Last Man Standing

by Duff McDonald

  Worse, it seemed that the institutional arrogance bred at Morgan Stanley prevented the new hires from adapting to their new organization. Instead of seeking any way to put together a blended culture, they built a mini–Morgan Stanley within Smith Barney. Lessin, in particular, surprised the old guard with his presumption. He saw himself as equal to Dimon, a view shared by precisely no one. (One jarring difference: Lessin was prone to walking around the office with no shoes on, a habit that would be inconceivable to Dimon.) In any event, the question became moot shortly thereafter, when Lessin suffered a stroke and was forced to downsize his role at the firm.

  Greenhill might have worked out if he had been able to deliver where it mattered: with market share and on the bottom line. Yes, he was throwing around huge sums of money, but if he succeeded in building an investment banking franchise, the thinking went, everybody would come out ahead. And he started off with a bang, landing an advisory role on the $8.2 billion takeover of Paramount by Viacom in 1993 that brought the firm $33 million in fees. That was followed by advice to Viacom on its purchase of Blockbuster Entertainment in 1994. The firm, which had come in twenty-second in mergers and acquisitions advisory rankings in 1992, vaulted to sixth place for 1993. By 1995, however, it was down to eleventh place, and the grumbling about Greenhill’s spending grew louder.

  Dimon could tolerate Weill’s getting all the credit in the press for the company’s success, but what he could not countenance was being saddled with partners who made a job he could easily have done himself a little more difficult. Coworkers came to see in Dimon a man both impatient to get the job done and able to relax when the time was right. “He worried a lot about substance, not so much about form,” recalled Plumeri. “He always used to say, ‘I just need to know the facts. I don’t want to hear some long story. Just give me the facts.’” And then, at the end of a long day, Dimon might invite a few junior analysts into his office on the thirty-ninth floor of 388 Greenwich Street to share a nice bottle of wine. He was still only in his mid-thirties.

  • • •

  At the same time that he was engaged in the audacious experiment with Greenhill, Weill decided that the time might be right to propose to Ed Budd at Travelers that they fold the remaining 73 percent of the insurance company into Primerica. In addition to consolidating control of Travelers’ operations—which would allow the Primerica team to truly do a number on its finances, instead of merely exerting influence at the board level—there was also the lure of the Travelers name and the company’s well-known logo, its red umbrella.

  Although the Primerica people had helped Ed Budd and the Travelers’ team whittle down the insurance company’s real estate exposure over the past year, Weill sensed that Budd was sick of heading the still sluggish company and would be ready to do a deal if the terms were right.

  Negotiations lasted just two days in September 1993; Budd accepted Weill and Dimon’s offer of a $4.2 billion stock swap. (Representing Travelers in the negotiations was First Boston’s Gary Parr, a man whose path would cross Dimon’s innumerable times over the next 15 years.) The combined company assumed the name Travelers Group, and the deal doubled Primerica’s assets to $100 billion. The transfer of power was also complete. Weill was named chairman and CEO of the parent, Dimon president and chief financial officer, and Bob Lipp CEO of the insurance group. Budd was named chairman of the executive committee, a role with no actual responsibilities.

  With the completion of the deal, Weill told anyone who would listen that he was finally back. In an article in Business Week in October, “The Contrarian—While Others Retrench, Sandy Weill Builds a Financial Services Empire,” he called out his former employer. “Travelers is bigger than American Express,” he told the magazine. (Travelers would do its own retrenching, cutting 4,000 jobs by the end of the next year.)

  When Joe Wright, a friend of Weill’s since the 1970s and longtime board member, cautioned Weill that Primerica might be ceding some of its terrific reputation in the financial markets by changing its name to the more consumer-oriented Travelers, Weill was even more blunt. “Be clear,” he said. “I am the one who had the reputation in the financial markets, not Primerica.” Regardless of this moment of megalomania, Weill also knew enough to give credit where credit was due. In November, he bestowed on Dimon yet another title: chief operating officer of the Travelers Group.

  • • •

  In addition to trying to prevent Greenhill from blowing millions on his Morgan Stanley cronies, Dimon had to deal with another top executive who was giving him headaches: the company’s head of brokerage operations, Joseph Plumeri. A motivator in the Sandy Weill mold, Plumeri was the kind of guy who could bring himself to tears rallying the troops; but the voluble Italian-American was an erratic manager. He had been unable to properly integrate the Shearson and Smith Barney units, and brokers were whispering to the press that the computer systems didn’t always work and the bureaucracy was stifling.

  Plumeri was also prone to making promises to brokers that he could not deliver on—such as guaranteed compensation—and resorted to petty threats when called on the carpet for them. A constant refrain, to either Greenhill or Weill, was that Plumeri was going to quit and take his 9,000 former Shearson brokers with him. Hearing of the threats, Dimon sat Plumeri down one day to put the older man in his place. “Joe,” he said. “Just so you know, the first time that you say that to me, I am going to fire you. But you should know that you can raise any issue.” Plumeri’s response: “Perfect. We’ll have a great relationship.”

  In the end, it didn’t really work out. But Dimon wouldn’t need to fire Plumeri. When they’d finally had enough, Greenhill and Weill called Plumeri into Greenhill’s office in the summer of 1994 and told him he was being made a vice chairman of Travelers. From that point on, Dimon directly oversaw the brokerage force. He had never been busier. Theresa Sweeney, his assistant, felt as if she never sat down during this time. “In the beginning, I never asked him how he was; he never asked me,” she recalls. “I walked in there at 7:00 A.M. and walked out at 10:00 P.M. I was working more hours than my husband, who was an investment banker. For a time, I never even knew if Jamie and I were friends. I’ve never worked so hard in all of my life.”

  Plumeri might have suspected he was being Zarbed. He might have been, but Weill had another idea. Realizing that the company’s insurance business could use a hot-blooded leader like the exiled Art Williams, he put Plumeri in charge of overseeing Primerica Financial Services.

  The media came to the conclusion that yet another addition to Dimon’s portfolio made it certain he was being positioned as Weill’s heir. Dimon’s comment to Business Week on the issue was politic. “Sandy’s got plenty of time, and that’s something he needs to decide when the time is right,” he said. “If it’s not me, then so be it.”

  Two years into the Greenhill experiment at Smith Barney, it was becoming painfully clear to everyone involved that things weren’t working out. Even though Weill had given Dimon official powers in early 1994, naming him chief operating officer of Smith Barney Shearson, it had proved difficult to rein in Greenhill’s excesses.

  Expansions in Hong Kong and Beijing the year before had been an expensive disaster. After initial success, Greenhill’s team proved largely incapable of luring a meaningful number of their old clients from Morgan Stanley. Investment banking is all about personal relationships, and the idea that they’d raid not only Morgan Stanley’s personnel but also its client list had been a large reason for hiring Greenhill in the first place.

  Greenhill and Dimon were also, more often than not, working at cross-purposes. The big spender and the tightwad were natural adversaries. Even as Dimon’s viselike grip on expenses kept the company’s return on equity in the top ranks of Wall Street, Greenhill’s continued spending was causing a widening rift between the brokerage and investment banking divisions. (Knowing his own reputation, Dimon used to crack wise at his own expense, asking people if they were tightening toilet paper dispe
nsers so as to dispense only one sheet at a time.)

  Dimon was no mere penny-pincher, mind you. He did invest in the business. Following the merger of Smith Barney and Shearson, for example, he invested significantly in creating state-of-the-art broker workstations and building out an array of new products and services offerings. Broker productivity rose sharply, net negative investment flows turned positive, and revenues went up. Spending that resulted in growth was fine with him, but spending that did not most certainly was not.

  While Greenhill continued to gallivant around the country, his inability to deliver compelling results at the end of the day had become the talk of the firm. “We used to call him Rain Man,” recalls one colleague. “He thought that meant it was because he was a rainmaker, but we were referring to Dustin Hoffman. Zarb had been ineffective, but cleaning up after Greenhill was like cleaning up after an elephant parade.”

  In March 1995, both the New York Times and the Wall Street Journal blew the infighting out into the open, rendering judgment that despite its grandiose ambitions, Smith Barney remained a minor player in investment banking. Indeed, over the past year, a desperate Weill had approached both Jon Corzine at Goldman Sachs and David Komansky at Merrill Lynch about a possible do-over by means of a merger. Neither was interested.

  Meanwhile, Dimon was wrenching control of the business away from Greenhill. In May, he forced the head of bond trading, Jack Lyness, and three colleagues out of the company in a move that was called the “Memorial Day massacre.” Increasingly mired in issues at Smith Barney, in June, Dimon ceded the title of chief financial officer of Travelers to Heidi Miller. Like Dimon under Weill, she had quickly risen from the position of assistant to become the CFO of the entire company. (Jay Fishman, who’d been angling for the job of CFO for years, instantaneously transferred his loyalty from Dimon to Lipp as a result. “Fish-man could barely remember Dimon’s name from that point on,” recalls an executive.)

  Increasingly frustrated, Dimon began openly criticizing Greenhill in meetings. Weill later wrote that he began to worry about Dimon’s inability to get along with any number of people—Frank Zarb, Joe Plumeri, Bob Greenhill. “Somehow, it seemed as though Jamie had a problem with anyone with whom I shared a close relationship,” Weill wrote in The Real Deal, “as though it amounted to a personal threat. I understood the legitimacy of many of Jamie’s points, but it bothered me that he couldn’t operate more collegially.” Even so, Weill could see for himself that the results were not quite what he had hoped.

  By the end of the year, Greenhill knew his time was up, and he took a $34 million severance package in January 1996. Dimon was named chairman and CEO of the company. His father, an employee of the firm, called and congratulated him. (“May I still call you directly to complain?” he joked.) One of Dimon’s first moves was to apologize to the bank’s staff for the expensive experiment gone awry. “We made a mistake, and I’m sorry,” he said to the brokerage force. “Let’s move on.”

  (Subsequent events would suggest that Greenhill’s failure to take Smith Barney to greater heights was an issue more of corporate culture than of talent. He founded his eponymous investment banking boutique, Greenhill & Co., in 1997, and by 2009 had methodically built it into a $2 billion company that had 55 managing directors. He continued to rope down big-ticket advisory deals, and although the firm saw its results in 2008 decline along with the rest of Wall Street, its revenues were still $222 million.)

  The first quarter of 1996 was an improvement for Smith Barney. With tightened cost controls, the firm delivered the highest return on equity on Wall Street. That was on top of a 30 percent return on equity in the fourth quarter of 1995, when Dimon had already effectively seized control of the firm from Greenhill. Later that year, in an interview with Business Week, Dimon even accepted responsibility for what most people perceived as Greenhill’s failings. “We tried to do too much too fast,” he told the magazine. “Blame it on me, not Bob.”

  • • •

  It was during this period in Dimon’s career that the seeds of an eventual falling-out with Weill were planted. As much as Weill was willing to let Dimon do behind the scenes, he was not prepared to share the limelight. When a picture of the two men appeared in the New York Times in July 1995 showing Dimon in the forefront with Weill standing distantly behind, Weill was outraged.

  The headline of that article in the New York Times was “Becoming His Own Man: At Travelers, Weill’s Protégé Is on the Move.” Despite the fact that Weill had endorsed the idea of the story, many viewed the seemingly innocuous celebration of Dimon’s talents as a critical turning point in his relationship with Weill. Weill came to see the article as an unforgivable transgression, even if Dimon obviously had nothing to do with the choice of photos in the story. “It’s not good for Jamie to be getting this kind of publicity,” Joan Weill mentioned to Themis Dimon in passing.

  But that, of course, was a matter of opinion. The article was little more than a recognition of the obvious, that Dimon had been shouldering an ever-expanding workload for more than a decade. Insiders thought he deserved it, too. After all, he really was everywhere at once, whether it was negotiating the next big deal or focusing on even the smallest of tax-related issues. Colleagues teased him for walking around the floor at Smith Barney at 6:00 A.M. to see who was already in; they called this habit “bed check.”

  Although Weill himself made several glowing remarks about Dimon in the Time’s piece, he was taken aback by the suggestion from a board member implying that Dimon—not Weill—was the central figure at Travelers. Joseph Califano, a director at Travelers, had actually said exactly that: “He runs Smith Barney,” said Califano, adding that Dimon was more and more the driving force at Travelers as a whole. It seemed to many around Weill that his insecurity kicked in, and he increasingly came to view Dimon as a threat, not an ally.

  (Weill had never lost—and would never lose—the joy of what one former colleague called “seeing his face on the cover of Fortune.” Even in retirement, his offices are a shrine to the cult of Sandy Weill, corporate executive and philanthropist.)

  Several people told Dimon that the story was going to cause him problems. They were right. Weill barged into a meeting the next day. “Who the fuck told Joe Califano to say that? And who chose that photo?” Still, Dimon initially failed to recognize the shift in his boss’s perspective. “I was still a little bit of a kid,” he recalls. “Weill’s PR people orchestrated it. He knew about it. He knew better, and I didn’t. But I don’t think it was really about the picture. He looked more like a proud father in it than anything else. It was about Califano’s quote. All of a sudden there was the question: ‘Is Jamie really running this place?’ I think that was what got to him.”

  The fact that the two men began to directly repudiate the press’s characterizations of a “father-son” relationship was further evidence of the strain. Dimon pointedly told the New York Times in July, “I’ve got my own father, thank you.” On the other hand, they gave so many interviews that it could also have been a natural reaction to being confronted with the same pat simplication once too often.

  If he’d been more inclined to pay better attention, Dimon would have noticed growing angst emanating from the CEO’s office. Weill came to believe that Dimon was deliberately keeping him out of the loop at Smith Barney during this time. On one occasion, Weill later wrote, when he suggested that the company purchase Aetna’s property-casualty business in late 1995, Dimon said in front of the room, “You’re making a mistake. You, Sandy.” What some had admired as youthful self-confidence now took on a note of arrogance. “He’d always respected his own intellect,” one former colleague recalls, “and reasonably so. But this was something else entirely.”

  The antithesis of the smooth backroom operator, Dimon came to be seen by some colleagues as more brutish than brilliant. Although he and Weill had been swearing at each other since Baltimore, Dimon grew increasingly comfortable challenging his boss, and the resulting fights unne
rved a number of colleagues. Whether or not he knew it, he might have been unconsciously expediting his own exit from the firm. He would find it extraordinarily difficult—if not impossible—to resign from the firm he helped build, but the growing realization that Sandy Weill wasn’t going anywhere anytime soon put the ambitious Dimon in a bind. Judy Dimon recalls thinking she wouldn’t have minded if her husband got a new job, considering the stress he was bringing home with him each day.

  Dimon, though, chose to continue playing with fire. Ignoring what had happened a decade earlier when George Vonder Linden asked Weill to stay away from the Smith Barney meeting in Pebble Beach, Dimon began to do exactly the same thing. Weill wrote in The Real Deal that he “hit the roof” when Dimon’s lieutenant Charlie Scharf told him that he was not authorized to provide Weill with certain information. (Scharf himself has no recollection of this, and has called the idea that he would try to withhold information from Weill preposterous.) Dimon was risking inflaming Weill’s still simmering anger over having been frozen out of Shearson in the 1980s by Peter Cohen.

  Weill goes on to write in The Real Deal that Dimon’s “mafia” was stoking the younger man’s ego—that Black, Boshart, Glucksman, Scharf, and others were constantly telling Dimon he was better equipped than Weill himself to run Travelers.

  In an attempt to finally address the issue head-on, Weill invited Dimon and Judy to have lunch with him and Joan during a company off-site in early 1996 at the Dorado Beach hotel in Puerto Rico. Weill later wrote that after pleading with Dimon to stop cutting him out of the information loop, he was shocked by Judy Dimon’s response. “But Sandy, you’re not giving Jamie enough credit,” she said, according to Weill’s retelling. “He’s been working incredibly hard, and you don’t appreciate him. He doesn’t even own as much stock as you!”

  And so two large egos collided with full force. Weill later wrote of his surprise that his “junior partner” had “somehow … come to see himself as my equal.” In a remarkable example of the pot calling the kettle black, he added, “It had become clear that Jamie’s self-image had rushed ahead unchecked to the point of fantasy.” Weill seemed to be talking as if Dimon were still an 18-year-old summer intern. Just to make things painfully clear that day in Puerto Rico, he added one final patronizing chastisement for the younger man: “You need to behave. If you do, all of this can be yours one day.”