One of the world’s oldest and most prestigious private investment banks, Lazard Freres has been gripped by a clash of civilizations. In one corner is the aristocratic chairman, Michel David-Weill, who regards Lazard as his patrimony; in the other is the brashly brilliant American C.E.O., Bruce Wasserstein, who wants to take the bank public. Probing the motives and machinations of both men, VICKY WARD examines their unlikely partnership and the standoff that ensued.
On December 6, 2004, as winter’s first chill was freezing the streets of Paris, the atmosphere inside a conference room in the offices of Lazard Freres, one of the world’s oldest blue-chip investment banks, was even colder. At the pearwood table sat Michel David-Weill, the impeccably dressed 72-year-old chairman of the bank and its largest shareholder, a man renowned throughout the international business community for his mental agility, his inscrutability, his interesting living arrangements, his charm-and, on occasion, his coldness. David-Weill is the owner of a celebrated art collection of classical and modern art. The company his ancestors founded in 1848 in New Orleans is sometimes referred to, on Wall Street, as the Louvre of investment banking.
To his left at the meeting sat Lazard’s C.E.O. of the past three years, American-born Bruce Wasserstein. Short, rotund, his suit rumpled as usual, Wasserstein, 57, is famous for two things: his aggressive and inventive deal-making, and his co-founding of Wasserstein Perella & Company, the advisory firm he sold to Dresdner Bank for $1.37 billion in 2000-almost half of which went into his own pocket. Less than two years later, in the fall of 2001, he walked away from Dresdner Kleinwort Wasserstein into the welcoming arms of David-Weill. When a senior Wall Street media banker received a prestigious deal-making award that year in New York, he made this joke to the assembled group: “Really this should go to Bruce Wasserstein. Because I did a deal for a client; Bruce did a deal for himself.”
Wasserstein’s chutzpah has earned him the nickname “Bid ‘Em Up Bruce”-which he apparently dislikes, but which supposedly so appealed to David-Weill that he “wanted to collect Bruce like a trophy painting,” according to a person who knows them both.
But soon after David-Weill got Wasserstein on board, the stark contrast in the two men’s personal styles caused their relationship to deteriorate into open warfare. The Paris meeting was a rare public appearance together after nine months of bickering, often via snarling memos, over Lazard’s finances, governance, and future, to the firm’s working partners, who, among them, own 64 percent of the firm. The meeting had been convened at David-Weill’s suggestion, and Wasserstein went along with it, according to someone familiar with the circumstances, in order to give much-needed clarity to the situation, which had wrecked morale and exacerbated employee tensions.
That morning a statement, supposedly representing a cease-fire, had been released to the press. It stated that Wasserstein would try to float Lazard on the market and that he had a year to do so; if he did not succeed by the end of 2005, then David-Weill could fire him nearly a year ahead of the termination of his original, five-year contract. “There are clearly two different points of view, and intelligent people sat down and worked out a resolution of it,” says Marty Lipton, a lawyer whose firm, Wachtell, Lipton, Rosen & Katz, has represented Wasserstein’s companies. But even the two men’s titles at the top of the statement reflected an uneasy distribution of power: while David-Weill was described as the chairman of Lazard, Wasserstein was its “head.”
David-Weill acknowledged that he and the “historical partners”-wealthy investors, including descendants of the firm’s founders, known as “the capitalists,” who among them own 36 percent of the stock-wanted to keep Lazard private. If it went public, that would make him “mostly sad,” he said. He also complained about the way in which Wasserstein had gone about rebuilding the business- spending vast sums to attract new partners, which, he claimed, had resulted in reported losses of around $150 million in 2003.
Wasserstein admitted to those in the room, according to Wall Street Journal reporters, that, yes, he had spent money-but this, he said, was necessary to build an “extra steel beam and cement support.” Perhaps he meant this not just metaphorically. One of his early moves was to remodel Lazard’s shabby offices in Manhattan’s Rockefeller Center, building for himself a vast office with an adjoining conference room the size of a basketball court, according to one person. He also moved the humdrum London headquarters from the dated and “backwater” bureau in Moorfields, in the City of London, to Mayfair. “It’s the flashiest building you’ve ever seen, with pure wood on all the walls … completely faceless, not one dot of character in it, worse than a modern hotel,” a former employee complains.
“I wasn’t consulted about how the house was reconstructed,” David-Weill told Wall Street Journal reporters. “I had one power, and that was to be unhappy.”
When David-Weill hired Wasserstein, in the fall of 2001, he struck the kind of deal that had not been offered to David-Weill’s previous heirs apparent, who included such financial rock stars as Felix Rohatyn and Steven Rattner. By late 2001 the latest steward, William Loomis, had proved unable to navigate the firm’s treacherous political waters. Lazard was in shambles. One current senior executive says, “Bill Loomis was eaten for breakfast by his partners in New York City.”
Lazard’s pay structure, with its equity-ownership cap (which Wasserstein soon abolished), had caused good people to leave in droves. In 2001, Lazard had fallen from 8th to 12th in one mergers-and-acquisitions league table. In addition, David-Weill was getting older and globe-trotting less, and he had no obvious successor. After the downturn caused by September 11, the bank was perceived to be on the knife-edge.
So when Wasserstein met with David-Weill in 2001, he knew he had unprecedented leverage. “He knew they needed him more than the other way around,” says a friend of his. Wasserstein eventually signed a contract that gave him absolute control over all three branches of Lazard, in Paris, London, and New York. David-Weill was left with only two weapons-the control of the board and the right, as the largest shareholder, to veto a sale or public offering. But, according to a person familiar with the situation, David-Weill felt he could rely on the capitalists to back him on key decisions.
However, in December 2004, Wasserstein told Wall Street Journal reporters that he wanted to “avoid the history of ambiguity of authority between Michel and previous managers.” He therefore deliberately did not consult David-Weill about whom he was hiring and what it cost.
“He was stacking the deck,” says another of Wasserstein’s friends. He fired many of the Old Guard-particularly in London-and imported new partners, many of whom were former colleagues, such as Jeffrey Rosen, now deputy director; Michael Biondi (brother of former Universal C.E.O. Frank Biondi), now co-chairman of investment banking; and Charles (Chuck) Ward, president. By promising them equity and guaranteed bonuses worth millions of dollars, he was ensuring their loyalty.
Finding himself virtually powerless, David-Weill competed with Wasserstein over trivial things, including “who had the most secretaries, the biggest office,” according to a former Lazard executive. (David-Weill’s spokesperson says that “these claims were nonsense and personal relations between the two men remained elegant.”) It was reported that by the beginning of this year David-Weill and Wasserstein were barely speaking, though a Lazard executive insists that this is an exaggeration.
In May 2004, David-Weill sent a memo to the partners (a memo which was also leaked to the media), accusing Wasserstein of incurring losses of $150 million and stating that the year’s accounts could not be approved. Wasserstein fired back a memo, retorting that this was not true-the accounts could be approved under U.S. standards-and that Lazard had a profit of $249 million before distribution to partners. David-Weill’s memo was to be treated, he said, with “grace, humor and tolerance.”
The battle lines were drawn. Wasserstein, according to Lazard colleagues, decided that there was only one way to deal with the problem: get rid of it. If he floated Lazard on the market he could buy out David-Weill’s and the capitalists’ interests. Wasserstein called in his closest advisers and worked on a plan, which was presented in September. It met with resistance, some of it potentially damaging from a public-relations perspective. Gary Parr, the star mergers-and-acquisitions (M&A for short) banker whom Wasserstein had hired away from Morgan Stanley in April 2003 for millions of dollars, and who in 2004 had pulled off Lazard’s biggest coup-the merger of Bank One with J. P. Morgan Chase, worth $58 billion and bringing in $20 million in fees for Lazard-was not happy with the idea of the firm going public. It is said that he told several Wall Street peers that if he had wanted to work for a public company he would have stayed at Morgan Stanley, where he had been vice-chairman.
Also against Wasserstein’s plan was Gerardo Braggiotti, the former senior partner at Mediobanca and the generator of much of Lazard’s European business. Backing him were Ernst Fassbender and Malcolm Thwaites, the head of the German investment-banking division, and a handful of others, who, according to The New York Times, accounted for 25 percent of the bank’s advisory revenues last year. “Initially there were concerns that the economic structure would hurt the non-French, non-U.K. European partners,” explains a New York executive. (In other words, there would be tax consequences.)
Things were made even trickier when, as negotiations got under way, David-Weill stipulated that he and the capitalists could be bought out only for $1.6 billion-a sum considered to be significantly higher than the estimated market worth of their shares-and also that the majority of partners had to be on board. But “it’s too simplistic to say this is about money for Michel,” says a senior Lazard executive. “This is his birthright. He inherited it from his father. He’s run it. To let go of it I think is tied to mortality.”
The idea of taking Lazard public was not an easy sell, even to those with no ax to grind. To finance a flotation, Wasserstein told the working partners, they would have to take pay cuts to make the shares more attractive to outside investors. Bonuses and compensation costs, it emerged in subsequent filings with the Securities and Exchange Commission, had to be capped at 57.5 percent of operating revenues, as opposed to 81.5 percent of operating expenses in the first nine months of 2004, and the partners had to commit to staying at the bank for at least two years in order to realize the benefits of an I.P.O.
Inevitably, there was grumbling. However, eventually, with the exception of Braggiotti and a dozen others in Europe, Was-
serstein won the working partners over, in the main, according to sources, because they could see no alternative. If Wasserstein left, who would lead the bank? Few wanted David-Weill to return to the helm. “He may have passed his sell-by date,” says a friend of Wasserstein’s. While there is huge respect for Braggiotti, says one executive, “you can’t have a European run the New York office.”
Then, in late October, just as the paperwork was being readied for the necessary filings with the S.E.C., David-Weill threw another wrench in the works: he sent an e-mail to Wasserstein and partners stating that he would agree to the I.P.O. only if Wasserstein could achieve it by June 2005. According to sources, Wasserstein, who is not a man given to showing much emotion, was astounded. An avid chess player since boyhood, he saw this in terms of “check,” according to one friend. “Everyone then knew this was a stress sell,” says a Lazard employee. “It was damaging.”
Wasserstein had to make what is arguably the highest-stakes calculation of his career: was he, to put it in the words of one of the few people he talked to about such matters, dealing with a “Frenchman who was prepared to destroy his company and lose millions of dollars rather than cede control of it,” or at some point, given the enormous sum of money on the table, would the Frenchman “blink”?
“In the end,” says this friend, “he bet that David-Weill would blink.”
Shrewdly, he promoted veteran Lazard banker Steven J. Golub, who has known both Wasserstein and David-Weill for many years, to vice-chairman. Over the ensuing weeks Golub smoothed the way between the two men, so that the December compromise was reached, extending Wasserstein’s window by six months.
The company filed to go public on December 17, 2004, although the initial filings did not contain the details that many were eager for-namely, the salaries and expenses of the partners. Reports subsequently stated that Wasserstein would try to push through the flotation as early as March.
Wall Street veterans sat back in their offices and speculated about whether Wasserstein could pull it off. “Ultimately it will come down to the market and if it’s viable -and right now the market is hungry, although that could change at any moment,” says Steven Rattner, the Lazard veteran who is now managing principal of Quadrangle Group, a private investment firm.
If the I.P.O. does not go ahead this year and Wasserstein is fired, the damage to his reputation will be incalculable, and as Lazard’s second-biggest individual shareholder, he will also pay a financial price if the stock plummets because of the internal turbulence. “If you can’t carry the firm as a C.E.O., then that’s very telling,” says a former colleague of his.
It would also mark the end of Wasserstein’s dream. He once said that he wanted Wasserstein Perella to be the Lazard of the 90s. To run Lazard as a public company would make the Brooklyn-born, self-made financier an international figure. “Bruce doesn’t want to be just another rich guy walking around,” says a friend. “The trouble is, nor does Michel David-Weill.”
During the reporting of this article there were many people who said, “I wouldn’t bet against Bruce.” But in almost every case, that was followed by a caveat: “On the other hand, I wouldn’t bet against Michel.”
The irony of the current standoff is that David-Weill courted Wasserstein for many years. The first approach came in 1987, when Was-
serstein was still in his 30s and a prodigy at First Boston, where he blossomed under the mentoring of Joseph Perella, now 63 and chairman of institutional securities at Morgan Stanley. In 1979, Perella had hired Wasserstein, from the law firm Cravath, Swaine & Moore, after he’d been impressed by Wasserstein’s work on a couple of deals, in particular Combustion Engineering’s takeover of a Texas oil-field-equipment outfit, Gray Tool Company. “We were in a room with 20 people, and Bruce tended to dominate the discussion,” recalls Perella. “He had clearly shown at that meeting his knowledge of the space in terms of the way deals get done.”
Wasserstein was years younger than most of his colleagues at Cravath, having graduated at age 23 from both Harvard’s law school and its business school. Even then, the thing that stood out most about the overweight, dark-haired, shambling young man was his prodigious brain.
Wasserstein always believed he was going to be something exceptional. His younger sister, Wendy, the Pulitzer Prize-winning playwright, wrote in New York magazine that “Bruce was a genius … conveniently born on Christmas Eve with, according to my mother, Messiah potential.”
The third of four children, and the only boy, he was worshipped by his parents and his three sisters, Sandra, Georgette, and Wendy. Their late father, Morris, was a successful textile manufacturer, and their mother, Lola, a dance fanatic who came from a wealthy Polish family.
In the 1970s, M&A was just starting to emerge as a sector in its own right. “An indication of how that business was viewed at First Boston at that time could be described simply (by the fact) that they asked a guy six months out of business school-me-to focus on it,” says Perella. “In today’s world, you would never dream that a major Wall Street house would do that.”
At First Boston, Perella and Wasserstein worked effectively together, coming up with clever legal devices to counter the junk-bond bust-up takeovers then in vogue. “We were in this halfway ground between the old law and the new rules, and no one knew how they worked except us,” recalls Perella.
Wasserstein became known as “the closer.” “Basically everybody (at First Boston) did what I call ‘Bruce foreplay,'” recalls a former colleague. “You walked out to the companies and said, ‘I’m here to talk to you about your business, and if you guys are the real deal I’ll bring Bruce in.'”
Ross Johnson, the former head of RJR Nabisco, who initiated the hostile takeover, which was chronicled in the 1990 best-seller Barbarians at the Gate, by Vanity Fair special correspondent Bryan Burrough and John Helyar, remembers being on the opposite side of the table from Wasserstein. “I found him very effective and very much to the point, and you could believe what he was telling you. You may not agree-but you could believe it,” he says.
“When you go into a conference room where a deal’s going on … and there’ll be a hundred people … and the world is going a thousand miles an hour … Bruce gets very calm,” says a former colleague. “And the world is finally moving at a pace that’s his norm.”
Wasserstein, however, was never deemed to be socially easy. One client felt that he would “talk to you about things you’ve thought of already. You wonder why this guy’s boring you to tears.” His largely unkempt appearance and somewhat shy demeanor also put him at a disadvantage outside of the boardroom.
By the mid-1980s, Wasserstein was hell-bent on rising to the top of First Boston. Apparently he’d been told that he had a 60 percent shot at this, though many of his peers thought he had been lied to. “He didn’t see that, while he was a great deal guy, he was not suited to running a business,” says a former peer.
At least one colleague did not like Wasserstein’s being derogatory about Perella behind his mentor’s back. (A spokesman for Lazard says, “Bruce has nothing but good things to say about Joe Perella. He likes and respects him.”) Yet when First Boston’s C.E.O. at that time, Peter Buchanan, called Perella in the summer of 1987 and said that he thought Wasserstein was leaving to go to Lazard, Perella told chairman Alvin Shoemaker not to let Wasserstein go: “If you shoot him, the bullet goes through me,” Perella said. “I decided to marry Bruce in 1979, and I’ll decide when I get a divorce.”
Buchanan, in fact, would gladly have let Wasserstein go, since he saw him as a distraction to the rest of the bank. Wasserstein’s attitude, according to someone close to Buchanan, was “Why pay somebody else when you could pay him?… Why pay the Municipal Department or the Corporate Bond Department or any other department when you could pay him? He was only interested in his own activities.” In fact, Wasserstein had already threatened to resign and go to Lazard or Dillon, Read & Company that summer, an episode that became known as “the Muppet Caper.”
Buchanan subsequently did a strategic review of First Boston’s structure because Wasserstein had wanted more resources to go to merchant banking and less to securities trading. But when the review was completed, six months later, neither Wasserstein nor Perella had been interviewed, and its verdict was that “no changes were necessary.” That was on January 22, 1988.
On February 2, 1988, Wasserstein and Perella, along with colleagues Chuck Ward and Bill Lambert, walked into Peter Buchanan’s office and handed him their resignation letters. During the next month nearly 20 colleagues followed them out of the building.
“Everyone said, ‘If you start up on your own, you’ll be some middle-market boutique. You won’t be able to do big, complex deals with multinational clients,’ and yet they did,” says someone who joined them. They moved into an empty office space at 31 West 52nd Street. “We rented it month to month,” says Perella, “not knowing whether we could afford the lease and that we would be in business in a year.”
But their old friends quickly came around. Corporate raider Henry Kravis gave them the sale of Tropicana to handle. And after the first month Perella and Jeffrey Rosen headed to Japan and struck a deal with Nomura, the Japanese securities business, which netted the company $100 million. They advised on the 1988 Philip Morris bid for Kraft and on the merger of Time Inc. with Warner Bros.
“For 18 months we were golden,” says Perella, “successful beyond our dreams. At the end of 18 months, we had $200 million of cash in the bank, a billion-dollar unspent private equity fund, and we were ranked second in the M&A league tables, and we had no debt.” This was, according to many people, the peak of Wasserstein’s career-and he reveled in it.
When asked why the firm had been named Wasserstein Perella and not the other way around, Perella says, “I didn’t give a shit. I didn’t care if you called it Mickey Mouse. Bruce’s personality required him to have his name first, to have his logo design (the cypress tree) be the logo of the firm, to have his color (cranberry) be the color of the tree, and on and on and on.”
Perhaps it was inevitable that a dip might come after the high. “Just about everything Bruce touched blew up in his face,” says a former colleague.
The worst-as far as many of his partners were concerned-came when he invested a total of $400 million of the firm’s money in a takeover of a U.K. supermarket chain, Gateway Isosceles. Gateway, according to the British bankers on the transaction, was a chain that “any British housewife could have told you was a bad deal. It was known as the Green Chicken Store because in the chiller cabinet, underneath the white chickens on the top, there were green ones.”
“He did this,” says a former partner, “against the advice of all the other partners in the room-Yves-Andre Istel (now at Rothschild), Chuck Ward, Jack Lentz, Joe Perella-all of whom subsequently left the firm.”
The investment fund-which still exists today under Wasserstein’s control and owns, among other things, the American Lawyer and Daily Deal magazines-has never fully recovered, something that irks Wasserstein, apparently.
A Lazard spokesman says Wasserstein “takes a long-term view” of its performance. But even one of his close friends says that Wasserstein is “the only guy who went into the LBO business in the 1980s who basically has failed almost completely. It’s almost not possible.”
“Bruce on the investment side has what I would describe as smart man’s disease,” says a former colleague. “He can never believe he’s wrong. And in this business you need to say, ‘O.K., I’m wrong,’ and cut your losses … but he would continue to make larger and larger bets to prove he was right.”
After five years-which the founding partners had committed to-there was an exodus: Perella, Jack Lentz, Hugh “Skip” McGee. Eventually Chuck Ward. By the late 1980s only four of the original 21 partners were left: Wasserstein, Lambert, Rosen, and Biondi.
In early 1994, Wasserstein hired a banker from Salomon Brothers named Fred Seegal to be president of the company-effectively his number two. “I would say that a significant percent of the firm’s revenues were personally generated by Fred,” says a former Wasserstein Perella executive. “He kept the firm in business.”
Seegal apparently did not hesitate to remind Wasserstein about his successes, and the two men, according to a colleague, rubbed each other the wrong way. In particular, Seegal was dismayed by a $100 million investment made by the fund in a record label, Red Ant, that effectively went down the drain.
Meanwhile, Wasserstein was talking-for the second time-with David-Weill, who had wanted to merge Lazard with Wasserstein Perella, since the two firms were direct competitors for M&A advisory work. The deal never happened, for a variety of reasons. One was that the Lazard partners, according to a story in The Wall Street Journal, refused to countenance Wasserstein in their midst. Another, according to former Wasserstein Perella executives, was that the numbers weren’t good enough for Wasserstein. “He called us all in for a meeting,” remembers a person who was there, “and said, ‘I know what the rumors are. Ignore them. If Lazard wants us, then they must be in trouble, which can only be good for us. So we should capitalize on that.'”
In 2000, after the M&A bubble had burst, Wasserstein pulled off the coup of his career. He sold Wasserstein Perella for what was considered to be an unbelievable price-$1.37 billion-to the recently merged German banking firm Dresdner Kleinwort Benson, which had a strong presence in London but not in the U.S. (Wasserstein Perella’s investment fund was not part of the deal.)
One source told Vanity Fair that several members of Wasserstein’s inner circle have said that at the point of the sale Wasserstein Perella was days from failing to make payroll. Through a spokesman, Wasserstein says, “W.P. was rated No. 5 in value in the U.S. for M&A transactions that year.”
“If Dresdner Kleinwort had known the reality, they’d have realized they had far more leverage,” says a source. Fred Seegal, according to sources, couldn’t believe that the Germans had bought the firm without consulting him. “If they had, they might not have made the mistake they made,” says someone close to Seegal, who by then was working out of a new office in San Francisco.
Wasserstein Perella was credited for working on the ill-fated AOL-Time Warner merger, which at the time was considered a triumph. However, the work had actually been done by Salomon Smith Barney and Morgan Stanley. “But Wasserstein rang up a contact there and begged him to put his name onto the transaction,” says a former Wasserstein Perella executive. Through a spokesman, Wasserstein says, “Bruce had been a strategic adviser to Time Warner on their internet strategy for three years. Although he was not part of the process of the AOL acquisition, they felt they’d include him for credit.” When Dresdner announced the purchase of Wasserstein’s firm in September 2000, it listed the AOL transaction as one of the “landmark deals” on which Wasserstein Perella had worked. As a consequence, according to one person, Thomson Financial, which lists the M&A league tables, made it a condition that to have your name attached to a deal you had to be listed at the time of the deal-not ex post facto.
Next, however, came the most surprising maneuver of all. Once he’d done the merger, Wasserstein abruptly moved to London while he renovated his New York City duplex, at 927 Fifth Avenue. (It’s the same building, incidentally, currently inhabited by Paula Zahn, Mary Tyler Moore, and Pale Male and Lola, two red-tailed hawks which nested for over a decade on a 12th-floor cornice and which the co-op board sought to evict. It had to reverse itself after a firestorm of protest last fall.)
The Germans were astounded. They had paid a lot of money for a “people business.” And chief among the people they’d wanted in the U.S. to build that business was Bruce Wasserstein. “We expected him to be in Europe a bit, because he was, after all, chairman of US Private Equity, and it was a European company, but it would be fair to say we hadn’t anticipated the extent to which he was here,” says someone who worked on the merger. “They should not have been surprised; he was executive chairman of what became Dresdner Kleinwort Wasserstein (D.K.W.) and D.K.W.’s headquarters was London,” a Wasserstein spokesman said.
It was also not lost on any of the D.K.W. senior executives that Wasserstein’s U.K. residency meant that he would not have to pay New York State capital-gains tax at precisely the moment he was realizing his profits from the sale of Wasserstein Perella. “The move probably saved him $50 million,” says a former colleague. Wasserstein’s spokesman says, “That’s utter baloney. If he’d wanted to evade New York State tax, he could have moved to New Jersey or Florida.”
Wasserstein had initially been keen on the merger because he had visions of building a global investment bank on a par with Goldman Sachs and Lehman Bros., but, after only four months, those dreams collapsed when D.K.W.’s C.E.O., Leonhard Fischer, sold the firm to Allianz, a German insurance company. Its board effectively told Wasserstein he could forget about such plans-they weren’t interested. In fact, they wanted to spin off the investment-banking business.
“They didn’t quite understand investment banking, these almost manic, egotistical individuals demanding huge sums of money, flying Concorde… While they were all earning money, it was fine, but after the big downturn hit (around 2000) they weren’t,” says a former Wasserstein Perella executive. “They certainly weren’t going to start spending more on Bruce’s pipe dreams.”
A person who worked alongside Wasserstein for years believes the Germans should have listened to him. “Had they stuck with it, it would have been fine. The Greenhill transaction (Greenhill, a boutique investment bank, last year went public very successfully) demonstrates that had they stuck with it and wanted to sell or take it public they would have gotten their money back and more.” (Neither D.K.W.’s former C.E.O. Leonhard Fischer nor Allianz’s C.F.O., Paul Achleitner, returned calls for comment.)
Claiming a breach of contract, Wasserstein walked out in late summer 2001, leaving with all of his cash and without having to take any time off, before walking directly into the arms of a competitor-Lazard.
His first task at Lazard was to recruit the F.O.B.-or “friends of Bruce,” as the inner circle of Rosen and Biondi is known. This time D.K.W. was not going down without a fight. In January 2002, Rosen was allowed to leave, but only after the matter had gone to arbitration-and eventually Lazard had to pay millions of dollars to buy him out. “We were going to make them pay for that one,” says a D.K.W. executive. Biondi joined Lazard in April 2003.
Meanwhile, Wasserstein started using his Rolodex to staff his new shop. He threw money at the talent he wanted: Chuck Ward, Gary Parr-the guys who’d left Wasserstein Perella, some miffed, but whom he knew he now needed. “He believes that in the end money will buy anyone,” says a friend of his. “He’ll figure out your break point.”
Some people say there is a softer side to Wasserstein.
Betsy Carter, a writer and friend from the University of Michigan, recalls in her 2002 memoir, Nothing to Fall Back On: The Life and Times of a Perpetual Optimist, how after her marriage of 17 years collapsed, Wasserstein “typically zeroed in on the one thing I needed more than anything: dates. Bruce knew everyone and I can only imagine how he worked his Rolodex. All I can say is that I started to get phone calls from every unattached investment banker and corporate lawyer in New York City.”
Carter also recalls that years later, when she was diagnosed with breast cancer, Wasserstein visited her in the hospital and gave her a glittering evening purse from Henri Bendel, on Fifth Avenue. “It was such a great present because it reminded me how there would be evenings out again,” she says.
Lucie Longworth, who was Wasserstein’s assistant for 16 years, says that her boss always used to insist that personal matters came first, and he was always there if she needed to discuss non-work issues. He had two mottoes, she says. One, which he asked her to frame and place in his office, was “But were you effective?” The other, which he frequently employed in conversation, was “Figure it out.” “He made me grow in the job,” Longworth says.
Wasserstein’s first marriage, to a woman named Laura, ended, according to divorce papers, in 1974; his second wife, Chris, was a tall, widely liked redhead, who bore him three children, Ben, Pam, and Skip, now all in their 20s.
That marriage ended in 1992, around the time he started to date Lorinda Ash, a blonde, well-heeled New York art dealer, who then worked for Larry Gagosian. Ash lived with Wasserstein for three years in the mid-90s, during which time, friends noticed, he exercised and lost 50 pounds. Even so, his shirt never seemed to stay tucked in, and his clothes still didn’t hang right. He is almost certainly aware that his disheveled appearance is the subject of much discourse. “Personally I don’t mind,” he once said to a colleague, “but my tailor’s pretty upset.”
The split with Ash was brutal, according to several sources. A source close to Wasserstein says he strongly disputes that the ending was brutal. “It was a relationship. It ended. Only Bruce and Lorinda know what happened.” Shortly afterward he began to go out with Claude Becker, a tall, half-French, half-American, raven-haired producer who had worked at CBS. They married, and, according to one of his closest friends, their relationship has been a true meeting of minds. The couple has two boys, Jack, five, and Dash, three, and Wasserstein is said to spend much time with his family. “Claude is very charming, and very funny,” says one of their friends. “She knows that Bruce is socially awkward and makes jokes about how she has to go around cleaning up his ‘little messes.'”
The couple currently has five houses, in Santa Barbara, Paris, London, New York, and East Hampton; Cranberry Dune, the one on Long Island, is now being renovated. “It’s like a long noodle,” says one person who has been there. “The idea is that you can see the ocean from every room, but as a result it has no flow.”
When the European partners of Lazard heard that Wasserstein was about to be hired as their leader, they saw him as the embodiment of American brashness and crassness. “If (you accept that) Americans are greedy and not really interested in what other people think, he’s that squared,” says a former British partner.
The situation did not improve when Wasserstein brought in the new partners. “Whatever you’ve heard about the tensions … it was far worse inside,” says a former partner.
Vernon Jordan, the Washington lawyer and Bill Clinton confidant, who joined Lazard in 2000 as senior managing director, says, “Leaders are not here to be liked; they’re here to make decisions.” Jordan says that Wasserstein’s initial speech to the partners in the fall of 2001 was highly energetic and motivational at a time when the bank desperately needed it. “It was clear that this was not a guy who was interested in mediocrity. He was interested in excellence; he was going to give his best and he expected that in return.”
But Wasserstein was so busy beefing up the M&A business that arguably he neglected asset management, which he’d been intending at one point to spin off. Ironically, it happened to be the bank’s most profitable area in 2002, thanks to the work of William von Mueffling, then 34, who had started a highly successful hedge fund within the bank. Von Mueffling, according to a 2004 report in Institutional Investor, was unhappy both about his own compensation-which amounted to 2 percent of the bank’s profits-and about how asset management was being run. He thought that its heads, Norman Eig and Herb Gullquist, both in their 60s, needed to retire. But Wasserstein ignored him. In January 2003, von Mueffling left to start his own hedge fund-taking 75 percent of Lazard’s hedge fund’s $4 billion in assets with him.
When asked about this, a spokesman for Wasserstein says, “Von Mueffling asked for way too much; we could not accommodate him.” A Lazard executive says, “You can nurture a hedge fund to a certain size and then they become difficult for large institutions to manage… He (von Mueffling) could have left under anybody’s management.”
More bad publicity came in February 2002, when two members of the distressed debt team, Michael Weinstock and Andrew Herenstein, left to go to Quadrangle. Wasserstein sued them so aggressively that Lazard was reprimanded by a Delaware court, which ruled that the firm should have realized that “without a contract” the departure of the managers was a “foreseeable business reality.”
Furthermore, in 2004 the bank had one of its worst years ever.
Outside of the bank, Wasserstein still runs his investment fund, and in December 2003 he pulled off an astonishing dawn raid in the bidding war for the purchase of New York magazine from Henry Kravis’s Primedia, snatching it away for $55 million from a consortium that included the publisher and real-estate investor Mort Zuckerman, filmmaker Harvey Weinstein, columnist Michael Wolff (now a V.F. contributing editor), and financier Jeffrey Epstein.
The Zuckerman team was understandably furious-especially when Zuckerman subsequently went to Kravis and offered to outbid Wasserstein, and Kravis told them they were too late. “Why didn’t Wasserstein call us and join us?” one of the team says. “We could have had fun.”
Wasserstein, however, is a man who apparently likes to have fun on his own. He has been relatively hands-on with the publication, having meetings once a week with Adam Moss, 47, the former New York Times assistant managing editor whom Wasserstein hired as editor last year. When asked, Moss insists Wasserstein is helpful, not interfering.
“He had the idea for running the article about the Tyco lawyer Mark Belnick,” Moss says. “He said, ‘You know, this guy is just so interesting’ … and it was a great piece.” On the other hand, Moss says, “when there are ideas (he has that) I don’t want to do, I will let him know that, and he is a very, very easy person to say no to.”
With a laugh, Moss declines to say what the rejected story proposals are.
Financiers on Wall Street are divided as to whether the Lazard float is a good idea. Against it is the fact that most businesses go public when they are turning a profit and need public investment to grow-which is not the case here, since not only has the company lost money for the past three years, but the new money will have to go to buy out David-Weill and the capitalists. In other words, a public Lazard will start life with a considerable debt load.
That partners there have only two-year contracts worries some bankers, as many think it will take at least five years to make Lazard profitable again.
Stephen A. Schwarzman, chairman of the Blackstone Group, a New York investment bank, and an old friend of Wasserstein’s, says, “Betting against Bruce in the long term is a very bad idea. The record shows that Bruce almost always pulls the rabbit out of the hat.”
Meanwhile, Wasserstein characteristically wears his troubles lightly. “He’s not distracted. One keeps thinking that he will be,” says Moss. “You open up the newspaper in the morning and you read about whatever you read about it, but we have these lunches where we bring, you know, (New York senator) Chuck Schumer, (Broadway producer) Rocco Landesman, whatever, and he’s there, completely attentive… He just obviously can handle it all in his head, which is, I think, why he is so successful.”
“He’s quiet, calm about the office,” says Vernon Jordan.
Over in Paris, David-Weill also remained quiet in the aftermath of the filing, but there was continuing speculation in the financial press that he did not intend to stay so for long, and that Gerardo Braggiotti, still not happy with the idea of the flotation, is being readied to take over if Wasserstein fails.
One insider shrugged off the deadlock between Wasserstein and David-Weill. “Lazard’s always in the press,” he says. “There’s always something that’s about to crush the place… There’s a million things that Lazard’s been in that everybody thought the place couldn’t survive. As one of my favorite partners put it the other day, after a nuclear holocaust there are going to be two survivors: cockroaches and Lazard.”
And if things pan out his way, also Bruce Wasserstein.