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

by William D. Cohan

  Bruce was very creative, even from a young age. This creativity extended to his reinterpretation of games. When he and Wendy played Monopoly, Bruce made up his own rules, transforming the game into a serious competition between mini real estate moguls. He started by dealing out all the property deeds, and then introduced serious financial leverage into the mix. Players could supplement the cash received at the start and from others throughout the game with money borrowed from the bank. Each property could then contain up to three hotels, rather than the one-per-property limit found in the conventional rules. He was pretending to be a real real estate mogul like the ones in Manhattan. His made-up Monopoly rules so infuriated his first wife she refused to play the game with Bruce and Wendy. He was also a chess champion. Wendy said later, "When I was a kid my life revolved around my brother."

  Bruce stayed at the yeshiva until age twelve, and then for a year attended the Brooklyn Ethical Culture School. After the family moved to East Seventy-seventh Street in Manhattan, Bruce finished high school at Felix's alma mater, the McBurney School. He became captain of the tennis team (just like Felix) and editor of the school newspaper. As editor, he instituted rhyming headlines. Among them: "Council's Coax: Give Up Smokes" and "Green and White Turns Black and Blue in Football Debut." There was also "Chicks to Cheerlead," which did not rhyme but Bruce conceded had "a certain sense of pzazz [sic]." The McBurney School administration didn't cotton to Bruce's humor, though, and removed him from the editorship during one Easter vacation. "The funny thing about the whole situation was that we won some type of award from Columbia which the headmaster kept on showing off," he later wrote.

  Bruce graduated from high school at age sixteen, some two years ahead of his peers, and headed off to the University of Michigan in Ann Arbor. Although not a particularly enthusiastic student--he had no facility with languages, for instance--he marched through college in three years thanks to advanced placement credits and a heavy course load, graduating at age nineteen with an honors degree in political science. While in Ann Arbor, Bruce indulged his growing passion for journalism and a desire to change the world. He was not alone.

  In January 1966, he became the second in command--executive editor--of the school's respected paper, the Michigan Daily. Though the position of executive editor had never before existed, Bruce, in typical fashion, convinced the previous year's editorial board (led by Larry Kirshbaum, his future publisher at Warner Books) to create it and give it to him. This was the eighteen-year-old's version of Bruceania, the fictional playland he had created as a child. He had a weekly column, Publick Occurrences--a reference to the first independent newspaper published in North America, in Boston, in 1690; the paper was shut down by the British after one four-page edition--and wrote occasional signed editorials and reported on subjects that interested him. He was on the editorial board. But he had no day-to-day responsibility for getting the paper out the door. "He had a tremendous intellect and an eccentric intellect that allowed him to think outside the box," remembered Harvey Wasserman, Bruce's former colleague on the paper. "So I was quite admiring of his ability to invent the executive editor position." The position gave Bruce a platform to pontificate on whatever subjects interested him. And pontificate he did, on subjects as diverse as the California governor Ronald Reagan's firing of Clark Kerr, the president of the University of California, and the need to resolve the 1966 New York City transit strike. He also advocated for having a meaningful student voice in faculty tenure decisions, for creating the opportunity for pass/fail classes, and for improving the oversight of the university's mammoth athletic department.

  He also tackled such weighty issues as the racial, social, and economic inequities that motivated the civil rights movement.

  The paper was the epicenter of the school's antiestablishment orthodoxy. Bruce was not shy about urging his fellow students to seek radical solutions to the changes he favored. In one column, "Raw Power Beats System Every Time," he was inspired by the Michigan political science professor Abramo Organski to wonder, in print, "How do you beat the system?" Bruce had been on the record for supporting a student voice on tenure committees, but what happens if the "faculty establishment" is opposed to the idea? What do you do? Bruce's rather straightforward solution, taken from the playbook of Saul Alinsky, considered the father of American radicalism:

  First, you pick a department in which a high percentage of students are liberals such as sociology. Then you get the students to boycott any class which is taught by a professor hired after a given date on which students demanded to be included in a tenure selection. Then you get people from Voice [a student antiwar organization] to picket the class so that wishy-washy students will be dissuaded from attending. Then you set up a picket line at the professor's house including all of the grubbiest students on campus. Assuming that the teacher lives in a nice, quiet middle class neighborhood he will begin to feel pressure from his neighbors. Of course, the home of the department chairman would also have to be picketed. Thus the sociology department would have hired a man who has no pupils to teach and is having one hell of a bad time in Ann Arbor. And, sure enough, he will take up that offer to teach at Berkeley. Although it is unfortunate that any individual has to suffer, that is the nature of politics. As Organski would be the first to point out, power is raw.

  In addition to focusing on his writing duties at the Michigan Daily, Bruce turned his considerable attention to one particular assistant day editor, Lynne Killin. She was from a proper Presbyterian family in the Westchester County suburb of Larchmont, New York. Her father was an executive at Young & Rubicam, the advertising agency. Killin remembered one day walking into the offices of the campus newspaper and seeing Bruce. She was immediately attracted to his obvious intelligence and his total indifference to football, which made the pair an anomaly in Ann Arbor. Bruce was her first boyfriend. Much to the horror, though, of both sets of parents--the Scottish Killins and the Jewish Wassersteins--soon after her graduation from Michigan and his first year at Harvard Law School, on June 30, 1968, Bruce and Laura Lynelle Killin were married in Larchmont. Bruce was not yet twenty-one. Lola had always preached to him about the wisdom of marrying early, but Bruce had taken his mother's advice even further than she would have hoped. Both sets of parents were against this improbable union, although Bruce's parents softened toward Lynne somewhat upon discovering that she had converted to Judaism--a decision that made her parents insane. Lynne described Bruce as "slovenly" at that time, overweight, hair disheveled, and shirttails flapping. "Let's put it this way," she said, "he and I were kicked out of the lobby of a hotel once, in London, because we didn't look okay."

  After the first year of law school, Bruce decided he had both the time and the inclination to pursue a joint graduate degree in law and business from Harvard. "Commuting by bicycle between the two schools in the winter was the real character-building part of the experience," he once said. He became one of the first people to enroll in the combined JD-MBA graduate school program. He graduated after four years, in 1971, from both the law school, cum laude, and the business school, where he was a Baker scholar with high distinction. One summer he worked as a poverty worker in two impoverished sections of his native Brooklyn, Bedford-Stuyvesant and Ocean Hill-Brownsville. But he didn't like the work because his co-workers thought he was just a rich Jewish kid who might give them money. At law school, Bruce joined the staff of the Harvard Civil Rights-Civil Liberties Law Review and was soon named its managing editor. In this role, he began to intersect with the consumer advocate, ITT nemesis--and future presidential candidate--Ralph Nader, and he was an active member of Nader's famous study groups. Improbably, Bruce was a Nader's Raider.

  Bruce and Nader's top Raider, Mark J. Green, who had also been the editor of the Civil Rights-Civil Liberties Law Review, together edited With Justice for Some: An Indictment of the Law by Young Advocates. The book, a collection of thirteen essays by law students or recent law school graduates published in November 1970, was dedicated to
"Laura Lynelle," Bruce's wife. "He damned well better have," she said. "I typed it." Nader met Bruce a few times that summer. "He always had a lot of fish to fry," Nader recalled. "He was clearly driven, and everything you would expect--very confident, very eclectic, nothing fazed him, and very ambitious. At the time, his ambition was to become chairman of the SEC." Killin remembered that Bruce was motivated not only by "winning" but also by a desire to create a dynastic legacy. "I remember him saying--back before we were even married, going to school--that he wanted to be remembered five hundred years from now," she said. "He wanted to set up a dynasty like the Rothschilds'."

  Wasserstein and Green collaborated on another book, published in 1972, on antitrust law enforcement, titled The Closed Enterprise System. This book, also under Nader's auspices, argued that lax antitrust enforcement leads to inefficiencies in the system of supply and demand, which result in unnaturally high prices for goods and services. Part of the book took to task Felix, Geneen, and ITT for trying to evade the nation's antitrust laws. Felix especially was singled out for criticism.

  After graduating from Harvard Law School and Harvard Business School, Bruce received a Knox Traveling Fellowship. He studied economics and British merger policy at Cambridge University, where, in 1972, he earned a graduate diploma in comparative legal studies in economic regulation. In 1973, the Yale Law Journal published his thirty-four-page "British Merger Policy from an American Perspective," based on the research he had done on the subject during his year abroad. Although this sort of writing tends to be convoluted and ambiguous, there are hints that Bruce favored greater regulation of mergers on both sides of the Atlantic. Regardless of what he was thinking by 1973 with regard to the economic and social benefits of the 1960s merger wave, it was unequivocal that he was one of the most knowledgeable twenty-five-year-olds on the planet on the subject of mergers and acquisitions at a time when most kids his age were worried about avoiding the draft and changing the world.

  Upon his return with Lynne from England, he ruminated with his sister Sandra about what he should do. He passed the bar exam and considered practicing law in Alaska. And he thought about becoming the editor of a small-town newspaper. But driven by his ambition, his brilliance, and a preternatural bias toward the deal business, Bruce chose the far more conventional and lucrative route of becoming an associate at the elite New York City law firm Cravath, Swaine & Moore. The senior partner Sam Butler took Bruce under his wing and, after seeing him in action, supposedly promised he would become a partner in a few years' time. Nader saw Bruce's choice to go to Cravath more simply: despite all his raw talent and his desire for justice, he was driven by the "almighty lucre" to head to Wall Street. After Bruce became a banker, Nader wrote him a letter admonishing him for turning away from his public-service and regulatory-reform work to pursue Wall Street riches. Bruce keeps a framed copy of the letter at his palatial house in East Hampton.

  Around this time, Bruce's marriage to Lynne began to deteriorate. "First of all, he was my first real boyfriend," she said. "I'm very attracted to brains and Bruce has brains. And when you put the brains to courting somebody, it's wonderful. And it was great for many years--well, not many years, for a long time, but what happens is, at least with Bruce, if you have a different point of view from him, then you're either stupid or ignored. He is not flexible. It's his way or, as someone said, the highway. You take it for a while, but then you say, 'Wait a minute. I'm a person in my own right. And I'm not competing, but you have to pay attention to me in a positive way.' He'll tell you himself that he's a very hard person to live with." There were two catalysts for their marital troubles. First, Lynne explained, even though she and Wendy were quite friendly for a time, she was not happy with the way Wendy depicted her in her play Any Woman Can't, which was produced off-Broadway in 1973. Lynne had been interested in rock collecting, and Wendy portrayed her as sitting on a carpet, playing with rocks as if they were marbles. "So she was making fun of my rocks, which I thought was stupid," she said.

  Soon after watching the play, the couple had a fight while they were working on their tax forms. "We were doing taxes, and Bruce wanted me to be at home, like the wifey, you know, the at-home person," she said.

  But if we were out, he would introduce me as a jewelry designer, as someone who made jewelry, like I made rocks. I mean, we're not talking high-end here, okay? And Bruce would never balance his checkbook, and in fact he often wouldn't even write down the checks. He wanted me to do that. He wanted me to do a lot of work on the taxes. I exploded, saying, "You're the one with all the damn degrees. You do it." And one thing led to another. We'd had problems and he refused to go to counseling, and I didn't know enough to know that I could get a divorce without his permission. I wanted to get counseling. I wanted to get further therapy, and he said, basically, "I'm not going to do that. If you don't like it, leave." So I left. I didn't realize I could maybe negotiate. But Bruce was such a forceful person and I'm not. I have character and integrity and all that, and at some point you say, "Enough." We'd been unhappy. I'd been unhappy for a while. He wasn't, I was. But he didn't pay attention to it.

  After being separated for eighteen months, they were divorced in August 1974.

  There were no children. She got a total of $3,000 from him, which she used to help put herself through Columbia Business School. She worked for a long time at AT&T before being let go. She now earns extra money by selling used books on Amazon, using the moniker "Wasser-Kill." She has spoken to Bruce only once since they were divorced, as they were both approaching their fiftieth birthdays. Much to her disappointment, she never remarried.

  IN THE FALL of 1976, Joseph Perella, a thirty-one-year-old accountant from Newark, New Jersey, was in charge of First Boston's fledgling M&A department, of which he was the only member. The same week First Boston announced Perella would be running the M&A department, Felix was on the cover of BusinessWeek, busy resurrecting his badly tarnished reputation. "I remember reading about all the fees he had collected working on deals," Perella said later. "I was so impressed. I said, 'God, this is really a great business to be in...'I was very impressed by seeing Felix Rohatyn on the cover of BusinessWeek, and I said to myself, 'Well, you know, someday if I work hard, I'll be on the cover of a magazine.'"

  In the fall of 1976, Combustion Engineering hired First Boston to help it buy Gray Tool, then the subject of a hostile offer. Combustion was to be the white knight, the friendly suitor that would rescue Gray Tool. To help out, Perella called Sam Butler at Cravath. Cravath was available and took the assignment. At the first meeting with Combustion, Butler showed up with his associate Bruce Wasserstein. "I don't think I was at the meeting more than twenty minutes before Bruce had virtually taken charge," Perella recalled. "He was telling everyone the way the deal should be done from the lawyer's standpoint, and I said to myself, 'Holy mackerel, this guy is unreal.' It was one of those moments in life where I knew I had met a rare individual. Bruce had the ability to take what he knew about the law and translate it into action that was going to accomplish the client's objective." Combustion won Gray Tool. Within a year, Perella had offered Bruce a job doing M&A with him at First Boston. He doubled Bruce's salary to $100,000. By November 1977, the pair had completed two deals that combined brought in $3 million in fees, a fine haul in those days. They were on their way.

  At Perella's urging, in April 1979 Wasserstein joined him as co-director of the M&A group. This was not the last time Perella would provide the grease for Bruce's career advancement. A few years later, Perella returned from a vacation and decided to turn over day-to-day management of the M&A group to Bruce.

  At the time, First Boston was evolving into one of the most aggressive of the few Wall Street firms that provided merger advice to their clients (the others being principally Lazard, Goldman Sachs, and Morgan Stanley). First Boston's unprecedented success came from its guerrilla-like approach to deals. With very few establishment clients of its own, the firm became known for its ability to break up the d
eals of others using superior tactics (thanks in large part to Bruce) and, over time, to allow its balance sheet to be used by the LBO mafia to shake up corporate America. Leading the charge in this take-no-prisoners strategy was the powerful combination of Wasserstein and Perella, the Jewish bully with the studied rumpled appearance and the patrician Italian former accountant.

  "When the M&A effort at First Boston seriously began in the late 1970s," Bruce later wrote, "we questioned how to crack the Lazard-Goldman-Morgan oligopoly. The solution was simple: Find the holes in the market, and then raise the stakes by outprofessionalizing the competition." Perella sought out and promoted Bruce because he knew he was brilliant and knew on some level that he needed Bruce's genius to succeed himself. By 1981, First Boston's nascent M&A department was on a major roll, having helped Bache & Co., the securities firm, elude a hostile takeover by finding the friendly suitor Prudential Insurance. The firm also helped keep St. Joe Minerals Corporation out of the hands of Seagram.

  The breakthrough deal for the First Boston M&A department came in 1981, when Bruce and Joe advised DuPont on its successful $7.6 billion acquisition of Conoco, holding off in the process aggressive bids from both Mobil and Seagram, which Felix represented. "The structure of the deal was so complex that it earned the nickname 'Big Rube,' after the convoluted machinery drawn by the American cartoonist Rube Goldberg," the New York Times reported.