like a Wal-Mart price, and by today's standards it definitely is," one longtime Vineyard resident said. In December 1990, Steve subdivided the property into two parcels, the one with the house on 10.88 acres, and the other, 21.09 acres of undeveloped land. (In 2001, he transferred the two parcels into Maureen's given name--Patricia M. White--and today they are appraised for real estate tax purposes at $23.2 million.)

By the summer of 1994, Steve found himself tussling with his neighbors over two projects, one of his own making and one not, but both engendered a fair amount of local controversy. In June 1994, he proposed building a 110-foot wooden seasonal pier off Lambert's Cove Beach on his property. The pier, to have been the first along the northern coast of the island in modern times, would lead to a floating dock, where his boats could be tied up. The problem he was trying to solve with the pier was that "our beach has become quite rocky, and particularly when there is any surf, bringing our boats into shore to load or unload our four small children can be a tricky and potentially dangerous exercise." The conservation-minded Vineyarders were quite opposed to Steve's dock. As the proposal was awaiting final approval and as protests from neighbors were mounting, Steve agreed to drop the proposal on the condition that his dozen or so neighbors sign a covenant forbidding the construction of piers along the northern coastline. Although the agreement was never signed, he decided to shelve his plan for the pier.

Meanwhile, a few months after the pier controversy, Steve faced another problem. His immediate neighbors to the east, Margaret Smith-Burke and Cary Hart, wanted to develop their eighty-one-acre parcel on Vineyard Sound. The idea, approved by the West Tisbury Planning Board in 1995, was to subdivide the eighty-one acres into four lots, three of which could have one house on them and one of which could have two houses. Steve had opposed the development, such as it was, every step of the way.

But after the planning board ruled against him, he took the additional step of filing a civil lawsuit, on October 4, 1995, in Dukes County Superior Court against the planning board, Smith-Burke, and Hart. The gist of Steve's lawsuit was that the owners of the new homes in the subdivision would be using the same dirt road that he used to get to his house. He complained that the dirt road was not suited to the extra traffic. The case went through the system for four years until Steve fashioned on a brilliant and unique solution: no doubt at Steve's suggestion, Brian Roberts, his longtime friend and client at Comcast, bought the whole property and put an end to the dispute. In July 1999, two Philadelphia attorneys, on Roberts's behalf, bought the eighty-one acres from Smith-Burke for $12 million, and then Roberts had constructed on the property a sixteen-thousand-square-foot home designed by the architect Robert A. M. Stern.

That matter solved to his liking, in March 2000 Steve rekindled his effort to build his controversial pier, this time at 130 feet in length and 320 feet farther east. Not surprisingly, the new pier project once again engendered much vocal opposition. "Being tone-deaf comes with the territory," one of Steve's Martha's Vineyard neighbors said about him. By the time a public hearing was set for October 2000, Steve had decided to change the proposal from a 130-foot pier to a much smaller, 24-foot pier that would connect with a seasonal floating metal dock that he already used. The new pier would, he said, allow his family to get to the floating dock "without having to wade through three feet of water" at high tide. Steve was the only person to speak at the hearing in support of the pier. Those opposed were outspoken and presented a petition with two hundred signatures against the building of a pier. Even his neighbor Brian Roberts was said to oppose the project. In the end, in December 2000, the Martha's Vineyard Commission voted 9-1 against even the slimmed-down pier.

Once again, though, Steve took refuge in the legal system. In early January 2001, his attorney filed a five-page complaint in Dukes County Superior Court asking that the commission's decision be reversed and the pier project approved. The commission voted again to reject the pier in June 2001. While Steve continued to press his case, he unwittingly galvanized an unprecedented coalition against any future piers or docks jutting into the water on the north shore of Martha's Vineyard. The conservation commissions from the four towns that border the north shore voted to preserve the shoreline and keep it free from piers and docks. The Martha's Vineyard Commission then voted unanimously to recommend the designation. Slowly but surely, voters from each of the four towns approved the designation, with Steve's hometown of West Tisbury approving the measure 59-7 in March 2002, effectively killing Steve's effort to build the pier.