Terror in America: The nation fights back

A company works to carry on: KBW tries to rebuild after losing 67 workers

Harry Keefe has seen war before.

On a June morning in 1944, Keefe was at the helm of a landing craft cutting through the chilly
waters off the Normandy coast in northern France.
He carried a crew of 19 – and a truck crammed with 5 tons of TNT. There was heavy enemy
fire, and as his boat neared the shore, a mortar round ripped into the hull, sending sailors
leaping into the surf. As bad as it was, Keefe knew it could have been worse; another 15 feet
and the round would have landed squarely on the explosives-laden truck.
It was most of a lifetime ago. But last week, Keefe couldn’t help but think about life and luck
and war and death.
“I made the invasion at Omaha Beach on D-Day,” he recalled. “I landed at Omaha Beach
three minutes after the first wave, and if you saw ‘Saving Private Ryan,’ you know what it was
like. My ship got sunk by German fire, but I didn’t lose a man.
“And here I sit comfortably in New York City. And suddenly, 67 people I know are dead.”
That is the toll at Keefe, Bruyette & Woods, the investment bank Keefe founded nearly four
decades ago. It started small – just eight people with modest offices in Hartford and New
York City. But the firm prospered, growing to hundreds of employees with branches scattered
around the nation.
In time, it became known as the country’s pre-eminent firm for rating bank stocks, and it
carved out a lucrative niche putting together mid-size bank mergers, including the one that
created Bank of New England.
Years ago, in a powerful symbol of the firm’s success, KBW moved its headquarters into new
offices more than 1,000 feet in the sky, filling two floors of the most famous business address
on the planet: the World Trade Center.
There, on Sept. 11, more than 100 KBW employees had a horrible, eye-level view of the
devastation when a hijacked jetliner slammed into the adjacent, north tower.
And it was there, 18 minutes later, that 67 workers were entombed after their own building
came under terrorist attack.
One co-CEO is gone. The other lost his son.
The chief financial officer is dead. So is the director of research and almost all of his New
York-based staff. In all, nearly a third of the company died in the disaster.
When Sept. 12 dawned, as employees walked from hospital to hospital in a fruitless search
for colleagues, the company leadership – those who survived – faced the daunting task of
rebuilding KBW, both spiritually and structurally.
But how?
“I can’t say there’s a blueprint, because I don’t think anyone was prepared for this kind of
devastation,” said Joseph Spalluto, managing director of KBW’s Hartford office, located in the
Gold Building.
But partly out of defiance, and partly for therapy, workers came together, setting up bare-
bones offices in borrowed space, determined to keep going.
They organized a command post in Hartford to collect information on missing workers, and
put in long hours fielding hundreds of calls from grief-stricken relatives and concerned
colleagues. They squeezed extra employees onto their Boston trading floor to be ready for
business when the stock markets reopened. They jumped back into the dozen or more
merger and acquisition deals in the works before the disaster. The task has been eased by
the extraordinary generosity of clients and competitors alike who have offered money, desk
space, research tools, training, anything.
Still, KBW is rebuilding under the most distracting of circumstances.
Some workers say they are torn between keeping their families in close sight and diving into
the task of putting the company back together. Others wrestle with guilt, confiding to their
bosses that they feel cold and callous devoting energy to the mundane details of bank
finance while rescue workers dig through the broken remains of their headquarters.
Many have taken on incongruous roles, as both Wall Street financiers and grief counselors
assigned to assist the family and friends of a lost colleague.
Executives steeled themselves and promoted junior staff – even as they clung to hope that
senior staffers would somehow be found alive.
And there is the heartbreakingly long list of memorial services. In his home office, co-founder
Gene Bruyette, who retired from KBW in 1991, grabs a sheet of paper from his fax machine.
It is a partial list of the first 20 or so funerals, many scheduled on the same day – some
simultaneously.
“Look at the first and the last,” he says, pointing out two services 90 minutes apart in the
same New Jersey church.
“They’re back to back,” he says sadly. “They’ve got them lined up back to back.”
No one in the company has been immune to the grief, and some days have been an odd
medley of working and crying and working and crying.
“It’s been a challenge for all of us to get our heads back in the business,” Spalluto said.
But, he said, employees who survived Sept. 11 remain driven by a simple imperative: to
honor the past by preserving the future.
“If we don’t rebuild,” he said, “then we’re not going to serve the memory of those who died.”
A Terrifying Scene

The two floors of the World Trade Center KBW occupied had two distinct rhythms. Stock
analysts and traders filled much of the open 89th floor, researching bank stocks and
constantly adjusting the company’s investment portfolios throughout the frenzied trading day.
They were early risers, often stepping off the PATH train from New Jersey or the subway
from points north as early as 6:30 a.m. Inside the south tower, a bank of high-speed
elevators would rocket them in less a minute to the 78th floor, where they would switch to a
local for the rest of the ride to the 89th.
Things were calmer on the 88th floor. There, the company’s investment bankers, who helped
broker mergers and acquisitions, kept more traditional business hours, a stroke of fate that
spared most of their lives.
On Tuesday, Sept. 11, researchers on the upper floor shared the morning’s news and tips
during a companywide conference call at 7:30 – about the same time passengers were lining
up in Boston to board an American Airlines 767.
KBW puts out an e-mail alert every morning by 8:30, so clients can make investment
decisions in time for the opening bell on U.S. stock markets. After the conference call,
analysts continued working the phones for last-minute information as the 8:30 deadline
approached.
Then, with the e-mail safely dispatched, workers could pause.
But the lull wouldn’t last long.
On the street, savvy New Yorkers picked up an odd sound. It was the familiar roar of a jet
engine, but it was too loud, too close, too low. Way too low.
The explosion jolted Scott Anderson out of his chair on the 88th floor.
The initial blast was hundreds of feet away, in another building, beyond the insulation of thick
glass and thicker concrete.
But the noise was deafening and the concussion palpable. Anderson assumed it was a
bomb. He ran to a window and fixed on an eerie sight: sheets of office paper – plain, white
office paper – fluttering in the wind. It might be an unlikely sight five stories above ground.
But 90 stories up, it was terrifying.
He raced for a window on the north side of the south tower, which once had offered a
spectacular view of Manhattan, stretching on clear days to the top of the island and beyond.
It was a view KBW proudly showed visitors.
But now the skyline had only one terrifying image, a mind-numbing collage of mangled steel
and mushrooming flames and falling bodies.
“I knew at that point it was time to get out of there,” Anderson said.
He didn’t know it – nobody could – but when the American Airlines jet smashed into the north
tower, an 18-minute timer began to count down on the lives of everyone at KBW.
Many who had lived through the 1993 terrorist bombing at the World Trade Center dropped
everything and ran for the elevators and a quiet, nervous ride to safety. Others raced down
stairs, surviving with a haunting vision of firefighters trudging the other way, wearing the bulky
FDNY uniforms they would die in that day.
But at least 20 KBW employees stayed behind and made calls to assure relatives that their
building was unscathed, that they were safe.
Many made subsequent calls after the second attack to say their assessment had been
terribly wrong.
Bradley H. Vadas, a 37-year-old senior vice president, called his father in Norwalk to let him
know he was OK after the first plane hit.
Minutes later, Donald Vadas’ phone rang again. Bradley Vadas told his father: “I just want to
tell you how much you mean to me, what a great dad you are. I love you.”
He said it would probably be the last conversation the two would share.
And it was.

A Company Devastated

Spalluto, the head of the Hartford office, was driving his daughter to school at 8:48 a.m. on
the 11th. He travels a lot, so he has a standing rule: When he’s home in Windsor, mornings
are family time.
After breakfast, Spalluto and his daughter were headed for St. Timothy’s School in West
Hartford when his car phone rang. It was his brother, telling him that New York sportscaster
Warner Wolf had called Don Imus’ show on WFAN to report seeing a large jet strike the north
tower of the World Trade Center.
“Which tower are you guys in?” he asked.
Spalluto felt an uneasy rush of relief – until the phone rang again.
“You’re not going to believe this,” his wife said on the line. “But building two just got hit.”
Spalluto tried calling the New York office. Then individual extensions. Then cellphone
numbers. Nothing.
He drove to the office in Hartford and finally tracked down Andrew Senchak, KBW’s vice
chairman, who was spared by a morning appointment in midtown Manhattan.
“When I was on the phone with him, the building collapsed,” Spalluto said. “And from there
on, it was just a series of bad news.”
The next day, KBW moved its operations to Hartford and used its website to communicate
with employees around the country. The website listed all 225 KBW employees in every
office, with one of two designations: “Safety Confirmed” or “Unconfirmed.” Sixty-nine names
were listed as “Unconfirmed.” Two later called in to say they hadn’t even been in the building.
But since then, not a single employee has been found alive.
Privately, executives surveyed the damage: The over-the-counter trading group was
devastated. Numerous key analysts were gone, including the sole analysts for eight small
banks around the nation. Most computer records were safe, but the company’s primary
trading floor was gone.
They thought through a plan to shift work to other offices, and to move some employees
around and ask others to double up on assignments. But they also made clear to workers
that their primary task was to serve the families of those who had died.
The company set up a gathering place for relatives at the Plaza Hotel in New York, and hired
Harris Rothenberg, a crisis-counseling firm, to help employees, relatives and friends.
On Sept. 17, the Sunday after the attack, KBW arranged a memorial service at the Fifth
Avenue Presbyterian Church in Manhattan. Executives envisioned a low-key affair, attended
by perhaps a couple hundred employees and clients.
More than 2,000 showed up.
It was brief, a few prayers and psalms. Then a KBW executive stepped to the pulpit and
pledged that the firm would do all it could to help the families of those lost. And he said that, if
for no other reason, they would rebuild the firm in memory of those had made KBW what it
was.
The speech was both comforting and rallying, and it came from a moving source: co-CEO
John Duffy, whose own son, a trader in the firm, is buried in the rubble.
Executives also tapped about 35 employees to act as “shepherds,” responsible for working
with the relatives and clients of one or two missing employees. They comforted grieving
relatives, coordinated memorial services and helped set up scholarship funds.
And they did it with no experience and no training.
“It’s difficult, but it’s something that you absolutely want to do,” Anderson said. “It’s a close-
knit firm. It’s a family. And whatever I can do, I want to do.”

Outpouring Of Support

When KBW moved employees to Hartford in the days after the attack, United Technologies
Corp., which has space on the same floor of the Gold Building, quickly offered a spare
conference room.
In New York, the company fielded several offers for temporary quarters before moving to the
offices of their law firm, Wachtell, Lipton, Rosen & Katz in midtown – the same firm that
housed KBW after the 1993 attack on the World Trade Center.
A week after the attacks, KBW established the KBW Family Fund, to provide for the families
of those who died. The fund was set up at the North Fork Bank in Melville, N.Y., a longtime
client that kicked in a quarter-million dollars to get the fund started.
“The outpouring of support from our many clients and friends has been overwhelming,”
Senchak said.
Even competitors have helped. Joseph Lenihan of Greenwich was KBW’s sole “syndicate
man,” with the delicate job of coordinating among various companies during an underwriting.
It’s an art that’s learned not in business school, but typically at the elbow of someone who’s
done it.
Lenihan was killed in the attack. Days later, an executive at rival Goldman Sachs called KBW
with an extraordinary offer, inviting Lenihan’s successor – who has not been named – to
learn the ropes by shadowing one of Goldman Sachs’ own syndicate men.
Within a week of the attacks, KBW had also scored two big deals with banks. Sympathy for
the firm may have played a role, but executives say they will survive on more than the
generosity of clients.
“We’re not looking to build the firm on charity and good will,” Spalluto said. “We’re not fooling
ourselves. When the dust settles here, the world may be a little kinder, gentler place. But
Wall Street will still be Wall Street, and the motivation will still be: How do you make money?”

Keefe, Bruyette & Woods has been making money since it was dreamed up nearly 40 years
ago by three colleagues at two firms that had just merged, Tucker Anthony and R.L. Day.
Harry Keefe ran the municipal bond operation in Hartford, and he made money for the
company every month, which earned him a promotion to the New York office.
Keefe had big visions, and he went to the Tucker board with an ambitious – and expensive –
plan to expand the New York operation. He knew he had his own vote, but there were 17
other board members.
And 16 voted against him.
“That’s when I said, ‘Keefe, you’re not in the right place.’ ”
Rumors that Keefe might leave made it to the ears of Gene Bruyette, a salesman, and
Norbert Woods, a trader. So the three got together for lunch one day at Chase Manhattan
Plaza in New York, where Keefe asked a simple question: “Wouldn’t it be great if we could
keep working together?”
“And that’s when we started KBW,” Keefe said. “That’s how it began – under a tree on the
Chase Plaza.”
The company needed to be in New York, but Bruyette, who still lives in Bloomfield, agreed to
sign on only if he could stay in Hartford. So KBW opened for business in July 1962, with
offices in New York and on Hartford’s Pearl Street.
Financial research into banks was primitive at the time, and before long, KBW had a list of
well-heeled clients eager for their reports. The original crew still remembers the day a Seattle
bank executive strode into the office with a big check and declared, “OK, Keefe. I’ve got the
rent for this year.”
Keefe wanted workers who were ambitious, but not cutthroat. In a daring experiment, he
scrapped commissions for salespeople, so no one would have an incentive to undercut a
colleague and steal an account. In their place, he set up a generous profit-sharing plan and
offered associates shares in the company, so anyone’s success would be everyone’s
success.
Founding partners often zealously guard their shares. But Bruyette said he and his partners
discovered that the more stock they gave away to associates, the more money the firm
made.
Bruyette also wove a close-knit company by relying heavily on the recommendations of his
staff when making new hires. And then he would tell the recommending staff member : “OK,
this guy is now your responsibility.”
That collegiality endures, making each small victory bittersweet.
Scott Anderson, who escaped the building, is back at work. He says he is committed to
helping the firm endure. And he says he’s constantly reminded of his friends who aren’t
coming back.
“You can’t get away from these thoughts,” he said.
“And I’m not sure I want to get away from these thoughts.”