Executives at WR Lazard & Co. have met with officials in New York City and plan to set up similar meetings elsewhere in an effort to reassure clients that the firm is stable following the drug-related death of its founder, Wardell R. Lazard.
Lazard, 44, was found dead in his Pittsburgh hotel room last week. Tests released Monday by the Allegheny County toxicologist's office showed that Lazard had ingested cocaine and had a blood alcohol level of 0.32%, more than three times Pennsylvania's legal driving limit of 0.10%.
On Wednesday afternoon, WR Lazard executives met with officials in the New York City comptroller's office to discuss the firm's role in the management of city pension fund money.
Lazard manages $480 million in city funds, performs financial advisory work for the city water authority, and has underwritten city bonds.
WR Lazard executives say they are confident that the firm can withstand the loss of Lazard. However, a firm spokesman said that the meetings will help are dispel notions that the circumstances surrounding Lazard's death could hurt the firm's ability to conduct business.
Aides to city Comptroller Alan G. Hevesi, who oversees the city's multibillion dollar pension fund system, said if the firm had not asked for a meeting, the city would have.
"They have been a good performer to date," said Jon Lukomnik, deputy city comptroller for pensions. "The unfortunate situation does prompt some questions regarding the ownership of the firm, and it's appropriate to exercise due diligence at this time." City officials would not provide details of the meeting.
WR Lazard, the nation's largest minority-owned securities firm, served as co-manager on $5 billion of issues during the first quarter of 1994, and ranked as the top minority-owned municipal underwriter, according to Securities Data Co.
The firm also serves as a financial adviser for more than two dozen municipal bond issuers and manages pension funds and other assets worth $2.8 billion for municipalities, colleges, unions, and private companies.
In recent days, one client removed its money from the firm's asset-management subsidiary, according to Roy Bumsted, a WR Lazard spokesman.
It is not known whether the client was a municipality or one of Lazard's customers from the private sector. Bumsted did not provide details, and said the firm did not provide a reason for the move. Sources with knowledge of the matter say Lazard managed about $5 million of equity for the client.
"The first objective is to reassure clients of the company's stability, and plans to go forward," Bumsted said. "The second objective is to try to initiate meetings with [clients], ideally in person or in conference calls."
Officials in Washington, D.C., will meet with WR Lazard officials at the board's next investment committee meeting in June regarding the management of the city's pension assets.
Jeanna Cullins, executive director of the District of Columbia Retirement Board, said the board mailed a letter to firm immediately after hearing of Lazard's death originally scheduled a meeting for yesterday. Lazard manages $100 million in the district's pension fund money.
"We want to find out about their status of the firm," Cullins said, adding that yesterday's meeting was canceled because of Lazard's funeral and city officials will meet with the firm in June. "Unless there is something we find out that's particularly unsettling, then we can conceivably have a special board meeting before then."
Municipal officials interviewed say the firm's pension fund business may receive the most initial scrutiny from Lazard's municipal clients since pension fund management depends on an ongoing relationship between the firm and public officials. Bumsted said the initial meetings with municipalities will reflect that concern.
According to municipal sources, staff members will ask for information regarding the continued employment at the firm of top executives, how the company will be run under new management, and if Lazard himself obtained "key-man insurance" to cover his personal taxes.
Without such insurance, the firm could be held liable for paying any back taxes Lazard may owe, said one municipal official. Bumsted confirmed that Lazard did have the coverage.
Bumsted said Lazard's family, including his wife, Betty, will retain majority ownership of the firm. Lazard owned more than 80% of the firm.
For the moment, Melvin L. Eubanks, a vice chairman at WR Lazard & Co., will serve as acting chairman and chief executive officer. Bumsted said it is clear if Eubanks will continue in this role.
"Clearly there will be changes," the municipal official said. "We want to make sure we can count on" the new management team.
Adding to the uncertainty surrounding Lazard's death, state and federal agencies are examining various issues regarding WR Lazard's brokerage business, WR Lazard, Laidlaw and Mead Inc.
The Manhattan district attorney's office is investigating the firm's relationship with the New York State Jobs Development Authority. The investigation was sparked by a lawsuit filed against the authority by James K. Blaine, the agency's former chief financial officer and treasurer.
In the lawsuit, Blaine charges that he was fired from the agency by its president, Audrey Bynoe, in part because he criticized the relationship between the authority and WR Lazard. Blaine charges that the relationship, which resulted in Lazard earning fees as a swap agent, cost the agency money.
Lazard's lawyer, Robert Plotkin, calls the charges "innuendo and hearsay. It's like a Kennedy conspiracy theory." He said the firm has done nothing wrong.
The Securities and Exchange Commission is also examining Lazard's relationship with the jobs authority and possibly other issues, a source with knowledge of the inquiry said on Wednesday. Details about the SEC's probe were not available.
Plotkin said neither he nor WR Lazard officials have been contacted by the commission. Plotkin also said that the commission has yet to subpoena records from the firm, and he doubts that a formal investigation of WR Lazard is taking place. SEC enforcement officials would not comment on the matter.
