Sandy gasped, nearly choking on his cigar.
“What is it?” Joan asked. She knew instantly that her husband was upset by whatever he saw flashing across the ticker of the Dow Jones News Service, which he paused to read at their visit to Shearson’s Hong Kong office. Sandy and Joan, along with the firm’s new trophy director, former president Gerald Ford, had been touring Shearson’s Asian branches, savoring the firm’s rising position and prominence in the global securities industry. But the newfound empowerment ended at that moment.
The news on this morning of March 20, 1981: Prudential Insurance Corporation of America, a financial titan, was going to buy Bache Halsey Stuart Shields, the well-known securities firm that had been a pillar of Wall Street for a century. The deal suddenly changed everything. Until this moment the consolidation of Wall Street had been horizontal as securities firms bought their competitors in a frantic effort to become bigger and more powerful. Right from the start Sandy had been the smartest and over time had become the most powerful player of that game, acquiring one securities firm after another to build his Shearson empire. But Prudential acquiring Bache: This was vertical! No longer were securities firms going to be independent players competing against one another. Now one of the richest and most powerful insurance companies in the world—the Rock—would own a strong franchise in what Sandy had presumed was his turf. As a stand-alone brokerage Bache had been no real threat to Shearson Loeb Rhoades, especially after the disastrous collapse of the silver market and its impact on the Hunt brothers and their account at Bache. But backed by Prudential’s huge asset base and its thousands of insurance agents with their millions of customers, Bache could find renewed power. Just imagine all those agents selling not just insurance policies but stocks and bonds as well! As large and powerful as Shearson had become, it still was no match for a juggernaut the size of the combined Prudential and Bache. And Sandy knew that the fallout would result in more complementary mergers as other securities firms, realizing the danger posed by this deal, scrambled to find wealthy partners in other parts of the financial-services industry. In a flash, Sandy—and his company—seemed as small and exposed as in their Corned Beef With Lettuce days.
Sandy knew he couldn’t afford to be left out, isolated as he was when he first entered the business. He immediately called his deputy, Peter Cohen. “Everything has changed,” he urgently told Cohen. “We have to move fast.”
Back in New York, a similar panic was spreading at the headquarters of American Express Co. Its chairman and chief executive officer, James D. Robinson III, a courtly patrician, couldn’t concentrate during a scheduled management meeting this morning. He darted in and out of the room to make and take calls on what could be the beginnings of a new era of financial conglomerates. The forty-five-year-old Robinson had been pursuing an aggressive, albeit genteel, expansion strategy for his company. While American Express wasn’t part of Wall Street, it nevertheless had retained some of the vestiges of the Street’s earlier days. It hired only the best, and the best typically were defined by American Express as white, Anglo-Saxon, and Protestant. Yet Robinson’s plans for American Express—notwithstanding his own lustrous lineage and his company’s blue-chip status—called for the company to become much more than the upscale purveyor of credit cards, trips, and traveler’s checks. He wanted his company to have a broader presence in the American economy, to make a bigger mark.
Thus, on opposite sides of the globe, two men as different as they could be, for very different reasons, reached the identical conclusion: pick a partner and do it now!
For Sandy, who had built his empire by merging up, only a company with a better name than his firm’s would do. Citicorp, the huge bank with a well-known global presence, would be the ideal match, but current laws prohibited any such merger between a bank and a securities firm. Outside of banking, the most trusted name in financial services was American Express. Its brand and its blue box logo merited the kind of international recognition that only the biggest consumer franchises, such as McDonald’s and Coca-Cola, enjoyed. Still hungry to be accepted by the establishment, Sandy relished the thought of running American Express, the ultimate WASP nest, and gaining its imprimatur of respectability.
The scion of a wealthy Southern family, Jim Robinson III—or “little Jimmy Threesticks,” as he was called back home—wanted to escape his past as well. Rather than follow in the footsteps of his great-grandfather, grandfather, and father in Atlanta banking, Robinson, with a Harvard MBA in hand, struck out for the world’s financial capital, eager to be accepted for his accomplishments rather than his pedigree. He performed with distinction at such blue-blooded firms as Morgan Guaranty Trust Co. and White Weld & Co., two of the most traditional firms on Wall Street, before being recruited to American Express in 1970 by its chairman Howard Longstreth Clark. Robinson knew that with its financial power and the prestige it enjoyed around the world, American Express could probably have its pick of the securities firms that were desperate to merge. If he were guided by prestige, Robinson would think about securities firms like EF Hutton and Merrill Lynch, logical choices consistent with the image and brand of American Express. But given his own success in the hubbub of New York, Robinson was drawn to the entrepreneurial spirit and cockiness of Sandy Weill and Shearson.
A mutual acquaintance had brought Sandy and Jim Robinson together for the first time just a few months before Prudential stunned the financial world with its announcement. Just like the companies they ran, the two were a study in contrasts. Robinson, with his youthful cherubic face and unfurrowed countenance, displayed a courteous, controlled manner and an athletic physique, the result of daily aerobic workouts with a personal trainer. Sandy, pudgy from his daily regimen of heavy meals and ample alcoholic beverages, had a dark complexion and Mediterranean look, with an expression that could change quickly from warmly inviting to cruelly harsh, reflections of his volatile mood swings. While each had used far different means to achieve his success, Robinson and Weill unknowingly shared the same intense, internal drive that results from growing up under the reign of hypercritical fathers. At that meeting they had chatted mostly about ways in which American Express and Shearson might cooperate on various projects that could benefit them both. The topic of an outright merger of two such different companies had been barely mentioned. American Express was driven by marketing, product positioning, and image, while Shearson lived and died on client relationships and market conditions. But they shared a common interest in meeting the challenge posed by Merrill Lynch’s very successful new product called a Cash Management Account. The CMA simply wrapped together in one account what would otherwise be a customer’s separate checking, brokerage, and money-market accounts. Customers liked the convenience of “one-stop” financial shopping and were willing to pay fat fees to get it. At the same time, the CMA permitted Merrill Lynch to corral much or all of a customer’s money under its own roof. Shearson was on the verge of introducing a similar product called a Financial Management Account. Reluctant to give up the free use of customers’ balances—Merrill’s CMA automatically “swept” a customer’s cash into the money-market portion of the CMA each day—Sandy had been slow to offer money-market funds. But Shearson brokers, struggling to counter the popularity of Merrill Lynch’s new product, finally prevailed on their boss to give them a similar competitive weapon. To make Shearson’s offering more attractive, Sandy had suggested to Robinson at that first meeting that American Express credit cards could be part of the package for Shearson’s account holders. Robinson, who discovered that Shearson’s clients had a higher net worth than Merrill Lynch’s clients, was eager to gain access to that customer base.
Talks had stalled, however, as each company’s marketing staff eyed the other with suspicion. Shearson officials felt they were treated worse than second-class citizens. American Express’s managers fretted over what such an alliance would do to the prestige of their beloved green cards. The American Express managers disdained their Shearson counterparts as crude and hell-bent on getting their hands on American Express’s prized cardholder lists.
Now the unexpected news of the Prudential-Bache merger triggered a second informal meeting between Sandy and Robinson after the Weills returned from Asia. Sandy and Joan invited Jim Robinson and his wife, Bettye, for Sunday brunch at their Greenwich home. Sandy was proud of his lush estate in this prestigious Protestant town, and it gave him a sense of comfort and security to host the Robinsons on his own turf. Sandy had his housekeeper prepare bagels and lox for the Weills and bacon, eggs, and grits for the Robinsons. After brunch, Joan showed Bettye Robinson the gardens and cut her a bouquet of forsythia while the two men retreated to Sandy’s dark-paneled study.
Sandy knew from the moment he and Robinson agreed to have this discussion that Shearson could not hope to craft even a so-called merger of equals, much less actually take over American Express. With $20 billion in assets compared to Shearson’s $2.5 billion, American Express was simply too large. So as the two settled in to discuss the possibilities, Sandy shed his pose as the gracious host and took on his other persona: the insecure street fighter. If the two companies merged, what would be his role at American Express? What power base would he have? What corporate responsibilities would he have, on top of continuing to head Shearson? Accustomed to being the acquirer rather than the acquired, Sandy wanted to make clear his interest in a top spot at the parent company. His goal if he sold Shearson to American Express: become its president.
Robinson, typically at ease in social settings, was taken aback at Sandy’s hard-nosed edge. Evasive while still exuding Southern charm, Robinson assured Sandy he would have an important role at American Express, one that would be worked out with the board of directors. Of course, he told Sandy, “you’ll have to prove yourself” over time. Remarkably, Sandy held his volatile temper at that condescending remark. The pair agreed to start negotiations.
By Good Friday 1981, Sandy and Robinson had worked out the parameters of the deal: American Express would buy Shearson for almost $1 billion. At a final negotiating session that day, the CEOs privately hashed out the most sensitive issues that remained open: the number of board seats for Shearson and Sandy’s title. Their deputies haggled over the details. Finally, the American Express CEO said he would present their tentative deal on Monday to his board, unofficially led by Howard Clark Sr., who had preceded him as CEO and had recruited nearly every director now on the board.
Robinson quickly dispatched Howard Clark Jr., the former chairman’s son who was American Express’s investment officer, on the company jet to Hobe Sound, Florida. His mission: persuade his father, as well as several other board members who had retirement places in the rich enclave, to approve the Shearson acquisition. It wouldn’t be easy. When he took over as chief executive officer of American Express in 1960, Howard Clark Sr. had gone to great pains to bring onto the company’s board the most elite directors he could find, people like Rawleigh Warner Jr., the chairman and chief executive of Mobil Corp.; Richard M. Furlaud, chairman of Squibb Corp.; and Robert V. Roosa, an influential former Treasury Department official who was a partner at the venerable private bank Brown Brothers Harriman & Co. With their backing he had pushed to establish the American Express card as a symbol of prestige as much as a convenient way to pay for things. His efforts were aimed almost exclusively at America’s upper crust. It just wouldn’t do, for example, to allow Kmart to accept the American Express card.
Thus the junior Clark, known as “H” to distinguish him from his eminent father, knew the board members he would see that weekend would not be happy to associate socially or in the boardroom with the likes of Sandy Weill. Nor would they be happy to associate their very distinguished company with Weill’s renegade securities firm. Clark argued that Shearson had the best profit margins in the business, the result of its incredibly efficient operations. He told the men, most of whom were members of the Blind Brook Country Club, one of New York’s most exclusive, that if American Express was going to be in the securities business—and it certainly should be—then Sandy’s company was in the strongest position to weather that business’s cyclical nature.
Excited and nervous, Sandy, Cohen, and Sheinberg left American Express headquarters together and shared a cab to their Upper East Side apartments. They chatted eagerly about getting the Shearson executives together the next day. As Sandy was about to get out of the cab first, he turned to Cohen, who hoped to eventually run Shearson after Sandy moved up to American Express.
“One other thing,” Sandy told his right-hand man. “You’re not going to be on the board.” With that, he slammed the door.
Cohen was stunned. By the time he arrived home he was livid, almost crazed. Sandy had just betrayed him! Figuring the Ivy League bureaucrats at American Express weren’t exactly clamoring for more pushy Shearson insiders on their board, he suspected Sandy had sold him out to get the deal. Cohen, the son of a clothing manufacturer, had attended public schools in the middle-class South Shore of Nassau County, Long Island, and graduated from Ohio State University. He knew he wasn’t like “them,” but neither was Sandy. They should stick together. Sandy’s betrayal gnawed at him so that he couldn’t sleep that night.
Cohen was a dark-haired, compact man who stood five feet, six inches tall and inch for inch was just as stubborn and scrappy as his boss. The grass was still wet with dew when he arrived at the Weills’ Greenwich estate early the next morning. He tore right into Sandy. “I’m mad, because we had an agreement that I would be on the board,” Peter said. “It’s not right.”
“I know you’re upset,” Sandy responded, keenly aware that he would need Cohen’s help in a few hours to convince his management team of the wisdom of selling their company. With his encyclopedic knowledge of the firm and the long hours he worked, Cohen had his own important allies within Shearson. “They’re giving us two board seats, not three,” Sandy explained. “If you can convince Jim Robinson otherwise, have at it.” With only two seats committed and a third seat uncertain, Sandy wanted Shearson’s lawyer, Ken Bialkin, or his friend Dan Seymour, former chairman of the J. Walter Thompson advertising agency, on the board. “It’s really important we do this deal. Don’t screw this up.”
Though he was hurt more than he let on, Cohen knew Sandy wanted to propel himself and Shearson into the establishment that had rejected him all his life. “Don’t worry. I won’t screw it up for you,” Cohen said, though he still planned to make a case for himself somehow. He felt oddly as though the bond between Sandy and him had changed forever, that their interests were no longer the same.
When the other executives from Shearson arrived at the Greenwich estate later that morning, Sandy told them he wanted their input and support before going forward with American Express.
“We don’t need them,” asserted Hardwick Simmons, Shearson’s marketing chief. “I’m opposed.” As Sandy’s token WASP in the 1970s, Simmons didn’t share his boss’s enthusiasm for breaking into the Gentile crowd. Also, Shearson was booming; that month the Dow Jones Industrial Average had broken above the 1,000 mark. Besides, Simmons and his colleagues expressed doubts about Shearson’s compatibility with American Express. They knew it was a stuffy hierarchy filled with memos and committees, all the kinds of things that Shearson’s rough-and-ready managers despised.
Sandy countered and cajoled. No longer the shy man on the sidelines, Sandy was powerful and persuasive about the positive reasons for teaming up with American Express. Sherman Lewis, who had become Shearson’s president when Shearson took over Loeb Rhoades, sensed that the sale to American Express was as good as done. He realized that Sandy managed by making his executives feel they were part of the decision-making process.
Sheinberg put the whole thing in perspective. “Professionally, we won’t be happy running a subsidiary instead of a whole company. Personally, though, we’ll all be better off financially. We’ve been on a roll lately, and now may be the time to take advantage of it.” Although he didn’t show it, Sheinberg was deliriously happy at the prospect of becoming really rich if Shearson was sold.
It didn’t take long for the Shearson executives to convince themselves that this might work. After buying one ailing firm after another as Wall Street had been falling apart for the past decade, they were the kingpins. They could do it again. We can take those snobs born with silver spoons in their mouths, they crowed. American Express may think it’s taking over Shearson, but we can turn the tables. We’ll wind up taking over American Express.
With impeccable timing, Sandy was ready to close the deal with his team. “Imagine if you got up tomorrow morning and read that American Express just bought EF Hutton? Would you want that competition?” Sandy said. “Let’s pick our partner while we can, rather than let our competitors get the best partners.”
The prospect of being left behind in the move toward financial conglomerates dissolved the last remaining opposition. Soon they focused on Sandy’s role in the new empire and snickered about how he could run circles around Jim Robinson and assume the helm of American Express. “Do you think I could do it?” Sandy asked with a laugh, suggesting he was joking.
Yet Sandy wasn’t entirely kidding. As the meeting broke up, he pulled aside Duke Chapman, who, as the president of Shearson when Hayden Stone took over the firm, was one of the most blue-blooded WASPs Sandy knew. “What are my chances of becoming chairman of American Express?” he whispered.
“None!” Chapman responded. “With this board of directors, a Jew will never be its chairman.”
The meeting broke up in time for the Shearson executives, the majority of them Jewish, to get home before sundown, the start of Passover. Sheinberg, recently divorced, stayed at the Weills’ to observe the holiday with them. For the traditional Seder, Jessica Weill read the Four Questions, as the family broke matzoh together and drank kosher wine.
The next morning, Easter Sunday, Sheinberg happened to look out his upstairs bedroom window in the Weill home. Coming up the walkway was Louis Gerstner, the highly successful American Express executive in charge of its flagship credit-card and travel business. Gerstner also lived in Greenwich, and as Sheinberg quickly drew the curtain, he guessed from Gerstner’s body language that Jim Robinson had ordered him to pay a visit to Sandy. Brought to American Express in 1977 from McKinsey & Co., the major consulting firm where he handled the American Express account, Gerstner was viewed as the up-and-coming heir apparent to Robinson. At least he had been until the Shearson talks began. The meeting between Sandy and Gerstner lasted only thirty minutes; both men knew that their corporate aspirations could put them on a collision course in coming months.
On Monday, April 20, the board of American Express met to discuss the merger. Robinson had told Sandy he would call him in a couple hours when it was over. But two hours stretched into four and then into the entire day. In the Shearson offices, Sandy was pacing. To Cohen and Sheinberg, he kept barking, “What’s going on? What are they doing?” As the meeting dragged on, the Shearson team began to fear there were problems. “It’s not the end of the world if we don’t do this deal,” Cohen remarked, trying to prepare Sandy for the worst. “We’re doing all right on our own.”
But Sandy was beside himself, chewing his cigars and his fingernails. Finally he called Joan, the one person with whom he could share his insecurity. “You better get down here. I think there’s a problem. I don’t know what’s going on.”
When Joan arrived at the World Trade Center offices at six o’clock that evening, she ran into Robinson getting into the elevator. He and Joan were ushered immediately into the private sitting room where Sandy was waiting. The board has approved the merger, Robinson told the Weills, on the financial terms we agreed to, a stock swap valued at $864 million at current stock prices. Sandy was confused; if that’s the case, what took so long? What he found out next made him question whether he even wanted to sell his much-loved Shearson to this crowd.
“Sandy, the board doesn’t want to name you president, or even chief operating officer, right now,” Robinson told him. “You will be chairman of American Express’s executive committee, and of course, a director.” Sandy and Joan were dumbfounded at such a nebulous, do-nothing corporate position, but Robinson knew he was lucky to get that for Sandy.
Robinson had just spent the entire day being grilled by his directors, who were very uncomfortable with Sandy Weill. Aware of Sandy’s no-holds-barred tactics and raw ambition, the directors were terrified that he would take over American Express. Even if they agreed to get into the securities business, they weren’t convinced it should be with Shearson and Sandy Weill. Led by the imperious Howard Clark Sr. and Rawleigh Warner, the directors refused to buy Shearson without certain conditions designed to limit Sandy’s power. They insisted that Alva Way, a senior executive, be made president, the vacant spot that Sandy badly wanted. To avoid naming a specific person to be Robinson’s number two, the directors named Gerstner a vice chairman. Also they rejected Sandy’s choice of Bialkin on the grounds that the board didn’t want a lawyer as a director. Instead, they chose advertising man Dan Seymour and Sandy’s chief deputy, Peter Cohen. Over the weekend, Cohen had presented his case for a director’s slot directly to Robinson, noting that without a board seat, he couldn’t commit to staying at Shearson beyond the transition.
Of course, Robinson didn’t dare confide what lay behind all these machinations to Sandy, who he sensed was about to call off the deal. Instead, he told him that the board had appointed his allies, Seymour and Cohen, and, in his sugarcoated Southern accent, he assured Sandy that he would rise quickly at the blue-chip company as soon as the board got to know him. Without a position of authority from the board, Sandy had to decide whether he could trust Jim Robinson, who was so polished he was difficult to read.
“What’s your net worth?” Sandy demanded. Robinson, who was startled at this blunt question, said he was wealthy, but nothing compared to the $30 million Sandy would pocket if he sold Shearson and ended up with 600,000 American Express shares, compared to Robinson’s paltry 15,000.
Sandy’s confrontational tactic highlighted how different he was from Robinson, who remained calm and diplomatic. Sandy was torn, visibly shaken by his dilemma. While his first instinct was to tell Robinson what to do with his vague promises and WASPy board, he had come close enough to the cachet and clout of American Express to want a role there even more.
Still, Sandy needed a face-saving role, something—anything—to show he would be assuming a top position at American Express. He had an idea: Could he sign the letter to shareholders in the annual report along with Robinson and Way? Sure, conceded Robinson, who knew this gesture was more symbolic than substantive. Increasingly aware that Sandy’s role at American Express was more important to him than the price tag of the deal, Robinson promised: “Your time will come.”
Sandy looked to Joan, whom he consulted on major decisions. “Should I trust him?” he asked. “Yes,” she answered without hesitation.
Sandy turned to Robinson. “Okay, let’s do it,” he said. When he walked out of the sitting room, he told Cohen with a scowl, “You’re on the board.” After final details on an agreement were worked out, the Shearson kitchen staff served steaks and champagne to the exhausted executives at midnight.
At nine o’clock the next morning, Tuesday, April 21, 1981, Sandy got on the nationwide “squawk box” to Shearson’s many offices with the news. In a halting voice, he started to explain the rationale behind the merger—American Express’s prestige and marketing power. But he stopped suddenly, his chest heaving. Then he finally let his emotions go. With thousands of his employees listening, Sandy sobbed openly.
Fifteen minutes later, the announcement of the groundbreaking merger went out over the news wires. Almost immediately, the media and Wall Street wags, who dubbed the matchup “the Odd Couple,” started predicting that the shrewd, calculating Shearson chief would unseat the suave, polite Robinson. Soon Sandy resumed his swagger, confident that he could do at American Express what he had done to a dozen firms in the last decade. “Not bad for a kid from Brooklyn,” he confided to a friend. “The Jews are going to take over American Express, and they’ll never know what hit them.”
Shearson shareholders met to approve the sale on June 29. At the Windows on the World restaurant atop the World Trade Center, Sandy nervously took the ballroom podium. “It’s amazing what one has to do to get a crowd,” he joked. “Welcome to the wedding,” he said to laughter and applause. The Shearson shareholders had always loved Sandy Weill, but never more than now. He had just made them richer than many of them had ever imagined by selling the company at three times book value. “Jimmy, you watch your back. Sandy is smarter than you,” one delighted attendee yelled out. Sandy basked in the adoration.
Three of the biggest shareholders in the audience were his early partners: Roger Berlind, Arthur Levitt, and Marshall Cogan. As Sandy reviewed the firm’s history from its modest beginnings, they expected to be recognized. “We’ve survived—and prospered—through too many market cycles to count,” Sandy told the friendly audience. “Always charging like bulls, never hibernating with the bears.” When Sandy was done, Levitt and Cogan were incensed; they hadn’t even been mentioned. Levitt was particularly offended. He firmly believed that Sandy wouldn’t be here this day had he, Levitt, not saved Sandy’s job in that fateful confrontation with Arthur Carter years ago. But Sandy wasn’t sharing the spotlight with anyone.
After getting the approvals of delighted Shearson shareholders and the less excited American Express shareholders, Sandy gleefully noted that Shearson’s stock had risen, making the company worth $988 million on its final day of trading. At 3:30, he left a meeting with Robinson to visit the floor of the New York Stock Exchange. The American Express chief couldn’t fathom Sandy’s sentimental urge to go to the Big Board. As a man given every advantage in life, Robinson clearly didn’t understand the fearsome hurdles that this Brooklyn boy had overcome to get to this day. Sandy fought back tears as he watched Shearson’s stock trade for the last time.
Sandy Weill certainly did not blend easily into the button-down, hierarchical world of American Express. He wore baggy, rumpled suits on his plump frame rather than the tailored attire of the physically fit American Express upper echelon. When he plopped in his worn, cushy couch and put his feet on the coffee table, which he did a hundred times a day, holes in the soles of his scuffed-up shoes showed. His American Express counterparts, who preferred antique chairs, had their shoes shined daily. Instead of gold cuff links, Sandy wore gold bracelets. When the executives and directors sipped wine at lunch meetings, Sandy would swill a martini. When no one else was smoking, Sandy puffed on his fat Te-Amo cigar. American Express always had a five-year strategy in place. Sandy’s long-term planning ran to where he was going to eat dinner that night. While American Express put its charitable dollars to sponsor major art exhibits at the top-tier museums, Sandy had quietly started a very effective charitable foundation that taught poor, mostly minority, high school kids about business and economics. Unhappy with Sandy’s poor presence at a podium, the polished and well-spoken Robinson hired Sonya Hamlin, a well-known speaking coach, to tutor him.
The other Shearson executives were equally at odds with their American Express counterparts. At a formal dinner shortly after the merger, Shearson executives sat amidst the American Express officers. They hooted, hollered, cursed, and drank. When one Shearson man stood on a chair to yell at someone across the room, Howard Clark Jr.’s dinner partners were aghast. “Oh my god,” whispered the man on his left. “What’s going on here? They’re animals!” said the man on his right, rolling his eyes.
Even though he didn’t dress and behave like his new colleagues, Sandy loved the perks that came with being at American Express. He relished the Gulfstream jet designated for him and had Sheinberg, an avid photographer, shoot his picture in front of it. The American Express helicopter delivered him to glitzy parties in the Hamptons and onto exclusive golf courses, where the pilot fetched Sandy’s clubs. He even appeared on TV in a celebrity-studded golf tournament playing with Jack Nicklaus. He had a car and driver, and attended corporate parties with the likes of Barbara Walters, Karl Malden, and Henry Kissinger. He showed up in the social columns of New York newspapers and even made the cover of Esquire magazine. American Express became his passport to more than wealth; it opened the doors to the fame and opulent lifestyle he had always dreamed of.
Accordingly, Sandy was determined to make his mark at his new corporate parent, even though he kept his title as Shearson chairman and CEO. While he initially retained his World Trade Center office with the fireplace, he also took a big corner office on the fortieth floor of the American Express tower. Certain that Cohen could handle the day-to-day operations at the brokerage firm, Sandy rolled up his sleeves to learn as much as he could about the other business units. Sandy’s job as chairman of the executive committee gave him responsibility for strategic planning and financial matters. He planned to use these duties to gain enough influence to persuade Robinson to name him chief operating officer, distinguishing him from his rival Gerstner, who was none too eager to share his business strategies for the flourishing green and gold cards with his new colleague. Indeed, Gerstner actively opposed any efforts by Sandy or his Shearson cronies to “cross-market” brokerage products to his cherished cardholders. What if a cardholder lost money on an investment or advice from Shearson? Gerstner argued. He might blame American Express.
Sandy wanted to impress the American Express executives with his knowledge of other businesses, proving he was more than a superbroker. As a director Sandy would be provided monthly financial reports the night before a scheduled board meeting. On those nights he insisted that Sheinberg, who had been named treasurer of American Express, spend the night at his apartment to flesh out questions Sandy could ask. At one early meeting, Sandy turned to a footnote in a report and pointedly asked Gerstner, “Why has the time to answer a customer call gone from thirty-eight seconds to forty-five seconds?”
Another time, Sandy detected weakness in the traveler’s-checks unit. Rather than sending a polite memorandum through the proper channels asking for a well-researched report, Sandy called William McCormick, the executive in charge, who was out of town for a weeklong meeting. “Cancel your trip and come back here,” Sandy ordered.
McCormick, a vice chairman of the travel-related services division, refused. He told Sandy his staff was studying the situation and that he would be briefed with the other executives at a future meeting. Cursing at such red tape and insubordination, Sandy angrily hung up. When the meeting was held, McCormick started his presentation about traveler’s checks. Sandy interrupted him, “We ask the questions and you answer them.” Robinson and Gerstner exchanged glances. Sandy’s longtime habit of brainstorming and browbeating his managers certainly didn’t comport with American Express business etiquette. Yet Sandy was dead right about the trouble. Robinson might not like his new colleague’s brusque style, but he was amazed at his alacrity at finding and solving problems, as if they were fires that needed to be put out immediately, lest they spread.
With Peter Cohen preoccupied by his duties at Shearson, Sandy felt the need for someone to work with him as he tried to bone up on the many facets of American Express’s business. When young Jamie Dimon, about to receive his MBA from Harvard, called Sandy looking for advice about job offers he was entertaining from Goldman Sachs, Morgan Stanley, and Lehman Brothers, Sandy invited him to his Upper East Side apartment.
“I have a better idea,” Sandy told the young man. He offered Dimon the position of his assistant. “I won’t pay you as much, but you’re going to learn a lot and we’re going to have a lot of fun.” The handsome and charming Dimon accepted and soon reported to his small office with a window next to Sandy’s.
Determined to display his deal-making prowess at American Express, Sandy searched for takeover candidates. He negotiated the purchases of two regional brokerage firms, Foster & Marshall in Seattle and Robinson-Humphrey in Atlanta. Separately, Sandy discovered that the American Express International Bank was attempting to emulate the Geneva-based Trade Development Bank to get into overseas banking for the very rich. That bank, Sandy knew, was run by billionaire Edmond Safra, the international banker Cohen had worked for in his year away from Shearson. Cohen had suggested that American Express explore the acquisition of Safra’s bank, and Sandy had given him the go-ahead to make an initial approach. Shuttling between the mysterious banker’s Paris apartment and New York, Cohen found Safra was interested and arranged for the Lebanese-born banker to meet Robinson, who was attracted to the Geneva bank’s wealthy international client base. Shortly after their amicable meeting, Sandy and Joan flew to Europe so Sandy could have his own powwow with Safra. The pair hit it off, even getting drunk together on New Year’s Eve. They called Cohen in New York in the middle of the night and jovially conveyed their intention to strike a deal.
On their way back from Europe, Sandy and Joan gave a lift on the corporate jet to Harvey Golub, a partner at McKinsey & Co. who ran the American Express account. The two had met when Sandy first joined American Express at the behest of Robinson, who wanted Sandy to use McKinsey as the other executives did. Sandy had refused, saying consultants were a waste of money. But Sandy used the ten-hour flight to pick Golub’s brain. From his nebulous post as chairman of the American Express executive committee—God, he hated that meaningless title that sounded like corporate purgatory—Sandy had felt the tremors that signaled potential changes in the executive suite.
It didn’t take long for Sandy and Golub—both Brooklyn-born cigar smokers—to establish an easy rapport. As he grew to trust Golub during the flight, Sandy peppered him with questions about issues he anticipated arising in the coming weeks: Should he give up the job as chairman and CEO of Shearson to become president of American Express? Should he become the president of American Express if he isn’t named chief operating officer at the same time? The two men, wreathed in a thick cloud of cigar smoke, discussed every pro and con.
“Title doesn’t matter,” Golub told his fellow passenger. “Don’t be so hung up on being named chief operating officer.” Yet the McKinsey consultant could tell Sandy was bothered by Robinson’s consistent refusal to name anyone to the chief operating officer’s position.
“It doesn’t matter if I give up the CEO title at Shearson, because Peter Cohen will be loyal to me,” Sandy offered. Again Golub disagreed. “That loyalty will last about fifteen minutes—at most.” Even Joan, who was listening to every word, weighed in on this: Shearson is your power base; don’t give up your anchor, she warned.
When the Gulfstream landed in New York, Sandy told Sheinberg, who was on the trip, “I like this guy Golub. He can be an honorary member of Shearson.” Golub walked away liking Sandy, but he also saw a man who was used to being in charge struggling to find his way. A minister without portfolio in a foreign culture, Sandy didn’t seem all that happy at American Express, Golub thought.
Sandy’s premonition about changes in the executive suite proved true. In January 1983, Alva Way, consistently outgunned by Sandy and Gerstner, announced his resignation as president. With the presidency available, Sandy made no secret of his desire for the post. But neither did Gerstner, who thought he deserved the spot as the head of American Express’s core travel-related services business, the company’s impressive “cash cow.” Certainly on paper Gerstner had the upper hand: In 1982 Gerstner’s Travel Related Services had contributed $247 million of the company’s $581 million of net income, while only $124 million came from investment services.
Robinson, who had gained respect for Cohen’s talents after he largely orchestrated the pending acquisition of Safra’s Trade Development Bank, asked the young executive for his input. He had come to regard Cohen as quite capable, despite his relative youth; indeed, Robinson had started inviting him to lunch in his private dining room. “Who do you think I should make president?” the American Express CEO asked.
“You have to make Sandy president,” replied Cohen, who was still loyal to Sandy despite the strains in their relationship. Besides, if Sandy got more involved at corporate, he would quit meddling at Shearson and give me control, he reasoned.
“Why? Lou is in charge of more revenue-producing divisions for American Express,” Robinson countered.
“If you don’t make Sandy president, Edmond won’t do the deal,” Cohen replied. The takeover of Safra’s Trade Development Bank was scheduled to close in a few weeks. “Edmond doesn’t know Lou Gerstner from a hole in the wall. He knows and trusts you and Sandy.”
As Robinson debated his choices in the days that followed, Sandy’s nerves got the better of him. He would pace the office floor, pull at his hair, and chew his cigar. He kept hounding Cohen. “Who do you think he’s going to pick?” Sandy asked. “Who’s going to be president?” When his longtime aide predicted Sandy would get the job, Sandy wanted more information. “How do you know? How can you be sure?” When Cohen said he had recommended Sandy, his boss—unaware of the growing bond between Cohen and Robinson—didn’t see how that would carry much weight.
At the start of 1983, Robinson encouraged Sandy to give up the CEO position at Shearson for Cohen. After the American Express chief hinted that Sandy’s relinquishing control at Shearson would free him up to do more important work at the parent, Sandy acquiesced. It was the first time Sandy hadn’t followed Joan’s advice. With mixed emotion, Sandy issued a press release naming Cohen the new president and CEO of Shearson. At age thirty-six, the hardworking and ambitious Peter Cohen became the youngest chief executive of any major securities house.
Within a few days, Robinson called a special board meeting at the Helmsley Palace Hotel to approve the acquisition of Trade Development Bank and select a new president. The directors expressed concerns about the secretive and peculiar Edmond Safra, who refused to come to the United States to meet them, ostensibly for tax reasons. Cohen thought the debate had overtones of anti-Semitism, but Robinson pushed for the lucrative international banking franchise for American Express. After the directors reluctantly approved the $530-million purchase of most of the non-U.S. assets of the Geneva-based bank, Robinson told them, “Peter Cohen is an extraordinary asset.” Sandy was floored. Robinson had never showered that kind of praise on him.
Sandy quickly recovered, however, when Robinson recommended him as the next president of American Express. The board approved Sandy only after Gerstner was named chairman of the executive committee. When the new positions were announced on January 16, 1983, Robinson went out of his way to praise both men equally.
Two weeks later, the American Express chairman and CEO handed Sandy a three-page letter detailing—actually limiting—his responsibilities. With the exception of certain financial duties, Sandy couldn’t act independently. He had to seek the approval for any major move with the affected operating chiefs of American Express’s five divisions or with Robinson. That hit a nerve.
“Jim, I want to be chief operating officer,” Sandy declared.
“No,” Robinson answered flatly.
Sandy implored Robinson, with assurances that he had the energy and the know-how to do a good job.
Robinson told Sandy that he would lose the “horsepower” of his strong subsidiary heads if he put a COO over them. Jamie Dimon, getting up to speed as Sandy’s assistant, couldn’t believe his ears. With his Harvard MBA freshly in hand, Dimon was getting a fast lesson in the realities of corporate governance, and he wasn’t impressed by what he saw. “Jim Robinson is keeping all the big egos happy and diffusing the power so broadly no one can come close to challenging his authority,” Dimon complained to Sandy. “Corporate America is full of children, and it’s a waste of fucking time.”
While Dimon’s observation had some truth to it, neither Dimon nor Sandy knew that Robinson’s directors had drawn a line in the sand regarding Sandy’s ascent at American Express. The board’s controlling clique, centered a little bit north of Palm Beach, would go only so far with Sandy Weill, and he had just reached that limit.
Instead of a cause for celebration, Sandy’s so-called promotion felt more like defeat to the hard-charging president. He was at loose ends. Without Shearson, he had no fiefdom to call his own. He would fall into the chair in Sheinberg’s office and complain, “I don’t have anything to do.” When Mary McDermott, who had been with Sandy almost since the beginning, ran into him at a Shearson function, she was astonished at Sandy’s appearance. “You look like hell,” she told him. “Whatever is making you look this unhappy, it’s not worth it.”
When his old friend Edwin Gill, who started as an analyst at CBWL, paid Sandy a visit in the American Express tower, he found his old boss in the executive corridor with a martini in his hand at 2:30 in the afternoon. “Edwin, I have nothing to do,” Sandy confided. After spending the afternoon having more drinks and reminiscing about the old days when Sandy was the CEO of his own company, Gill left with a heavy heart. It’s as if Sandy has lost his bearings, Gill thought sadly.
By the summer of 1983, Sandy knew he had to do something to revive his career at American Express—and himself. If he was constrained from managing people, he could at least manage deals. A deal junkie, Sandy thought he had found a good target: Investors Diversified Services. IDS wasn’t a sexy or prestigious financial company but a folksy Minneapolis-based firm that sold mutual funds, annuities, and insurance policies through “financial advisors.” Selling door to door, the IDS salespeople were the Avon ladies and Fuller Brush men of financial products. After American Express bought Shearson, Sears had snapped up Dean Witter on the theory that Sears could peddle everything from “stocks to socks” to Middle America. IDS would be American Express’s chance to go after the middle class too. With a bull market under way, Sandy told Robinson that everyone from teachers to repairmen had a favorite stock or an insurance need. He got the go-ahead to test the waters on an IDS purchase.
Excited and eager, Sandy contacted Fred Kirby II, the chairman of Alleghany Corp., the diversified company that was IDS’s parent. Kirby, whose family owned the biggest block of Alleghany stock, was willing to consider a sale on the condition that American Express buy the entire company, including its steelmaking unit. A further condition was that Sandy and his minions couldn’t have access to IDS’s books to do their due diligence until a purchase price was agreed upon. Such unreasonable provisos normally would have given Sandy pause, but he was so enthusiastic about bringing in a deal that he pushed forward.
The reclusive and obstinate Kirby left to spend the month of June at his remote Adirondack Mountains retreat. But Sandy wouldn’t wait for his return. Kirby could be reached only by patching telephone calls through a radio link, but that was good enough for Sandy, who wanted to get this deal rolling. When he reached Kirby, Sandy wasted no time making an offer: “Six hundred million?” Sandy shouted into the phone from his office as he puffed a Marlboro. “How does that sound, Mr. Kirby?” When Sandy couldn’t hear a response over the radio’s static, he raised his bid to $750 million and then $900 million without apparently getting any response from the other end. Sheinberg and American Express counsel Gary Beller, who were with Sandy, stood by helplessly as Sandy upped the price to a whopping $1 billion in just five minutes.
Sandy wants this deal at any price, Sheinberg thought. He’s negotiating with himself.
With a $1-billion price tag established, Kirby agreed to let Sandy and his team make an on-site inspection of IDS in Minneapolis. Most of American Express management had been ambivalent about pursuing IDS but were highly skeptical when they got wind of the purchase price. Cohen was particularly outspoken about an atrocious price tag for a Midwestern company with a “farm team” for agents. Hell, this amount was twice what American Express paid Safra for his renowned worldwide bank. Sheinberg and Dimon were about to leave with Sandy for Minneapolis when Cohen said he would join them. Robinson had given the new Shearson CEO his own instructions: “I want a real independent due diligence,” Robinson told Cohen privately. “I don’t want to be smoked by Sandy.”
After the first day of due diligence, Sandy found Cohen and Sheinberg in the hotel bar. “What do you think?” Sandy queried. “Isn’t this great? Isn’t this really great?”
“I think it’s great at the right price, but not at this price,” Cohen answered. “Here’s why I think we’re overpaying.”
Before Cohen could explain, Sandy launched into a tirade, screaming, “You don’t know what the fuck you’re talking about! You better not challenge me on this!”
Remembering Sandy’s outburst at his going-away party, Cohen yelled back, “You know what, Sandy? I don’t have to take this shit from you. I’m not going to take this shit from you.” Looking over at Sheinberg, he added, “George has the same point of view.” In an effort to calm Sandy, who was creating a scene at the bar, Cohen asked, “Can we renegotiate the price?”
“Hell no, we’re not renegotiating,” Sandy fumed. “This is the price, and this is great. You’re wrong!”
“Sandy, we’re going back to New York. We will not see you tomorrow,” Cohen said as he left the bar. Sheinberg paid their tab and walked out behind him. The next morning, Cohen and Sheinberg took the Shearson plane back east to be dropped off in East Hampton, where they planned to spend the weekend at their summer houses.
A senior management meeting was set for the next week, August 15, 1983, to evaluate the IDS purchase. But the meeting would be more than just a consideration of a deal. It would be a vote of confidence in Sandy Weill as well.
As the acquisition’s proponent, Sandy made the presentation to the executives seated around the long mahogany table. For the first time in his life, he actually put on a slide show in the American Express tradition. Sheinberg, who had known Sandy for nearly two decades, thought to himself: This is the reverse of the real Sandy Weill. This is a snow job, a con job. So you’re stooping to this, my friend, you’re so desperate to get back in the game.
After the show-and-tell, Robinson went around the room for opinions from the executives, including Gerstner, who had concerns about tarnishing the pristine image of American Express with such a lowbrow operation. When a question arose about taking on a steel subsidiary as part of the deal, one of Sandy’s aides jumped in. “Actually, we project a steel-company profit of ten million dollars,” he said.
“Where did you get that?” interjected a surprised Sheinberg, who had been assigned the due diligence of the steel unit because of his experience with factories at Bulova. “That’s bullshit. This company is lucky if it breaks even. My guess is it will lose money.”
Embarrassed and furious that his pitch was being undermined, Sandy exploded. “Why didn’t you say anything before this?”
“I just got back from a trip to that site,” Sheinberg replied, assuming that the candor that had always marked their relationship at Shearson was what Sandy expected of him. But this time Sandy felt ambushed, stabbed in the back by one of his own men. Sheinberg had committed the cardinal sin of disloyalty. The $1-billion IDS deal died at that meeting.
So did the longtime friendship between Sandy and Sheinberg. Sandy didn’t speak to the treasurer for several months, until he left a message for him to meet him for lunch. He coldly informed Sheinberg he was being replaced. (Treasurer was just about the only job over which Sandy had any control.)
“Fine, I’ll go back to Shearson,” Sheinberg said. “That was our deal when I joined you at corporate.”
“I can’t have an enemy around, can I?” Sandy responded.
“A deal’s a deal,” Sheinberg said.
“We’ll see,” said Sandy.
Sandy succeeded in ousting Sheinberg from the parent company. But Cohen, whose star was rising even as Sandy’s was falling at American Express, persuaded Robinson to keep Sheinberg at Shearson. Distraught that his deputies had turned against him and in need of respite, Sandy fled New York for the pampering and luxury of the Hotel du Cap on the French Riviera. There he and Joan vacationed for three weeks among the fragrant pines, splendid gardens, and panoramic views, dining on superb Provençal cuisine and lounging by the seawater pool chiseled into the massive seaside rocks.
When Sandy returned to his office after Labor Day, Cohen asked him to go to lunch “to straighten out the IDS thing.”
“You have me all wrong,” Cohen told his old mentor.
“You’re not loyal, you son of a bitch,” Sandy reacted vociferously. “You should show me blood loyalty, cut-your-wrist kind of loyalty. You didn’t support me.”
“Stop it already,” Cohen said. “IDS is a very good idea at the right price. And Kirby has nowhere else to go. So let’s structure this transaction so it will fly.” Cohen, always a financial wizard, laid out a plan that included a lower purchase price rather than a dilutive pooling of stock, and a tax-efficient scheme of marking up the value of the assets and re-depreciating them.
“That’s a great idea,” Sandy acknowledged. Beaming, he darted out before finishing his lunch. American Express made another attempt at IDS as a stand-alone, retained Harvey Golub from McKinsey for an impartial due-diligence investigation, and finally agreed with Kirby to pay $773 million in cash and stock.
But the tensions and confrontations in the executive ranks weren’t American Express’s only troubles by the fall of 1983. While Robinson and his management had been expanding the company’s banking and investment activities, the Fireman’s Fund, its property-and-casualty insurance unit, was slipping deeper and deeper into debt. The subsidiary had become badly overextended in recent years as premium income declined, competition intensified, and costs rose. Under pressure to deliver earnings to American Express, Fireman’s Fund had resorted to accounting gimmickry to paper over its problems. Finally, the bottom fell out in late 1983, forcing American Express to take a massive write-off. On December 12, the company suffered its first earnings decline in thirty-five years because of Fireman’s Fund. The news sent American Express shares plunging $3¾ to $28 3/8, erasing $750 million of its market capitalization.
Enormous pressure was building on Robinson to show the markets and his board that he was prepared to take all necessary action to stop the decline. Yet only one person in his executive ranks had the reputation as a turnaround artist: Sandy Weill. Under unaccustomed attack after years of kudos, Jim Robinson needed Sandy to rescue his and his company’s reputation. At the same time, Sandy, longing for a challenge he could sink his teeth into, needed Fireman’s Fund to rescue himself. It didn’t take much persuading before he assumed the leadership of the beleaguered insurance unit and departed to its headquarters outside San Francisco. Sandy knew the cross-country assignment removed him from the corporate power base, but he wanted a real job. And as American Express’s second-largest shareholder, he wanted to protect his investment.
Diving into his new assignment with his old fervor, Sandy stayed in San Francisco almost full-time at the beginning. At Robinson’s behest, he took along Bill McCormick, the traveler’s-checks executive with whom he’d had the run-in during his early days at American Express. While McCormick, who had been trained as a nuclear physicist, may have been one of Robinson’s favored lieutenants, Sandy nevertheless appreciated his work ethic and methodical dissection of details. Soon, Sandy, McCormick, and Jamie Dimon, who traveled everywhere with Sandy, were spending every waking moment together as they prepared to move quickly and dramatically to turn the company around. At breakfast every morning, Sandy smoked his cigars, until finally McCormick announced, “I can’t enjoy my scrambled eggs with that cigar smoke.” At the end of eighteen-hour days, the trio often crashed at McCormick’s house, purchased so he could stay there full-time while Sandy and Dimon commuted from New York. Plotting the rescue, they smoked cigars and drank gin in the backyard hot tub until midnight.
In early 1984, Sandy launched the turnaround. He fired two thousand employees, sold off the subsidiary’s foreign operations, raised premium rates, and slashed expenses. At American Express, McCormick had not been a fan of Sandy’s style since their first confrontation over proper procedures. Now, however, McCormick found Sandy an excellent leader, something McCormick had never glimpsed at American Express headquarters. He could count on Sandy to give him straightforward, guileless answers, sprinkled of course with choice expletives, rather than the “glassy-eyed, fishy stare” that McCormick got from most corporate bigwigs.
As Sandy’s constant right hand, Jamie Dimon was getting a crash course not only in crisis management but also in eating through four time zones. Wherever they went, Sandy would arrange meetings over meals. With the American Express jet flying them to two cities on some nights, they frequently consumed two complete dinners. After a martini or two, Sandy always ordered whatever he thought was the restaurant’s finest dish and an excellent red wine to wash it down. Flying home after that, Sandy wanted a snack available on the plane. The American Express pilots knew to have Domino’s pizza—heavy on the jalapeños—sent to whatever airport they were at. Jamie Dimon longed for a simple container of yogurt.
Under Sandy’s rule, Fireman’s Fund showed a modest improvement in profits in 1984. In March, rejuvenated by his early accomplishments in California, Sandy was looking forward to a dinner at the ‘21’ Club with Robinson and his new fiancée, Linda Gosden, a public-relations maven. A former acupuncturist, Gosden was ambitious and vivacious. She was surfacing not just as Robinson’s new love but also his chief advisor. With Joan by his side, Sandy excitedly discussed ideas he was using at Fireman’s Fund that could also be implemented at American Express. Yet while Sandy had been away, Gerstner, assuming more responsibility for corporate strategy, recommended that American Express unload the insurance unit.
Sandy saw what was happening. He was still president of American Express, but he was being frozen out. He had never been welcome in the WASP nest, and he had lost the friendships of his closest Shearson colleagues, Cohen and Sheinberg. Still, Cohen, who was forging ahead to expand the securities firm, kept Sandy informed of the unfolding negotiations that spring to buy Lehman Brothers Kuhn Loeb Inc. As one of the last privately held investment banks, Lehman was in turmoil as its co–chief executives, Lewis Glucksman and Peter Peterson, warred over its future. Taking over Lehman would settle a score for Weill and Cohen, who had been snubbed in 1977 when Kuhn Loeb rejected Shearson’s offer in favor of merging with the more esteemed Lehman Brothers.
Ending one hundred thirty-four years as a private institution, Lehman agreed to sell to Shearson/American Express in April for $380 million. Cohen, the epitome of the Young Turk reshaping Wall Street, had learned at the feet of a Wall Street master, Sandy Weill. To show his gratitude and a little sympathy for his old boss, who was clearly on the outs, Cohen wanted to tell Sandy himself.
“The day after this deal is closed, you and I are having lunch, just the two of us, right in the middle of their fucking dining room,” Cohen told the man who had been humiliated by these old-line firms more than anyone. “It’s what you always wanted to do.” On May 11, 1984, Sandy and Cohen met for that lunch in the elegant dining room at the Broad Street headquarters of the firm, now renamed Shearson Lehman. As he placed the white cloth napkin in his lap, surrounded by Rembrandts and Renoirs from Bobbie Lehman’s collection, Cohen proudly remarked, “Look how far we’ve come from the day I went to work for you.” It was a bittersweet moment for Sandy, who saw this day not as his victory, but as one for his former assistant, who had outmaneuvered him at American Express. Sandy felt betrayed by Cohen. He’s done everything in his power to thwart what I want to do, and driven a wedge between Robinson and me, Sandy thought.
As American Express moved forward with its plan to rid itself of Fireman’s Fund, Sandy came up with an idea that could benefit him and American Express as well as provide him with a logical exit. “As long as we’re talking about the possible disposition of this thing, would you mind if I see whether I can put together something to buy it?” Sandy asked Robinson.
Robinson wasn’t sure; it wouldn’t look good to sell to a senior executive.
“Look, Jim, I may not be around the company much longer,” Sandy said. “Why not sell to me?” The American Express CEO reluctantly consented that Sandy could explore a buyout—quietly. “It would be a nice gentlemanly way to exit the company.”
Sandy swung into full gear. He could have a company of his own to run again! He called his friend Robert Greenhill at Morgan Stanley and other potential investors who might be interested in helping him do a leveraged buyout of the insurance unit, basically borrowing the money to buy Fireman’s by pledging its assets as collateral for the loan. Dimon, who loved reading the annual reports of the Berkshire Hathaway Group—which coincidentally had its own insurance holdings—suggested Sandy contact Warren Buffett, the famed investor who served as Berkshire’s CEO. A longtime friend of Sandy’s, Arthur Zankel, who had made investments with Buffett in the past, arranged a meeting for them when Buffett visited New York the next week. After a productive breakfast at the Plaza Hotel, Sandy and Dimon flew to Omaha, Nebraska, to Buffett’s nondescript office in Kiewit Plaza. They drank Cherry Cokes and reviewed Sandy’s plan that called for Buffett to put up the funds to buy one fifth of Fireman’s Fund.
“I’ll take twenty percent and whatever anyone else doesn’t want,” Buffett said. When Buffett drove Sandy and Dimon back to the airport where the American Express jet was waiting, Sandy invited the financial guru to come aboard and take a look. Buffett, known for his Midwestern penny-pinching values, was impressed. “Mmm, this isn’t a bad way of life,” he told Sandy before sending them on their way. Dimon was bowled over by what had just happened: “My god, we have an investor!” He and Sandy knew Buffett’s reputation for careful investing and utter probity would appeal to American Express.
At the same time that Sandy was preparing a bid for Fireman’s Fund, rumors began to crop up about the former Shearson chief’s impending departure from American Express. The press picked up on the sales of about half of his American Express stock. Attributing them to “personal financial planning,” Sandy denied any plans to leave American Express.
But friends and enemies inside the company knew Sandy was on his way out—one way or another. Robinson and Cohen, who had become close at Sandy’s expense, decided to give the man who brought them together a “going-away” party, although it couldn’t be called that. Instead, they hatched the idea to throw a lavish gala in honor of the twenty-fifth anniversary of Sandy’s start on Wall Street when he and three friends opened Carter, Berlind, Potoma & Weill. Cohen asked Mary McDermott, the firm’s first gal Friday and now Shearson’s public-relations head, to spare no expense in putting the party together. Asked about a budget, Cohen replied, “Just make it great.”
On May 2, 1985, nearly two hundred Shearson employees and friends gathered at the Federal Hall National Memorial on Wall Street from as far away as London, Geneva, and California. Arthur Carter and Roger Berlind attended, despite the difficult circumstances of their exits from the firm. Both men had gone on to very successful careers; Carter made close to $100 million buying and selling companies in the 1970s and had a real estate and publishing empire, and Berlind, returning to his first love, had produced major Broadway shows including Amadeus and Sophisticated Ladies. Arthur Levitt still felt some bitterness that his old partner took all the credit when Shearson was sold to American Express. He and Cogan refused to attend despite the fact that they had gone on to their own successes, Levitt as chairman of the American Stock Exchange and Cogan as a co-owner, among other things, of New York’s swanky ‘21’ Club.
In the 143-year-old landmark marble building, guests in black tie and evening gowns passed through Corinthian columns for the dinner dance in the massive rotunda. Vases of lilacs and dogwood sat atop tables draped in silver lamé, as oversized white balloons floated overhead. When McDermott, who had hired a famous party planner for the event, entered the breathtaking room, she burst into tears. Her quiet crying was for more than the room’s beauty; she was brokenhearted that this would be Sandy’s “swan song.”
After dessert, speeches were in order. The Weills’ children, Marc and Jessica, spoke about growing up with their father and their Shearson family. Both now worked for the firm: Marc, twenty-nine years old, was a financial consultant in asset management, and Jessica, twenty-five, worked in the marketing department. Cohen took the podium to talk about Shearson’s growth to 22,000 employees and to present Sandy with a silver cup inscribed MASTERMIND, MASTER BUILDER AND MASTER CHAIRMAN OF THE BOARD.
Robinson, who had arrived with bodyguards, introduced himself, drawling that he was from “southern Brooklyn.” He delivered a parody of the Gettysburg Address: “One score and five years ago, Carter, Berlind and Weill brought forth in Brooklyn a new firm dedicated to the proposition that all money is created equal…” Then the American Express CEO presented Sandy, Carter, and Berlind with 2,300-year-old coins, tetradrachms from the Macedonian Empire. He explained to the crowd, many of them, like Anthony DeMeo and Charles Bachi, from Shearson’s back office, that Macedonia, like Shearson, was created in twenty-five years, and gave them all replicas as party favors.
Following the brief remarks of Carter and Berlind, Sandy took the stage, speaking so quietly he could hardly be heard in the vast rotunda. “Arthur Carter lived across the hall from me,” he stammered. “We bought a seat on the New York Stock Exchange and…here we are.” Overcome by emotion, Sandy couldn’t continue. The Weills and their friends danced, often in big groups hugging and swaying to the beat, until 1:00 A.M.
A few days later, Sandy offered his plan to take Fireman’s Fund private. In a deal worth $1.6 billion, American Express would retain 40 percent of the company, Buffett would get another 40 percent, and Sandy would own the remaining 20 percent. After presenting the plan, Sandy retreated to the fortieth-floor dining room for lunch with Clarence Jones, whom Sandy had made a partner—the first black partner on Wall Street—at CBWL back in the 1960s. While they were eating, one of Sandy’s assistants came into the dining room to whisper in his ear. Jones, who didn’t hear what she was whispering, watched Sandy simply deflate. The assistant had told Sandy what she had just overheard one American Express executive saying to another in the elevator about Sandy’s plan: “What really pisses me off about this deal is that it can make Weill richer.” That wasn’t a good sign. He was about to be turned down. Having suffered much discrimination in his own life, Jones tried to comfort Sandy, who still seemed like a fish out of water in the WASPy company.
“Sandy, this isn’t you,” Jones said softly.
“I know,” Sandy replied.
With nothing else to do until American Express decided on the proposal, Sandy and Joan, his supporter through good times and bad, returned to the Hotel du Cap to celebrate their thirtieth anniversary. In New York, the American Express board didn’t like Sandy’s plan. The directors complained that it contained too much debt and asked for too many guarantees. Perhaps more important, they worried that if Sandy did turn around Fireman’s Fund, he would make a ton of money and look like a star, while the board could face shareholder lawsuits for selling it to an insider. Instead, the board decided that the parent company would sell it to the public. Robinson called Sandy on June 18 to say that the board had rejected his proposal. The message was clear: American Express didn’t mind if Sandy had nothing else to do but resign.
Sandy returned to New York on a Friday afternoon. “I think this is a good time to leave,” he told Robinson. “I will go quietly.” Then he and the American Express CEO spent most of Saturday at the American Express offices in Lower Manhattan discussing Sandy’s departure. On Sunday, Sandy went to the Robinsons’ Greenwich home to continue talks on what salary and benefits he would receive as a “consultant” in the future, including an office, pension, stock options, bonus, medical benefits, two secretaries, and car and driver. Sandy met Dimon and his secretary at the office that Sunday night to clean out his office. Sandy also summoned Marty Lipton, his lawyer, to finalize his contract. At 2:00 A.M., Monday, June 25, Sandy left the American Express tower alone, exhausted, and morose. Dimon, knowing Sandy’s moods were lifted with a good party, considered orchestrating a last-day event for his boss. “One problem—no one would come,” he told their secretary as they finished packing. “They would fear looking like Sandy partisans, a kiss of death at American Express.”
Later that Monday morning, American Express announced Sandy’s resignation as president and his replacement by Louis Gerstner. In response to a flood of media inquiries, Robinson and Sandy agreed to meet with reporters in the fortieth-floor conference room overlooking New York Harbor. Smoking his Te-Amo cigars, Sandy somehow felt relief, even happiness; as he became more relaxed about his departure, even his humor returned that afternoon. He crowed that he wouldn’t be Robinson’s “Deputy Dawg” anymore, referring to an old cantankerous but ineffectual cartoon character.
Reporters tried to find out what behind-the-scenes intrigue had led to the unraveling of one of Wall Street’s most unusual partnerships. Did Sandy underestimate Robinson’s skills as a politician? Was Sandy frustrated by the bureaucracy? The insular board of directors? Didn’t Sandy want the number-one job someday?
“Obviously I feel sad about that,” Sandy acknowledged. But he couldn’t bring himself to criticize Robinson or American Express for his failure to rise to the top. He knew he had made his share of missteps. Much of his undoing was his own. For the first time in his life, Sandy hadn’t been true to Sandy. Never again, he vowed to himself.
The big question everyone wanted to know: What will you do now?
Conceding that he had no specific plans, his answer was true to himself: “Maybe I’ll build another company. Whatever I do next, I will want to be the top person. I just want to run my own show again.”