Folder 137

NYC 9/11 Public Portal Document

Copyright Investment Dealers' Digest, Inc. May 13, 1996

Full Text:

In the few hours of court hearings that preceded a quickly -negotiated settlement on the ownership of Cantor Fitzgerald last week, the warring parties shed light on internal maneuvering that led up to the court battle. In particular, Howard Lutnick, president and now-undisputed managing general partner, revealed an aborted attempt to buy out the Cantor family's stake in mid-1995.

The attempt, called Project Omega, would have bought out the majority stake owned by the company's founder, B. Gerald (Bernie) Cantor and his wife Iris. The plan fell apart however, at first over price, and finally because the founder was unable to sign. Ironically, the final settlement resembles closely the planned buyout. But it took a messy court battle to get it done.

Lutnick testified that he and two other partners, Stuart Fraser and Rod Fisher, joined in negotiations to buy control of the firm in mid-1995 when Bernie Cantor was not Vet critically ill. The three partners were prepared to pay between $150 million and $175 million to the Cantors, and as much as $300 million for control of the firm over time. Lutnick had a right of first refusal if the Cantors decided to sell their majority stake. In subsequent months he transferred that right to all his partners.

Lutnick testified that Iris Cantor could have obtained three or four times $150 million if she found an outside buyer. But tax problems presented a major hurdle for a third party sale, said Lutnick.

In addition, a sale to another firm would not guarantee the perpetuation of the Cantor name And the one thing Bemie Cantor did make abundantly clear was his desire to keep the Cantor name alive on Wall Street—in perpetuity. The 34-year-old president of Cantor said that several times his mentor, Bernie, had referred to the disappearance from Wall Street of all traces of Carl Loeb, the man who originally gave him his start in the business. The Loeb family became very wealthy after selling out, but they are not remembered as the Wall Street force they once were. Bemie wanted above all, said Lutnick, to maintain his name on the firm.

"Bernie made me promise him that I would keep the firm independent ...His name was his immortality," said a tearful Lutnick, rubbing his cheeks in a forceful attempt to choke back tears before an audience of almost 20 hard-bitten courtroom lawyers.

But, according to Lutnick, Iris Cantor wanted more money than the insider trio could offer. Rod Fisher flew to Los Angeles to talk Iris down from her $175 million position, Lutnick told the court last Monday. Presumably he came armed with arguments such as the tax advantages of an insider sale, and certain outstanding potential liabilities, such as a large lawsuit from Reuters. Iris eventually hired Wasserstein Perella to advise her in valuing the firm for the negotiations.

Lutnick said that Fisher succeeded, but at high personal cost—Iris wanted him written out of the final deal, Lutnick told the court. And by this point, Bemie Cantor was unable to sign the documents. (Fisher was the man who earlier this year deemed Bemie Cantor incompetent, but then reversed his position, under pressure from Iris in the months preceding the court ueeaey, September 1!, 2001 America Online: RG1b Pepe: 2

NYC-WTC 000136340