Sunday, July 4, 2010

The firm that lost it all

The Scotsman

Published Date: 01 August 2003


Of all the individual tragedies that resulted from the 11 September terrorist attacks on New York, the fate of Cantor Fitzgerald might be the one that captured the public imagination the most.

The financial world’s biggest interdealer, occupied floors 101, 103, 104 and 105 of the World Trade Centre and was the workplace of more than 1,000 employees.

When al-Qaeda flew an American Airlines jet into the 96th floor of the trading tower, a total of 658 Cantor Fitzgerald employees died. The death toll included 20 pairs of brothers, including Gary, the brother of Howard Lutnick, the chief executive officer of the money brokers.

“What makes our company special and what has made it special, is that we were a family and we are still one family,” said Lutnick, at the Central Park memorial service for those who died. “We were not a place of business. We were a place where, if you were like me, you wanted your brother to come and work with you.”

Those sentiments might have a hollow ring to Steven Horkulak, who yesterday won £912,000 damages from Cantor.

Horkulak was awarded the massive damages after a court ruled that he was constructively dismissed from his post as head of global interest rate derivatives at Cantor’s London office after suffering months of bullying by his boss.

The High Court in London heard that Lee Amaitis, the 53-year-old president of Cantor Fitzgerald International, hysterically screamed obscenities at Horkulak over a six-month period. Horkulak also claimed that Amaitis objected when he took time off work when his mother died of cancer and asked aloud if there was a “f***ing epidemic” after another employee’s wife was diagnosed with leukaemia.

Amaitis denies both allegations and also denies describing an executive at a rival firm as a “f****** fat greasy f***” – although he conceded to the court that he would “probably have said he was a f*** or a bastard”.

Not the sort of scenes that hijacked the public imagination post 11 September, as Cantor became the first financial institution since money was invented to win the sympathy of the world.

But those who have followed the fortunes of Cantor since that terrible day in 2001, will be only too aware that the Family That Lost 700, as it was dubbed, has displayed dysfunctionality as breath-taking as the bonuses its best-paid employees command.

Horkulak's case is just the latest in a string of embarrassing episodes which highlight the fact that regardless of the terrible personal price paid by so many at Cantor and their families following the terrorist attacks, money is the name of a financial house’s game and when a moneymaker talks, it does not always sound terribly polite.

The public perception of Cantor Fitzgerald as a victim began to fade soon after the attacks on the twin towers.

In late September, Lutnick agreed to appear on a television show and talk of his grief at losing his brother, his friends and so many of his employees. On 13 September 2001, a weeping Lutnick told Connie Chung on American national TV that Cantor Fitzgerald was determined to stay in business to take care of the victims’ families. He became, “the face of tragedy.”

Within a month, Lutnick became something quite different when Cantor widow Lynda Fiori went on The Bill O'Reilly Factor TV show and complained that Lutnick had not spoken with her, and no-one from the company had attended her husband’s funeral.

“Do you think he’s a phony?” O’Reilly asked. “I think so,” Fiori answered.

The negative coverage continued, much of it centering on Lutnick’s 15 September decision to stop paying his lost employees.

Lutnick’s defence appeared to hold some logic, but the shine was coming off Cantor. “I couldn’t possibly have made another decision,” Lutnick said, explaining that 60 per cent of staff were lost. “Three hundred twenty-five people could not, days after the attack, pay the salaries of 658 people who died, when it was unlikely … that the 325 people would have had a business that covered their own pay.”

Lutnick has, however, promised to rebuild Cantor and to pass on 25 per cent of its profits for the next five years to the families of those who died and he has also made a $1 million personal donation to a relief fund for victims’ families.

Relations within the Cantor Fitzgerald “family” faced challenges, too.

Post 11 September, Cantor tried to put all staff on a commission-only system, paying their own National Insurance and expenses. The traders refused to accept it. The company has since introduced a loyalty bonus, although this is seen by some as little more than a ploy to stop key staff leaving.

Not long afterwards Cantor became involved in an acrimonious High Court battle with rival brokers Garban-Intercapital, which later became ICAP.

Cantor had accused ICAP of poaching three brokers in a cynical attempt to destroy its business, just months after Cantor the World Trade Center attacks.

The three were among the best performers at Cantor, which in court highlighted an e-mail from Michael Spencer, chief executive at ICAP, that said: “Oh, I would love to put one up their bottoms …” Mr Justice McCombe concluded that two brokers, Edward Bird and Spencer Gill, had been put under such extreme and abusive pressure by Cantor to sign a new pay deal that it amounted to a breach of their contracts.

The case presented a seamy side of the broking culture with tales of “whoring parties”, trips to lap-dancing clubs and bets on obscenity usage also emerging.

The court heard that one Cantor executive had suggested to a junior that they could “go whoring” after dinner.

More worryingly, perhaps, Cantor has also found itself under the regulatory spotlight for trading in contracts for difference (CFDs), financial instruments that allow investors to bet on share-price movements.

While many of its rivals have restricted their involvement in this area, Cantor remains a big player. It provided the CFDs for Shami Ahmed, founder of the Joe Bloggs clothing empire, when he started stake-building in Moss Bros. It also provided the shares for Robert Bonnier when he tried to bid for Regus, the serviced-office operator.

However, this week it was back to court, as Horkulak sought damages of £1.5 million from Cantor Fitzgerald for constructive dismissal and breach of contract following his treatment by Amaitis.

Asked by Mr Justice Newman why he had brought the case, Horkulak replied: “I am sitting here now because I want an admission that he [Amaitis] treated me like dirt.”

According to Horkulak, who left Cantor Fitzgerald in June 2000 and needed psychiatric help, Amaitis would “shout at me and scream at me almost every time that we spoke”. He gave evidence that his former boss threatened to “break him into two” and “rip (his) head off”.

Horkulak denied allegations that he absented himself from the office without informing anyone where he was going, that he often had his mobile phone switched off and that he was frequently absent from work without explanation.

Cantor strongly denied breach of contract and the allegation of bullying.

Those familiar with the ways of the City might have pointed out that the sort of behaviour Horkulak described is commonplace in an environment where billions of pounds are at stake. But for how long will such behaviour remain acceptable?

Mr Justice Newman yesterday found in Horkulak’s favour, in a judgment that could have far-reaching ramifications for all workers, but particularly for those working in the jungle that is Square Mile.

The judge said: “Even when full allowance is made for Cantor’s right, acting through Mr Amaitis, to set and maintain a very strict, demanding regime of performance for its employees, I am unable to conclude that such criticisms, as it had in connection with the claimant’s conduct, were properly raised and handled.

“Threats of dismissal should not be used to intimidate. Nor should they be issued in intemperate language. The level of the rebuke must be proportionate to the alleged failing on the part of the employee.”

He said that Amaitis, who was not in court yesterday, demonstrated a “lack of familiarity” with the firm’s disciplinary procedure.

Once the seeds of doubt had been sown over Horkulak’s ability to perform in late 1999, Amaitis did nothing to prevent their “unrestrained development”.

The judge continued: “In my judgment the contract broke down and the position of the claimant became intolerable because Amaitis took every opportunity to vent his disapproval of the claimant, to the claimant and sometimes to him in the presence of others.

“He demonstrated by his outbursts that he had lost faith in him and gave him no chance to re-establish the trust and confidence which would recreate the ‘faith’. Far from having a discussion and giving advice, he uttered intemperate, summary views in foul and abusive language.

“His solution seems to have been to frighten the claimant into performing according to the standards he required and to make it plain that any contrary view which questioned his authority would not be tolerated.”

The judge said that he had reached the firm conclusion that Amaitis’s deliberate course of conduct from January 2000 to June 2000 breached the implied term of trust and confidence in Horkulak’s contract of employment.

Following the ruling yesterday, Horkulak said that he hoped that Cantor’s US bosses would accept that there were “deep-rooted problems” within its London office, concerning the treatment and welfare of its staff, and take the necessary corrective action. “I launched this action so that Lee Amaitis and Cantor Fitzgerald would be held accountable for what they had done to me.

“The court has said whatever the environment, however rich and powerful the boss, whatever the rewards, there are standards below which no employer should go.

“I hope that today’s judgment will go some way towards curbing the excesses of Cantor Fitzgerald. If that is the legacy of this case, I believe I was right to fight it, not just for me, but for other people who are suffering similar treatment.”

It is not yet clear how Horkulak’s victory over Cantor in London will be received in New York.

There, it was recently presented with another court action that could bring fresh embarrassment for the firm.

In May this year, 1 World Trade Center LLC filed a suit in a New York Court alleging that the broker has refused to pay more than $1 million in unpaid rent on the offices it occupied in the World Trade Centre.

Larry Silverstein, the leaseholder and the man behind the property company, has brought the case as he attempts to rebuild the shattered Ground Zero site.

Some might accuse him of heartlessness and tastelessness, publicly demanding payment for the very place where 658 Cantor Fitzgerald employees perished. Others might suggest that Silverstein is simply talking to Cantor in a language the money dealer understands very well.

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* Last Updated: 01 August 2003 10:55 AM
* Source: The Scotsman
* Location: Edinburgh

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