Be careful what you ask for Logan. You might just trigger a “short” response from me. 😂 Over 30 years ago I was one of three investment banking VPs in a large regional investment bank with a good reputation who was responsible for equity deals. My focus primarily was financial institutions and manufacturing company mergers and acquisitions. Other people had different specialties. One of my colleagues who had been with the company for longer than me, who was a particular favorite of the head of the department, had a tendency to push deals that were poorly conceived and resulted in losses for our customers. For the most part the damage was minimal, since none of them were overly large and we had an extensive and diverse institutional client base in addition to our retail clients. He tended to be aggressive, chasing what would sell rather than what made sense financially. It was all about the dollars and that is why he was a personal favorite of the department head. Investment banking is a commission based business. There was no question about his marketing skills. I came from a very different school of thought. I had started my professional career as an enforcement attorney for the SEC and had always focused on protecting the public from predatory practices. I was careful to choose deals with the lowest risk profile so that our customers would do well. Not everything I did had the kind of returns I would’ve liked, but I can proudly say that no one ever lost any money on any of my deals.
Since we had over 4000 Brokers scattered around the country working for us, many of them would call and ask for an opinion as to the quality of the deals coming out of our department. Many of them also prioritized protecting their customers, not maximizing the commissions they could make. I always tried to give an unvarnished opinion even if it varied from the party line and marketing literature that we would distribute companywide.
After a couple of years, our salesmen began to perceive that I would give an honest analysis of our department’s offerings and people tended to look to me to give them objective appraisals. During this period my colleague developed a relationship with someone who was doing television and radio deals. There were a number of red flags, since he also did his own deals on the side and generally saved the best ones for himself. He was trying to move the shakier deals into our department. After a great deal of groundwork, my colleague and his TV client put together a large package of properties for a public partnership involving a variety of TV and radio stations. It was the largest deal we had ever attempted at that time. It took months to put together and as time went on, more warning signals went off in the back of my mind. The deal kept getting delayed and cut back in size and various properties removed and substituted with other ones of a different type in quality. The whole thing was a mess and it looked like they were just trying to get something on the street, not put together a solid investment package. The more the deal was delayed, the more questions our brokers had with regard to what was going on and I would get increasingly frequent phone calls. I warned them that I was uncomfortable with the progress being made and that I would be cautious about putting any clients into it who could not do their own due diligence. This got back to my colleague and the department head. I was not disparaging the deal, merely warning our brokers to look at it closely. It clearly was not appropriate for all types of investors. We had a variety of ostensibly good internal conversations about it since our organization on paper encouraged the thoroughness of our department’s due diligence and the integrity of the offerings we brought to market. We had a reputation as a quality investment bank, and for the most part we were.
That year I just happened to have a number of major deals close all at once and I was the leader in the department in terms of revenue generated. This upset my colleague who was generally the leader in this regard, and he worked hard behind the scenes to help put me in my place. The net result was that in spite of my stellar performance I was summarily fired a couple of weeks after the close of the year. I moved onto a better position with a smaller firm.
The postscript? My colleague’s deal ultimately came to market at about 20% the size that was originally planned and immediately went bankrupt. Our clients lost every dime. This resulted in massive litigation which cost the company about $20 million to settle. My colleague did not survive the carnage. He was summarily fired. I can look back proudly at that era in my life, because I did the right thing in spite of significant pressure to just be quiet and say nothing. The greed was rewarded with the penalty it deserved.
