The last tycoons: the secret history of Lazard Frères & Co

by William D. Cohan

  Word had gotten around the firm about the various incidents. Loomis took Bohner out for lunch--a burger downstairs in Rockefeller Center--and just let her know that he was aware of and concerned about the senior vice president's increasing visits. Some two weeks later, Mary Conwell, a banker in Lazard's Chicago office, had come to New York for Christina Mohr's wedding and was staying at Bohner's apartment. Conwell was at the apartment the night that the senior vice president knocked on the door looking for Bohner. He was in an inebriated condition supposedly exacerbated by sleeping pills. At first Conwell told him to leave, that Bohner was not home. He apparently did leave, went for another drink or two, and then returned to the apartment. This time Bohner was home, and the senior vice president was let in. He proceeded to "throw me into a brick wall" in the apartment, Bohner said. He became ill. He supposedly announced to Bohner that he was in love with her and wanted to leave his wife and children.

  As appalled as Bohner was, she would never have said anything about the incident, she said, because she had a sense that somehow the victim has a way of getting blamed for these types of things. "If I had gone to Bill Loomis and said a senior vice president came stumbling over to my apartment and threw me into a brick wall, nothing good can happen to my career for saying that," Bohner explained. "There's going to be fifty people in the firm that say it was somehow my fault." Conwell felt differently. She reported the incident to Ken Jacobs and also to Loomis. "The incident--what I observed of it--was the biggest injustice from a moral standpoint," Conwell explained. Loomis confronted the man. And the firm fired him instantly. Loomis had simply seen and heard enough after decades of the women at Lazard being sexually harassed. The senior vice president became the fall guy for his own lapse in judgment--and that of all the Lazard bankers before him. Bohner said she forgives the man. She even congratulated him years later on his accomplishments since leaving the firm. The incident has done nothing to damage the friendship between Loomis and the senior vice president, either. Loomis has had business dealings with him and they see each other regularly, both socially and professionally.

  But after the firing, Bohner had had enough of Lazard--and vice versa. She was simply too disruptive a force at the firm. "I was embarrassed by the whole situation, quite frankly," she said. "I could tell that people were treating me differently inside the firm afterward. And I just felt depressed, and I felt like I'd been ripped off. There were certain people that were really on my side, and then I think there were just certain people that were like, oh God, what a troublemaker, but I don't know, because no one ever really said anything to me. I just sort of dropped into the background after that." She left the firm a few months later after fulfilling her two-year commitment. "They couldn't wait to get rid of me," she said. On that day, the former Lazard partner Ward Woods, who had become CEO of Bessemer Securities, called her and invited her to lunch at Le Bernardin, one of the best restaurants in New York City. While Woods's wife spent her time at their home in Sun Valley, Idaho, Woods and Bohner began a four-year affair. Woods, handsome and charming, had a long track record himself of sexual misadventures, according to his former partners. He also used to carry on his trysts in the corporate hotel suite of one of his Lazard oil and gas clients. Now Woods and Bohner became a public item. They went to parties and restaurants together. They lived together in Woods's Fifth Avenue apartment, where she became well known to his doormen and his driver. They had lunch every Friday at Le Bernardin. She became well known to the pilots of his private jet.

  To Loomis, the firm's record in treating its women employees is nothing to be proud of. "There were a series of very difficult situations involving women ranging from equity to appropriate conduct which were very unpleasant for me, for Michel, and for other people, too," he recalled. But he maintained Lazard did improve in this regard over time. (Could it have been much worse?) "I'd say, in 1980, I think if the place had had a policy, it would have had a policy that there wouldn't be women partners," Loomis said. "And in 1990, if the place had a policy, it would say, 'You know, we need to have more women partners.'"

  But to another of Loomis's partners, the firm's troubled experience with women was nothing less than an embarrassing, and long-hidden, fiasco, with the bad behavior condoned by the senior partners. "Kate came into my office one day and was in tears," this partner said. "She said, 'I don't know what to do, blah, blah, blah. I don't know whether to sue Lazard or not.' I said, 'Well, Kate, why don't you think it over?'" He also went to see Michel to talk about the deteriorating situation. "So I went to Michel, and I said, 'Michel, this could really be an ugly scene.' At that point, the Goldman litigation--remember when they got sued for $150 million? Sued by a secretary, there was a big litigation. I went to Michel and said this could be a really expensive thing. And Michel's comment to me was, 'I don't understand the way American parents raise their daughters.' My jaw dropped. I didn't know what he meant by that. As if his predatory partners were not at fault. But he was sort of blaming the women."

  The Goldman litigation, though, hit a nerve with Michel. "Then all of a sudden he said we have to stop this," this partner explained. "He didn't send a memo around, but it was understood that you weren't supposed to do this anymore. It still went on, and there were a number of women who left this firm, really wonderful people who left this firm, after being sexually harassed." Lazard assiduously cultivated its image of having the highest ethical standards, of being an independent adviser beyond reproach. "And of being a class act," this partner said, "and it never was."

  The fallout from Lazard's experiment in the 1980s--culminating in the myriad incidents involving Kate Bohner--rained down on the firm for many years thereafter. In the mid-1990s, a New York City police detective came to the thirty-second floor at One Rockefeller Center looking to arrest Robert Agostinelli for violating a temporary restraining order his wife had had issued against him. Apparently, this domestic dispute had its origins in the affair Agostinelli had been carrying on with a woman who lived on his block on East Seventy-second Street. He also had an affair with a woman in Chicago, who was said to be a stripper. His American Express bills were said to be on the order of $200,000 a month. (Agostinelli divorced his first wife, Pascale, and later married a European countess and changed his name to Roberto Agostinelli.) In the mid-1990s, Christina Mohr left Lazard to become a managing director at Salomon Brothers, what is now Citigroup. Sandy Lamb stayed at Lazard until 2002, although in the late 1990s she was demoted from partner back to vice president. She then founded Lamb Advisors, her own advisory firm, which works with nonprofit organizations.

  Meanwhile, as for Kate Bohner, after leaving Lazard, she enrolled at the Columbia University Graduate School of Journalism, on a prestigious Reader's Digest scholarship. After graduating in 1993, she became a reporter at Forbes. In 1994, she married Michael Lewis, the author of Liar's Poker, the classic Wall Street narrative about Lewis's brief tenure at Salomon Brothers. At Forbes, thanks to a tip from Ward Woods and help from her new husband, she penned one of the few articles ever written in the English language--before his death--about Edouard Stern, Michel's notorious son-in-law. Even though the article was heavily edited and taken off the cover of Forbes, it caused a sensation around Lazard and on Wall Street. Although Lewis once wrote an article about Bohner's perfect derriere, the marriage lasted a mere eighteen months. After leaving Forbes in 1997, Bohner co-wrote Trump: The Art of the Comeback with Donald Trump. The book hit the best-seller lists in November 1997. As the Internet bubble inflated, she became an on-air correspondent at CNBC, reporting on business celebrities. But in 1998, her contract with CNBC was not renewed. So she then went off to London as president of an Internet venture, Startupcapital.com, backed by the British venture capitalist Stephen Morris. They started dating. When they stopped, in June 1999, her gig in London ended, too. She then became managing editor of JAGfn, a short-lived Internet business news Web site. From there, as the bubble was reaching its dizzying heights, she jumped to E*Trade Financial Cor
poration as the managing editor of Digital Financial Media as part of E*Trade's short-lived, over-the-top effort to imitate CNBC. In an expensive, glass-walled studio on Madison Avenue in midtown Manhattan, Bohner hosted an hourlong business broadcast over E*Trade's Web site. The Times profiled her, as did the New York Observer. In the market bust, she lost most of her savings--some $70,000. Eventually, Bohner became the executive vice president of marketing and content for a venture-capital-backed health care device company based in New York and New Jersey. But she is no longer with the company. In the fall of 2006, she started Kate Bohner Productions, a media consulting firm in Boca Raton. And she never remarried.

  CHAPTER 15

  THE HEIR APPARENT

  It is clear that the Suzanna Andrews New York article did far more damage to Felix and to Lazard than it did to Steve, thanks to Steve's media savvy and a passel of friends willing to help redirect Andrews's thinking.

  Not surprisingly, the article prompted a swift--but low-key--reminder from Michel about the dangers of airing dirty laundry in public. The New York article was bad press. In a "Memorandum to All Managing Directors and Vice Presidents," Michel wrote:

  We are at our very core a private firm in an environment in which it is increasingly difficult to be so. All of us have seen and read too often in the press the intimate details of issues and conflicts with our competitors. We ourselves have had some instances where comments have been made and misrepresented, taken out of context or isolated from other comments that were made which would have provided balance and have therefore created erroneous impressions. By the very fact of being in the business we are in, we have undertaken obligations of confidentiality and privacy as to our daily affairs. From time to time we may fall short, in the end, though, we can prevent our own undoing. We should avoid any discussion of the inner workings of the Firm or of its people in the press.

  The last line, while perhaps not directed at Felix alone, would certainly have been an admonishment of him, a highly unusual zinger for one of the world's most masterful manipulators of the press and his own image.

  Three days later, at Michel's insistence, Felix penned his own rather extraordinary near apologia, addressing the New York article head-on:

  The article in New York Magazine this week was extremely unfortunate. I recognize that it need not have occurred. Although I was interviewed by Suzanna Andrews in a different context than this week's article, I nonetheless made many comments to her that were ill advised. Statements about Steve Rattner were inappropriate and inaccurate. It is a fact that Steve is a serious professional of significant talent and achievement whose work is appreciated by me and by everyone else in our firm. In particular, I know that Michel David-Weill has always had and continues to have the highest regard for Steve and looks forward to a long and mutually satisfying association between him and Lazard Freres. I hope this will close an unfortunate chapter that was completely unnecessary and inflicted needless pain.

  Ten years after its publication, the article still touches a raw nerve with Felix. But he could not be any clearer about his utter lapse in judgment or any more eager to proclaim his error. "There's absolutely no excuse for it," he said. "You don't criticize a younger partner. You don't do it publicly. You don't speak to a reporter about this." The article was "not one of my crown jewels," he continued, and said it helped to convince him that "I had stayed too long. When you begin to make mistakes like that, you should do something else. And that was a very bad thing. I had never done that before, and I lost my temper." He brought the subject up again another time, in case somehow his mea culpa had not been heard. "Look," he said, "what happened, happened. I'm not proud of it. It should never have happened. And it was extremely painful, I'm sure, for him, but very much for me. And probably for the firm as a whole."

  For his part, Steve said of Felix and the incident: "He's a complicated guy. I know him as well as anybody but not well enough to know what really goes on in his head. He blew a circuit breaker and it all poured out, and he would be the first one to say that. As soon as he did it, he knew he made a horrible mistake, but there's no taking it back, and the rest is history."

  Armchair psychiatry and near apologies aside, Michel and Lazard now had a huge problem: with no way to rebut it, the worst kind of publicity about the firm and its two most prominent bankers had just been unleashed, giving competitors all the ammunition needed to sow significant doubts with CEOs about the quality of the advice coming from Lazard. And the market for M&A deals was heating up once again.

  NOW, OF COURSE, it was time for Felix to leave Lazard. When he would leave and what he would do when he left were details to be worked out. Even though Felix added immeasurably to Lazard's chronic dysfunction, nobody really wanted him to leave. Everybody knew that his prodigious ability to bring business was not going to be easily replaced, even if Steve was getting close. Obviously, the Fed embarrassment and the New York article were painful and unfamiliar setbacks. And for sure Steve wasn't going anywhere, given his steep career trajectory and impressive fee-generating ability. "We were both viewed in the firm as important sources of revenue," he said. "I don't think anybody, including me, wanted Felix to leave. I think that Felix basically reached the judgment to leave on his own." In the past, when Michel had been asked about how the firm would manage without the prolific Felix, he would quote Georges Clemenceau, the French World War I leader: "The cemeteries are full of indispensable men."

  By serendipity, several months after the New York article, Felix and Liz were dining in Paris with Pamela Harriman, then U.S. ambassador to France. "She was a hard woman," Felix said. "One of the toughest women I have ever met." The First Amendment notwithstanding, one of the first things Harriman did at the dinner was complain bitterly to Liz about the fact that the New York Public Library had allowed Sally Bedell Smith, the respected author of Reflected Glory, a frank and unflattering portrait of Harriman, to read publicly from her book at a library-sponsored event. Liz, the recently appointed chair of the public library, quickly deflected the inappropriate assault. Felix saw the need to change the topic. He put the spotlight back on Harriman by reminding her about the expulsion from France of five CIA agents, including the station chief, after they were accused of political and economic espionage during her tenure as ambassador.

  Then they got down to the substance of the dinner. Harriman told the Rohatyns that night that she had told Clinton she "wanted to go home" and did not want to serve another term as ambassador. "Which wasn't quite true," Felix said. "Because she did want to be renewed but they decided not to." Then, out of the blue, Harriman suggested that Felix think about taking the job. As a replacement for her, Felix recalled that she said, "They ought to have somebody with a European background, like you, as ambassador to France. And there's only you and one other person" being considered for the post--Frank Wisner, a career diplomat then serving as U.S. ambassador to India. "Would that interest you?" "And I said, 'Well, you know, I've never thought of being an ambassador,' which was true. 'But probably France is the only country that I would consider being ambassador because I think I could really do something. But I don't know, let me think about this and I'll talk to Elizabeth and we'll see what we want to do.'"

  Felix recalled later talking to his wife about Harriman's proposal. "And I said to Elizabeth, 'What do you think?' And she said, 'Well, you think you'd really like that?' I said, 'I'm not sure, but I do think we ought to get out of Lazard,' because after the Steve business and the Fed, I mean I was gone" mentally from the firm. "And," he continued, "Elizabeth had been urging me to leave already for some time. But she says, 'You don't have to be ambassador to France to have a future.' I said, 'No, but I think we ought to try it.' And she is really terrific. She hated the idea. She had been recently made chairman of the New York Public Library, which is a big deal, and she'd worked hard at it. And to just pull up stakes--she's just had a grandchild and to go to be the wife of the ambassador to France, she thought that was just awful. But she thought
it was good for me to get out.... So I tell Pamela, 'Yes, I'd be interested, but only if you make the recommendation to the president, you know.' She says, 'Fine, absolutely, we'll do it.'"

  As with the Fed appointment, Felix may have thought that his replacing Harriman in Paris was a done deal. After all, he spoke fluent French, had done business in France for decades, and worked for a firm founded by a French family. He also had donated $362,500 in soft money to the Democratic Party in 1995 and 1996 alone. But it was not. The first sign of trouble came within weeks of his return from Paris. He got a call from Janet Howard, who had been Harriman's assistant for some twenty years. The two women had had a falling-out, and Harriman had fired Howard. Howard was furious with her former boss. In their conversation, Felix recalled, Howard told him, "You know, Mr. Rohatyn, I have to tell you that behind your back terrible things are happening and Pamela really doesn't want you to replace her. She wants Frank Wisner."

  Felix then called his friends and longtime Clinton confidants Vernon Jordan and Erskine Bowles, who offered to find out what was going on. Jordan reported that Harriman had double-crossed Felix and decided to rally her friends in the State Department to argue vociferously that a career diplomat, such as Wisner, was the right person for the Paris job. Jordan also told Felix that Harriman had suggested that Felix's friendship with Edouard Balladur, the French prime minister and political foe of Jacques Chirac, the French president, would unnecessarily complicate relations between the two countries. Felix was not happy when he heard Jordan's report, especially because, Felix said, he didn't really know Balladur--he had only met him twice--and he got to know him some months before only because Harriman had asked him to set up a meeting for Balladur with American CEOs on a visit the French prime minister had in New York. He even had a copy of a "glowing" letter of thanks from Harriman to him for arranging the Balladur meeting. He sent Jordan a copy of the letter. "So I gave that to Vernon, and I said, 'You know, this is a little strange.'"