Gilded Lily

by Isabel Vincent

  It was dawn when Guilherme Castello Branco got the call. He had just drifted off to sleep after spending most of the night at Claudio’s wedding when the telephone jerked him awake.

  “It was Magna, Claudio’s secretary, on the other end, and her voice sounded terrible,” recalled Castello Branco. “She told me to call all the newspapers, radios, television stations, and anyone else I could think of to block the story. Claudio did not want the story in the press.”

  But the bleary-eyed Castello Branco had no idea what she was talking about. “What story?” he asked. After being told of the tragedy, he hung up the telephone and, for the second time in a week, called every media outlet in Rio to keep a story from reaching the press. Again, he claims he paid no money to censor the news. A simple phone call was enough to halt any bad publicity.

  The censorship seemed to have worked because while just about every media outlet in the city gushed about the wedding, there were only fleeting references to the terrible accident and the funeral, and they only appeared a week after the events.

  According to an editor who was close to both the Bloch and Safra families, they went out of their way to make sure that the story did not end up in the press, partly because Claudia “was either drunk or on drugs or both.”

  “The whole thing was simply too embarrassing for the families, and really too tragic,” said the editor, who did not want to be identified. “Can you imagine? On Saturday night you have the wedding, and then on Sunday morning the funeral?”

  The families clearly did not want bad publicity to upstage what had been a very glamorous and important “happening” in Rio high society. On top of that, in a Catholic country under a military dictatorship, it would simply not do to reveal that the niece of one of Brazil’s most important tycoons had died because she had been under the influence of drugs and alcohol.

  Edmond and Lily heard the news as they made their way to their luxurious suite at the Méridien in the early hours of Sunday morning. Edmond, still in black tie from the wedding, immediately called his chauffeur and drove to the morgue to offer his support to the Bloch-Sigelmann families. He also took it upon himself to make the funeral arrangements. After the body was released from the morgue, the funeral was immediately scheduled for that morning. Many of the guests who had attended the wedding now found themselves at a wind-swept Jewish cemetery on the industrial outskirts of Rio de Janeiro, presiding at the burial of a young woman whose sister had just celebrated what should have been one of the happiest days of her life.

  Inês Sigelmann, the mother of the bride, her tear-stained face hidden behind large sunglasses, had worn a flowing gown the color of pink hydrangeas for her eldest daughter’s wedding but was now dressed in a sober suit to bury her younger daughter. Most of the mourners were dumbstruck: They shook their heads in disbelief; they had no explanation for such a senseless tragedy.

  “Life sometimes sends us difficult times, and I know that none of the well-wishers at the wedding had the words to express their sadness for what happened right after,” wrote Perla Sigaud in her society column on the Cohen-Bloch wedding, which appeared the following week. “I was hesitating over whether in the face of so much pain I should write about the happiness that occurred on the eve of so much tragedy. It was climax and anticlimax; euphoria and extreme sorrow. Life sometimes forces us to deal with the most dramatic contrasts. And we must learn to take from every difficult experience an important lesson in humility.”

  But Sigaud’s rather poetic musings seem to have fallen on deaf ears, at least when it came to exercising humility. Here were two extremely wealthy families whose single-minded pursuit of wealth and status had been, and continued to be, ruthless and overreaching. At least that proved to be the case with Bloch. The media baron would famously overextend his reach after making his bold move into television on the eve of the wedding in 1983, and see his whole empire collapse a little more than a decade later. His beloved sparkling glass office building in Gloria where he had pulled out all the stops for the wedding of a lifetime, and where he had entertained some of the most important figures in recent history, would fall into disrepair. In due course, it became the property of the Brazilian courts and was auctioned off to pay the tens of millions in salaries that the company owed to its former employees.

  “Everyone said that the death of Evelyne’s sister on the heels of the wedding was a terrible omen,” said one of the wedding guests, who also attended the funeral the following day.

  It was a curse, others said—a warning of some unimaginable tragedy that would surely befall those families in the future.

  For the Safra family at least, that was exactly what it turned out to be.

  MONTHS BEFORE THE wedding and the funeral, Joseph Safra warned his brother not to sell the bank. He had even flown from São Paulo to Montreal, in the midst of a January deep freeze, to tell his brother in person that he was making a huge mistake by selling the Trade Development Bank to American Express. The final negotiations were underway at the Four Seasons Hotel in the frigid Canadian city, and Joseph needed to try to convince Edmond that what he was doing was sheer madness.

  “You don’t even know these people,” pleaded his younger brother, who must have found it hard to believe that Edmond was breaking with family tradition by entrusting one of his beloved “children” to strangers who did not understand the Safra way of doing business.

  But Edmond could be stubborn. Despite their heated discussions about the suitability of Lily as a wife seven years before, Edmond had gone ahead and married her anyway, even after the public shame of l’affaire Bendahan. Joseph had also pleaded with him not to marry Lily. But in the end, Edmond refused, and for years after their 1976 wedding, the Brazilian Safras had frosty relations at best with Lily, whom they considered an opportunist and an arriviste.

  But in many ways, the imminent sale of the bank was far more important than any woman. It must have bothered Joseph and the rest of the Safra clan that for the first time since the death of their father in 1963 Edmond had not consulted them over one of the most important business decisions of his life.

  John Gutfreund, chair of Salomon Brothers investment firm, agreed that Edmond was making a terrible move. Gutfreund also took an intercontinental flight—from New York to São Paulo where Edmond was attending a bar mitzvah—shortly before the negotiations with American Express were scheduled to begin. Gutfreund tried to convince his friend to reconsider. A hard-nosed veteran of Wall Street, he knew that Edmond’s aristocratic banking methods would be mocked in a huge American company like American Express. American executives at the company simply wouldn’t take him seriously; they would find a way to subvert his power. The experience, Gutfreund warned, would be disastrous.

  But Edmond had made up his mind, partly because he had developed the niche market in European private banking so well that he felt there was no longer any space to expand. “It was an economic decision to join American Express because he felt that the private banking market in Europe was going into a downturn,” said one observer familiar with the negotiations. “And here was American Express under Jim Robinson III wanting to develop the private banking market and turn itself into a financial services supermarket. At the time, it seemed like a good fit.”

  Edmond also worried about the worsening Latin American debt crisis and the exposure that his Swiss bank faced as country after country in the region showed signs of defaulting on their loans to international creditors and commercial banks. Between 1975 and 1982, Latin American debt to commercial banks skyrocketed, and the region saw its external debt grow from $75 billion in 1975 to more than $315 billion in 1982—a figure that then represented 50 percent of the region’s gross domestic product. If Argentina and Brazil—two of the largest economies in the region—began to default as Mexico had done in August 1982, what would become of his own bank, which had made large loans to Brazil and other Latin American economies?

  Edmond also offered up the usual excuses for wanting to get rid of
the bank—he was tired of the pace, he wanted to spend more time with Lily and the grandchildren. These would all have been quite normal reasons for wanting to lighten his business load, but Edmond was not a normal businessman. From the age of eight, when he followed his father into the souks of Beirut, banking had been his life. Besides, what would his clients say? Many of these people banked with him because they trusted his family. Now he was selling the crucial Swiss arm of his business and his loyal clientele to a huge American company that did not understand the old ways, that would not provide the same kind of personal attention to their needs that Edmond had done over the years. Of course, Edmond did try to reassure them, reminding his best clients that he would still be their point of reference as chief of American Express’s international banking division. No, everything would work out fine, he had said. There was nothing to worry about.

  In the end, it was Jeffrey Keil, the keen young treasurer at the Republic National Bank of New York, who helped persuade Edmond to sign on with American Express. Keil, along with former Republic executive Peter Cohen, now himself part of the American Express group, felt that incorporating Trade Development Bank within the massive American Express structure would boost the declining fortunes of the company’s own bank—the American Express Bank—and offer the TDB a safe haven.

  After weeks of discussions with Keil and Cohen, Edmond seemed convinced by their arguments and signed the deal. He waited until the stroke of midnight on January 18, 1983, because 18—the numerological value of the chai, the Hebrew symbol for life—was considered good luck among some Jews. The TDB sale hit the front pages of business papers around the world with American Express executives gushing in print that they had added one of the most brilliant banking minds to their team.

  Although they listed his accomplishments and his banking lineage, many of the reporters covering the story also noted that Edmond would not be taking up his new appointment as chief of American Express’s International Banking Corporation for at least a year, citing unspecified “complications,” a reference to his delicate tax situation. Although none of his aides voiced this openly at the time, there was some concern that an absent new chief executive might not get the respect he deserved.

  A year later, when his U.S. tax issues were resolved, the New York Times formally announced Edmond’s appointment, noting that he would be taking over his new duties in New York on March 1, 1984. Jim Robinson III, the chairman and CEO of American Express, was quick to point out that Edmond had not been idle since the deal was signed in January 1983. He had been doing a lot of work, integrating TDB into the larger company’s framework.

  “Over the course of last year, since we completed the combination of American Express International Banking Corporation and Trade Development Bank, Edmond Safra has worked very closely with senior management of the bank and the entire American Express Company,” he said. “Clearly we are fortunate to have a business leader with his banking experience and stature.”

  But Robinson’s statements to the press couldn’t have been further from the truth. In the year that Edmond was forced to stay in Europe, relations between American Express and the TDB deteriorated rapidly. As Gutfreund and others predicted, American executives did not appreciate Edmond’s Old World banking style, which clashed with the massive American Express bureaucracy. Even before Edmond formally took over the post, American Express executives assigned to review the day-to-day operations of Trade Development Bank shook their heads in disbelief—they simply could not figure out how it functioned.

  “TDB ran like nothing we’d ever seen,” said one American Express official. “It ran like an extended family. The management style was just Edmond, who knew everyone. It was very loose, there was no documentation, and only Edmond knew the structure. If someone wanted to talk to him, they simply picked up a phone and called him. It was about as different from a McKinsey model as you could find. Our attitude was, well, we’ll show these guys how to run a company.”

  Another executive who was close to the company noted, “Safra’s a brilliant guy, but he needs to do everything himself. He’s not used to a bureaucracy. He insisted on approving every loan. It began to grate on both sides.”

  But while American Express executives shook their heads in frustration at having spent so much money on a bank whose methods seemed a throwback to the nineteenth century, Edmond was growing increasingly frustrated with the way he was being treated by the company hierarchy. Used to being in firm control at his banks, he was finding out about American Express business ventures and losses after the fact. After the sale of TDB to the company, Edmond was its biggest shareholder, and he considered it a huge slap in the face every time he found out about the company’s dealings in the press. Shouldn’t Robinson and his associates be consulting him about what was going on in the company? For instance, Edmond learned from a Dow Jones wire story about American Express’s plans to pay $1 billion for a Minneapolis-based financial services company. He was also stunned when he learned from news reports just before Christmas 1983 that the Fireman’s Fund, the company’s California-based insurance company, would post a pretax loss of $242 million, dragging down American Express’s total earnings for the year.

  Edmond was livid. To make matters worse, American Express was now reaching out to its newly acquired private banking customers in Europe—the TDB clients—and they were sent all sorts of promotions for other services that the company offered in the mail. For this select group of deposit holders to suddenly be receiving a barrage of mail and promotional material was too much for Edmond. These were people who had banked with him out of a need for utter discretion; now they were on the American Express mailing list!

  He worried; he lost sleep; he couldn’t relax. How could they treat him and his customers like this? In retaliation, Edmond decided to dump almost all of his American Express stock—a slap in the face to his new bosses that ended up costing him more than $100 million in losses. Now, Edmond openly threatened to resign; he even offered to buy back the Trade Development Bank. American Express refused, saying his offering price was too low.

  But Edmond simply couldn’t continue to feel like a hostage of the global conglomerate, and in October 1984 American Express formally announced that Edmond would be resigning as the head of international banking, although he would be made a director on the company’s board. The deal allowed him to buy back several foreign banking operations that he had sold to American Express the previous year. As an article in the Wall Street Journal noted, “Mr. Safra, a private sometimes eccentric 52-year-old billionaire whose holdings include Republic National Bank in New York, apparently didn’t fit well into American Express’s more bureaucratic style of management.” But a year later, the break became final when Edmond simply could no longer abide the American way of doing business at the company.

  After he decided to rid himself of the American Express albatross, Edmond felt like a different man. He threw a party for Lily’s fiftieth birthday at Annabel’s in London, inviting the Gutfreunds, the Erteguns, and many of the others who had attended Claudio’s wedding. Edmond arranged for the restaurant to be decorated in “pillars of white and pink tuberoses,” and the menu featured eggs with caviar and Becheyelle ’70 at intimate tables of eight and ten. The party earned Lily one of her first mentions in Women’s Wear Daily, which described Edmond, Lily, and their guests as “the international camera-shy money-doesn’t-talk set.” Later, on a whim, Edmond and Lily flew from New York to Rio de Janeiro for a much-needed vacation. “For the first time in my life I left New York without telling my secretary where I will be,” said Edmond to his friend Albert Nasser as the two men settled into a backgammon game at Nasser’s luxurious beachfront Ipanema apartment. “I feel as free as a bird and I am very happy to be this way.”

  As soon as he had broken ties with American Express, Edmond set about building another bank—a Swiss extension of his Republic National Bank of New York. But as per his original and very complex contract with American Exp
ress, Edmond was forbidden from luring away his former employees, and had to agree that he would not start a competing bank for three years—until March 1, 1988—after his final departure from the company in 1985. However, Edmond was anxious to save face and recoup his losses, and demanded that his lawyers find a loophole in his original contract with American Express to allow him to get away with it. The loophole came in the form of a small clause that stated that his relationship with the company would not affect his dealings with Republic National Bank of New York, his other “child.”

  “Nothing in this agreement shall impose any restriction on the conduct of the business and affairs of Republic or any of [its] subsidiaries,” noted the contract, which Edmond’s lawyers quickly interpreted as carte blanche to hire back their top TDB people for the new Republic Bank that they were planning to open in Geneva.

  It was a bit of a legal ruse, to be sure, and it disingenuously assumed that American Express’s senior executives simply wouldn’t notice when all of Edmond’s top people started leaving TDB in droves. American Express executives saw their chance to get even with Edmond when they suspected one of his old TDB employees of stealing irreplaceable internal bank information system information, known as IBIS files, which contain a bank’s entire administrative system. American Express rapidly launched a criminal probe of Edmond in Geneva. The March 1987 complaint, which was kept secret as per Swiss law, also accused Edmond of unfair competition and raiding American Express employees.