Anxiety prevails at Alex. Brown Departures, upheaval mark 14 months since Bankers Trust merger

November 15, 1998|By Bill Atkinson | Bill Atkinson,SUN STAFF

At the Central Intelligence Agency's headquarters in Langley, Va., seven weeks ago, A. B. "Buzzy" Krongard's phone kept ringing.

The callers didn't want to talk about international security or the latest round of negotiations for peace in the Middle East. They were former associates begging the tough but respected Krongard to dump the spy agency and return to run BT Alex. Brown Inc.

"I think Buzzy had over 500 phone calls," a source familiar with the situation said. "If I were his secretary, I would have just hung up the phone."

The barrage came just eight months after Krongard had stunned friends and family by announcing he would leave the Baltimore-based investment banking company he headed for six years, and give up $4 million in salary and bonus to become counselor to CIA Director George Tenet.

The calls were evidence of how rocky the merger between Alex. Brown and Bankers Trust Corp. of New York has become.

Melding of the two companies has not been achieved as effortlessly as predicted when the two merged Sept. 2, 1997.

The Sun interviewed more than two dozen people including current and former employees, analysts and others in the industry, none of whom wanted to be quoted by name. Current employees requested anonymity for fear of losing their jobs, while former executives are still working in the industry and want to maintain cordial relations with Bankers Trust.

Frank N. Newman, chairman and chief executive of Bankers Trust, also declined to comment.

Since the acquisition, morale at the firm has fallen, and many worry about their futures. Six of the 11 highest-ranking executives at Alex. Brown have left since the takeover.

The country's seventh-largest bank lost millions of dollars after betting big on Russian securities. It became entangled in an international hedge-fund scandal that made multibillion-dollar bets around the globe and nearly failed.

Its stock price has been sliced in half. And rumors swirl about layoffs and that Bankers Trust might be a takeover target itself.

Alex. Brown employees also grumble that they can't make decisions and that Bankers Trust executives don't know how to manage the investment banking company.

"People really feel sold out," a former Alex. Brown executive said. "I think it has become us and them. That wasn't the idea."

But those are just recent signs of trouble. In fact, executives have had difficulty putting the companies together from the beginning, according to those interviewed by The Sun.

Onset of troubles

The first sign of trouble was in January, when Bankers Trust held its annual partners meeting at the New York Public Library. More than 200 executives from the two companies and their spouses were invited to meet for several days of training. Teams of Bankers Trust and Alex. Brown partners worked together demonstrating how they could win business.

On Jan. 23, they met in the library's cavernous main hall, chatting and sipping cocktails. Dinner followed in a large room downstairs, and as the evening neared an end, Newman stood to address the gathering. Then he presented his wife, Lizabeth, who introduced the evening's entertainment -- the cast of the Broadway musical "High Society," which performed for close to an hour.

The Alex. Brown executives were shocked by the extravagance. "We just looked at each other" curiously, recalled an Alex. Brown partner.

Added another: "That was a little much for us. You didn't need to have 'High Society.' Buzzy would have had dinner, thanked everybody and gone home."

That wasn't the only cultural difference between the two companies. Meetings that once had been concise and decisive now dragged on, and decisions weren't made.

"You never get a sense for who makes decisions, because you could never get things done," said a former Alex. Brown executive. "It was certainly not a culture we were used to. We were used to decisions that were made by people and not by consensus."

Executives who were used to controlling their budgets, hiring employees and overall decision-making suddenly found themselves stripped of power. "That was all switched to New York," said a former executive.

Unlike at Alex. Brown, where memos had to be signed for accountability, correspondence from Bankers Trust arrived unsigned in many instances. "No one has responsibility for anything," the former executive said.

Even "casual day" caused a stir. The uniform at Alex. Brown was crisp business attire. But Bankers Trust condoned polo shirts and khakis on Fridays during the summer months. While some liked the relaxed style, others in Baltimore complained it was inappropriate. There is "nothing casual" about the business, one employee noted.

Differences at the top

But the biggest disparity between the companies is at the top. Krongard and Newman have vastly different personalities and management styles.

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