Bank officer leaving today

Figure in Alex. Brown, Bankers Trust merger quits Deutsche Bank

Financial services

June 30, 1999|By Kristine Henry | Kristine Henry,SUN STAFF

Frank N. Newman, who helped engineer the merger of Bankers Trust Corp. and Alex. Brown & Sons Inc. and offended many with his management style after he took over, announced his resignation yesterday from Deutsche Bank AG, which acquired Bankers Trust for $9 billion less than a month ago.

Analysts said Newman's resignation was expected, especially amid growing opposition to his pending appointment to Deutsche Bank's management board.

"Bankers Trust stumbled recently in operating results, so it wasn't as if he was handing over a sterling bank or a bank with phenomenal numbers -- that probably added some weight to his decision," said Gerard S. Cassidy, a bank analyst at Tucker Anthony Cleary Gull in Portland, Maine. "Because Deutsche Bank was making tough decisions and he was not the top decision-maker anymore, I would have been surprised if he had stayed."

Newman, 57, co-chairman of Deutsche Bank's Global Corporates and Institutions Division, said in a statement that he concluded that "the role originally envisioned for me will not be necessary." His resignation, which the company said was on "amicable terms," is effective today.

Financial details of his departure were not disclosed. However, Deutsche Bank spokesman Dierk Hartwig said rumors of a $100 million settlement were "far too high." Newman did not return calls yesterday.

He joined Bankers Trust as chief executive officer in 1996 to help turn around the company after it was hit by a derivatives scandal. The bank's net income rose from $215 million in 1995 to $866 million in 1997. But the next year, Bankers Trust reported a net loss of $73 million, including a loss of nearly $500 million in the third quarter on investments in junk bonds and Russian securities.

This month, it was announced that 13 Bankers Trust executives, including its chief financial officer, left the firm after Deutsche Bank said there could be firings over BT's mishandling of an investigation into illegal fund transfers.

The company pleaded guilty in March to shifting $19.1 million of unclaimed customer funds into its own account between 1994 and 1996 -- prior to Newman's arrival.

Bankers Trust acquired Baltimore-based Alex. Brown in September 1997. Since then, at least 26 Alex. Brown employees have resigned -- including three top traders, four managing directors and 10 brokers. Newman's management style was said to be a factor in the defections.

"I am pretty bitter," a former broker who requested anonymity said yesterday. "To me, Alex. Brown was the most perfect place to work, and the minute [Newman] came into the picture things began to change. Every day there is further deterioration of what once was a jewel of a firm."

Alex. Brown employees characterized Newman as "arrogant." When he met with them in Baltimore, he was chauffeured in a limousine and flanked by a team of bodyguards. His flamboyance stunned Brown employees.

"If I had to give him a grade, it would be a `fail,' " said another former broker. "I think most people would think that way."

But Cassidy said the initial read on Newman's legacy is "very good."

"He came in and was quick to realize the derivative problem; he was quick to make changes and get Bankers Trust out of those problems. Then he ran into his own set of issues with some of the acquisitions he made -- Alex. Brown and [Bankers Trust Securities Corp]. Trading losses were sustained in the fall and exposure to overseas problems were greater than people realized.

"He came up to bat and hit the ball out of the park. But his second and third times up, he did not do as well."

Staff writer Bill Atkinson contributed to this article.

Pub Date: 6/30/99

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