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Book: The last tycoons: the secret history of Lazard Frères & Co by William D. Cohan
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Authors: William D. Cohan
Tags: General, History, Biography & Autobiography, France, Biography, New York, New York (State), Economics, Banks & Banking, Business & Economics, Business, Corporate & Business History, Lazard Freres & Co - History, Bankers - France, Banks And Banking, Finance, Bankers, Corporate & Business History - General, History Of Specific Companies, Banks and banking - France - History, Banks and banking - New York (State) - New York - History, Bankers - New York (State) - New York
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Vente a Credit d'Automobile, or SOVAC. Andre's idea was to turn SOVAC into a broad-based finance company. With the help of his two financial partners, J. P. Morgan & Co. and Commercial Investment Trust, now known as CIT, Lazard bought SOVAC and turned it into a finance giant before selling it for a huge profit many years later to GE Capital, the finance subsidiary of GE. Andre's next astonishing performance was to rescue Citroen itself from sure bankruptcy during the depths of the Depression. At first, Andre Citroen had asked Pierre David-Weill to assist him, but the situation was so dire that Pierre turned the assignment over to Andre Meyer, who in short order went on the board of the company and negotiated a deal with the tire maker Michelin, Citroen's largest creditor, to exchange Michelin's debt for equity. Overnight, as this sophisticated alchemy had never been seen before, Andre had become a sensation in France, sought out by corporate executives throughout the industrialized world.
DESPITE MEYER'S RAPIDLY growing stature, a pall continued to envelop the three Lazard houses during the mid-1930s. London and Paris were still struggling to pay off the debts incurred to stave off the firm's near collapse. And New York was just muddling along in the ongoing Depression. New York had developed its underwriting business, but it was not all that profitable, given the intense competition. Most of the firm's profits seemed to be coming from its investment in General American, Altschul's pet project. A July 1936 letter from Pierre David-Weill to Altschul reflected the French partners' increasing concern about the poor financial performance of New York, and specifically the ongoing lack of the 4 percent interest payments on their invested capital, an eerie foreshadowing of the same problem Michel would have seventy years later with Bruce Wasserstein. "As you remember," Pierre wrote, "nothing has been paid for the year 1935, and the full interest has not been paid since 1931. Now that these amounts have been earned there is no longer any reason to postpone the payments. Perhaps you will be good enough to look into the matter and let us have your views. We have noticed for sometime the increase of the item 'Partners' Withdrawals' which stands at a rather big figure. I imagine there is some fiscal explanation to it. The whole fiscal problem of L.F., N.Y. seems to me worthwhile reconsidering in the light of the provisions of the new tax law concerning foreigners." When Altschul wrote back nine days later, he told Pierre he was working on the answers but was reluctant to write them down, as "some of the questions involved are of such a nature that they had better not be dealt with by correspondence."
Altschul asked his partner Albert Forsch to study the matter raised by Pierre's letter. Forsch reported back that the 4 percent annual payment on capital had been split into two tranches, a 2.5 percent piece and a 1.5 percent piece. "The method was employed for fiscal reasons and comes from the first profits earned," he wrote. He further elaborated that his understanding of the contract was such that the 2.5 percent piece "does not become payable until the contract has terminated and it is determined that profits remain from which this 2.5 percent can be paid."
No doubt the news that their payments would not be made anytime soon did not please the David-Weills and likely exacerbated the family's ongoing cash needs. After David David-Weill's 1898 marriage to Flora Raphael, herself the heir to a sizable London banking fortune, the couple settled in Neuilly, where they built a huge mansion, complete with separate servants' quarters, horse stables, tennis courts, and formal gardens. David David-Weill also pursued the passion for art he had discovered during his transatlantic move to Paris as a teenager. He bought his first painting--a portrait of the French playwright Marie-Joseph Chenier by Adelaide Labille-Guiard--when he was eighteen. His
DESPITE MEYER'S RAPIDLY growing stature, a pall continued to envelop the three Lazard houses during the mid-1930s. London and Paris were still struggling to pay off the debts incurred to stave off the firm's near collapse. And New York was just muddling along in the ongoing Depression. New York had developed its underwriting business, but it was not all that profitable, given the intense competition. Most of the firm's profits seemed to be coming from its investment in General American, Altschul's pet project. A July 1936 letter from Pierre David-Weill to Altschul reflected the French partners' increasing concern about the poor financial performance of New York, and specifically the ongoing lack of the 4 percent interest payments on their invested capital, an eerie foreshadowing of the same problem Michel would have seventy years later with Bruce Wasserstein. "As you remember," Pierre wrote, "nothing has been paid for the year 1935, and the full interest has not been paid since 1931. Now that these amounts have been earned there is no longer any reason to postpone the payments. Perhaps you will be good enough to look into the matter and let us have your views. We have noticed for sometime the increase of the item 'Partners' Withdrawals' which stands at a rather big figure. I imagine there is some fiscal explanation to it. The whole fiscal problem of L.F., N.Y. seems to me worthwhile reconsidering in the light of the provisions of the new tax law concerning foreigners." When Altschul wrote back nine days later, he told Pierre he was working on the answers but was reluctant to write them down, as "some of the questions involved are of such a nature that they had better not be dealt with by correspondence."
Altschul asked his partner Albert Forsch to study the matter raised by Pierre's letter. Forsch reported back that the 4 percent annual payment on capital had been split into two tranches, a 2.5 percent piece and a 1.5 percent piece. "The method was employed for fiscal reasons and comes from the first profits earned," he wrote. He further elaborated that his understanding of the contract was such that the 2.5 percent piece "does not become payable until the contract has terminated and it is determined that profits remain from which this 2.5 percent can be paid."
No doubt the news that their payments would not be made anytime soon did not please the David-Weills and likely exacerbated the family's ongoing cash needs. After David David-Weill's 1898 marriage to Flora Raphael, herself the heir to a sizable London banking fortune, the couple settled in Neuilly, where they built a huge mansion, complete with separate servants' quarters, horse stables, tennis courts, and formal gardens. David David-Weill also pursued the passion for art he had discovered during his transatlantic move to Paris as a teenager. He bought his first painting--a portrait of the French playwright Marie-Joseph Chenier by Adelaide Labille-Guiard--when he was eighteen. His
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