From the just-prior entry here, this was the closing line:
Let the race resume, because this melodrama has several acts yet to play, but it seems unlikely at this point that, regardless of moves in the prices of assets under their management, Messrs Cayne & Prince will repeat the mistaken actions of Mr. O’Neal.
Unsurprisingly, it turns out that even without repeating the mistakes of Mr. O’Neal, it’s pretty easy for other members of the august group of executives listed above to be kicked to the curb.
Today’s WSJ, in an article too long and beefy to effectively excerpt without violating fair use, entitled “Bear CEO’s Handling Of Crisis Raises Issues“, you’ll find the anatomy of a palace coup. Omitting only malfeasance, fraud, and necrophilia, Mr. Cayne is “charged” (in the sense of the items having been discussed in a front page WSJ article) with a laundry list of complaints. Among them:
- Lack of attention to detail
- Excessive enjoyment of personal time
- Being filthy rich
- Enjoying golf and bridge
- Being a marijuana smoker
One of these charges is not like the others. And the article in which the complaints appears is made quite lopsided by the short, seemingly random inclusion of his alleged preference for the killer weed.
Sure, the article has lots of quotes from supportive staff members, relating that he’s always reachable when needed, totally engaged in the business, and so forth. But the overall picture gives the impression of a calculated character assassination.
Not that there’s anything wrong with that, mind you – perhaps he even deserves it. But this one is so heavy-handed, that my first thought on reading it was “Cui bono?“. I don’t know who might be among the “players” within Bear Stearns, but surely in a firm known for its sharp elbowed trading prowess, they must be found in every corner office, no? Honestly, though, this one makes the attempted embarrassment of Blackstone’s Stephen Schwarzman look like a grade-school taunt.
The connection, to the extent one exists, between Mr. Cayne’s current agonies and those of Mr. O’Neal might be the “alumni network”. Apropos nothing much, there’s this, from the WSJ story of Nov 1:
Late in June, as the outcry from investors in Bear’s hedge funds grew, Bear authorized an 11th-hour loan of up to $3.2 billion to the less-risky of the two beleaguered funds. The fund ultimately borrowed about half that amount from its parent company.
On July 12, chatting with visitors over lunch, Mr. Cayne seemed less interested in discussing the markets than in talking about a breakfast-cereal allergy and his stash of unlabeled Cuban cigars. On another occasion, he told a visitor he pays $140 apiece for the cigars, keeping them in a humidor under his desk.
Five days later managers of both funds informed investors their holdings were virtually worthless.
The next day, July 18, Mr. Cayne left for Nashville to play in the bridge tournament, accompanied by his wife, Patricia, who is a neuropsychologist and another avid bridge player. Mr. Cayne took part in a prestigious event called Spingold KO. He was in Nashville all or parts of 10 days, according to bridge and hotel records.
For most of that time, Warren Spector — then co-president of Bear and also a competitive bridge player — was in Nashville as well. Mr. Spector was in charge of asset management at Bear, along with all of its trading operations and its prime-brokerage unit, which handles trades for big clients such as hedge funds as well as lending them money.
Amid the turmoil, Mr. Cayne on Aug. 1 called in Mr. Spector, the co-president who had been with him at Nashville. Mr. Cayne was annoyed that Mr. Spector had been away from the office during the fund crisis, according to people familiar with his thinking. He told Mr. Spector he had lost Mr. Cayne’s confidence and should resign, these people say.
Just being a conspiracy-monger, I find myself wondering whether this is all just a comeuppance delivered on behalf of, or directly by, Warren Spector? Seems pretty obvious, I know, but his having taken the bullet several months ago on Bear’s behalf seemed odd at the time (since they were both at the same tournament), and seems odder now.
Perhaps, then, Cayne’s getting knifed by a guy who owes him a knifing. Perhaps it’s far broader than that.
But it might provide an object lesson: Make sure you’ve got competent friends and incompetent enemies. Corollary: Be sure not to convert a competent friend into an enemy.
And it’s not over yet. Tomorrow’s WSJ will contain a follow on, entitled “CEO of Crisis-Hit Bear Denies He Used Marijuana“, (a gratuitous pile-on, I think, given that the original article also contained his denial) including this:
In a note to clients, Punk, Ziegel & Co.’s Richard Bove said “the article clearly places the company in play” because Mr. Cayne would more likely sell Bear than retire “in disgrace.”
The original WSJ piece, above, reported that Bear (which is heavily owned by employees, with Mr Cayne being personally among the largest shareholders) has been able to spurn earlier merger approaches:
He [Mr. Cayne] has resisted overtures to sell Bear. In 2002, when Mr. Dimon, then head of Bank One Corp., raised the possibility of buying Bear, Mr. Cayne didn’t give the idea much consideration, according to people to whom he spoke. Mr. Cayne told members of Bear’s executive committee he would do a deal only for a significant stock price premium, a big personal payout and the use of a private jet, say people familiar with the conversation. The takeover idea ultimately faded away.
So, of course, another plausible explanation for an airline toilet being dumped on his head, aside from the possibility of revenge from a former associate, is that this is all a bit of inside baseball, and that one way or another, Bear’s going to be owned by someone else.
Ignoring the unsavory undertones of such a public defenestration, this story seems likely to get more interesting before it gets boring.
Addendum – Might as well throw this one in too, to keep the circle (Cayne/O’Neal/Prince) complete. In addition to continued rumblings about Prince’s stewardship of the post-Sandy Weill Citigroup, WSJ’s Deal Blog reports other strange things potentially afoot at the Circle K.
Addendum – (11/2/2007 3:24PM) This just in:
NEWS ALERT from The Wall Street Journal
Nov. 2, 2007
Citigroup board members are expected to gather for an emergency meeting this weekend, two people familiar with the matter said. The meeting comes amid worries of potential writedowns and pressure on CEO Charles Prince.
Addendum – (11/4/2007 5:15PM) No story link yet, just an alert from WSJ:
NEWS ALERT from The Wall Street Journal
November 4, 2007
Citigroup CEO Charles Prince resigned at a board meeting Sunday, as the bank faces big new losses from distressed mortgage assets. Board member Robert Rubin, the influential chairman of the company’s executive committee, will be named Citigroup chairman, while Sir Win Bischoff, chairman of Citi Europe, will become interim CEO.
I’m sure the story will be up shortly, and of course this event is no surprise. What will surprise me, however, is if the chattering classes avoid the usual hand-wringing and shirt-rending over his “exit package”.
Like Merrill Lynch, Citigroup has no reported severance agreements in place for its exiting CEO. Stan O’Neal walked away with about $160 million, and Prince is reportedly set to leave with about $40 million. In the first case, the storyline was that O’Neal got a massive golden handshake. A fairer reading might indicate that he just received what he’d earned and owned. This would also be the case for Prince at $40 million – to all appearances so far, he’s got an earned and owned stake of $40 million.
Even operating under the presumption that they were both constructively fired for cause, there’s no case to be made for depriving either of what they already own. I look forward, perhaps futilely, to press coverage that recognizes this, if in fact it also ends up being true in Mr. Prince’s case.