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The Little Big Firm That Could
Newsday
09/08/02 by CHRISTIAN MURRAY

As the names of the fallen workers were read at a memorial service last fall, Jim Byrne sat in Carnegie Hall thinking of his brother. Tim Byrne, 12 years his senior, had been a father figure for him after their dad died at an early age.

And before the final name of those who died Sept. 11 was read, Byrne started thinking about leaving his job in Chicago to join the company where his brother worked — and died.

Jim Byrne left that service for the scores of Sandler O'Neill & Partners workers who died in the attack impressed with the top executive's vow to rebuild the Wall Street firm in their honor. But he also felt he would find a workplace where his grief and his ambition, and even his anger, would be welcomed.

The 25-year-old Oyster Bay native started in December, and now keeps Tim's photo in the top drawer of his desk. He shares a common goal with many workers there: He wants the battered firm to rise up from the ashes after terrorists killed 66 of its 171 of employees in the World Trade Center attacks.

"We all want to succeed in honor of those who have died," said Byrne who now lives on the Upper East Side. "Not a day goes by when I don't think about Tim and the trade center. I often get called Tim by fellow employees," he said, with a sense of pride. "I guess we sound the same or we look alike."

Many Sandler O'Neill employees sound alike in their zeal to re-establish the firm. Administrative assistants, traders, investment bankers and new recruits all express that conviction, and many have put their personal lives on hold — working weekends and extra hours to train recruits or to connect with clients.

This is a story of how Sandler O'Neill & Partners has managed to rebuild in the past year despite losing many of its best and brightest people, key records and trading systems. While the firm has won back its clients, its workers are still coping with feelings of grief and sadness.

The firm has benefited from generous competitors, hard-working employees and a scrappy management team who quickly focused on the future. And the firm is profitable again. Sandler O'Neill now has permanent offices on the sixth floor of an ordinary Midtown building.

When it was founded 14 years ago by six ex-Bear Stearns employees, the partners would refer to their startup as "Our Little Firm." At that time, while operating at aging offices downtown, "we unplugged the coffee pot to use the copier," said Tom O'Neill, a founder. The offices at 115 Broadway were so downscale that, the 55-year-old O'Neill joked, the firm's workers looked more like bookies than traders.

But after Sept. 11, staff members took a felt-tipped blue pen, scrawled on a piece of white paper a few words that would become a new slogan, and taped it to the office wall. It read: "Our Little Big Firm."

Today, at the Third Avenue office, a large wooden sign with those words — an anonymous gift — hangs next to the trading floor.

Managing partner Jimmy Dunne III, thrust into a leadership role by the attack, says he is still "dug in" to rebuild the firm. "Bin Laden set out to kill me and my colleagues," the 45-year-old Long Island native said recently. "What would he like us to do, build a new business, or to quit and run? I'm not going to quit and run, or doubt the system. Instead, I'm rebuilding a business people are proud of."

But Dunne's vulnerable side emerged when he met Paul Reda, who is entering his senior year at St. John the Baptist Diocesan High School in West Islip, the school Dunne attended.

He promised Reda a summer internship in upcoming years based on the recommendation of the student's high school history teacher. Then, Dunne gave Reda some telling advice, drawing on his Sept. 11 experience. "The one thing you can control is your attitude," he said.

"There are going to be setbacks. You may not be able to get into the college you want. But you have to dig in, get a little mad and don't let it affect you," he said as his voice quavered and tears formed in his eyes.

"Don't let it take the spirit and fight out of you."

Escape Down the Stairs

Before the first plane struck on Sept. 11, 83 Sandler O'Neill employees had arrived for work at the firm's office on the 104th floor of Two World Trade Center.

Jennifer Gorsuch recalls being in the bathroom washing her hands about 8:45. "The lights flashed, and I saw a huge explosion," she said. "I looked outside and saw the hole in the next building." Between the smoke and all the paper leaving Tower One, it looked like a "ticker tape parade of debris."

Gorsuch, a 27-year-old assistant for the mergers and acquisitions group, recalls how co-founder Herman Sandler was in Christopher Quackenbush's office when it happened. They ran out of the office and yelled out "Holy ... " and let those on the trading floor, which faced Staten Island, know what had happened.

A fellow worker who had fled the building after the 1993 bombing by going down a central stairwell told Gorsuch she was going to make the 45-minute trip down the stairs. Gorsuch and the other woman were among 17 of the firm's employees who got out before the towers collapsed.

As she fled, many of the firm's employees were phoning their families telling them they were OK, she said. "No one was told to stay," Gorsuch recalls. And most people "didn't know another plane was coming."

Gorsuch said she felt cowardly for leaving the building, but figured she could always come back. But when she reached the 55th floor, the second plane struck and people started falling down the stairs.

Gorsuch, who now organizes the firm's events and works with families, said she felt particularly guilty in the days following the tragic event. She remembers vividly the weekend following Sept. 11 when all the families gathered at the St. Regis Hotel, and she was constantly asked by distraught relatives: "Have you seen my son or my daughter?"

She said it was just too much to bear, and to this day she thinks "why them and not me?"

Fighting to Rebuild

The tone for Sandler O'Neill's comeback was set early.

Jimmy Dunne III, known for his tough-talking, no-nonsense style, was appointed senior managing principal after key personnel died. He would constantly tell his workers: "Failure is not an option." In late September he told Newsday, "You're going to have to rip my heart out to stop me from rebuilding the firm."

Yet on the Monday following the attack, Sandler O'Neill's future seemed in such jeopardy that CNBC said the firm was going to shut down. An enraged Dunne called up, and was given time on air to set the record straight. Still, Sandler O'Neill lost nearly 40 percent of its employees on Sept. 11; its equity division, which accounted for 15 percent of its revenue, was virtually wiped out. Its fixed income group, consisting of 60 people who bought and sold bonds, lost 21 employees.

Furthermore, two of the three members of its executive committee were dead. Herman Sandler, 57, who many considered a strategic thinker and visionary, was gone. So too was Christopher Quackenbush, 44, the head of investment banking. Dunne, the remaining executive, survived; he was out of the office trying to qualify for an amateur golf championship in Westchester at the time.

The firm responded to the crisis fast. It regained its financial footing shortly after the attack, with the help of its competitors that sent business its way and offered free office space. It hired 40 people within three months of the attacks, and announced a deal Oct. 22 to move into its permanent space in midtown Manhattan in January.

At last count, the firm had hired 65 employees since Sept. 11, and it is planning to add more.

The firm, founded in 1988, carved out a profitable niche providing investment banking and advisory services to small to mid-sized banks. In the late '80s, the big firms on Wall Street weren't interested in serving smaller banks. Sandler O'Neill&Partners moved in, providing services for banks that wanted to go public. It traded their bonds and stocks, researched companies' prospects for would-be investors and helped them acquire other banks.

After 13 years in business, the firm had established offices in Memphis, Chicago, Boston and San Francisco, which had 34 employees. In New York, 137 employees were based out of the firm's headquarters at the World Trade Center, chosen largely for its affordable rents.

Sandler O'Neill moved in days before the 1993 bombing, but none of the firm's workers were injured in that attack.

It developed a small tightly knit staff in Manhattan, with a history of hiring friends, relatives and old college roommates. Many of the senior employees vacationed in Ireland, Scotland or Florida together, often to play golf.

In many ways, this closeness proved to be a strength for Sandler O'Neill. But this very strength made the firm especially vulnerable. Now it had to mourn not only for co-workers but also for friends, relatives, neighbors who had been recruited.

Tom O'Neill, one of the founders, lost his nephew Peter O'Neill Jr., 21, and his best friend's son, Judd Cavalier, 26. His daughter's best friend and soon-to-be matron of honor, Kristy Irvine Ryan, died when the towers fell, too.

Tom O'Neill recalls how he and his wife, Carol, would sit down on Thursday nights and decide which of five or more memorials they would attend on weekends.

"We had to work out which ones we would go to as a couple and which ones we would go to separately," he said. "I would have gone to them all if it were physically possible."

The enormity of the event would sink in while he was at work; it would "hit me like a wave." He said at times he left the trading floor, and would walk around the block "sometimes with tears in my eyes." To this day, O'Neill has not gone to the World Trade Center site, nor has he watched any video of the planes striking the towers. The only time he saw it was from his hotel room in Portland, Ore., on TV, where he was doing business.

O'Neill says that he still has flashbacks to the days prior to Sept. 11. "I was in San Francisco visiting banks recently, and came to a place where I thought, this is where Tim Byrne and I would be."

He spends a great deal of time meeting bank executives on the West Coast and often works with younger sales associates, showing them how to work with clients. "I like watching the new guys develop; perhaps I'm a closet schoolteacher," O'Neill said.

On the first Monday following Sept. 11, with the firm using borrowed office space, O'Neill went over to a shell-shocked and tearful Jennifer Imbrogno, now 29, and embraced her, like a father does his daughter. Imbrogno was among the four survivors of the 26-person equities desk. She had set her alarm clock for 6 p.m., instead of 6 a.m., and was late for work.

Imbrogno, who was nearing the Wall Street area when the second plane struck, said, "You always think if I was up there and said 'Let's go,' and gotten people to leave," maybe more people would have survived. She said that the attacks "still feel very fresh. It feels like last week."

For the first few weeks following the attack, "I went back to work, trading and settling," Imbrogno said, putting in 12- to 15-hour days, and taking work home on weekends. "I'm feeling things now [a year later] that I should have felt that day. That day was just a big blur."

Outwardly, Sandler O'Neill's new midtown office, on the sixth floor at 919 Third Ave., looks like many others in the city. It has a trading floor with about 60 seats that looks out to a roof of an adjacent building. Executives see Third Avenue and a streams of yellow taxis, a far cry from the majestic views of the city and harbor the firm's offices once had. On a recent visit, computers blinked, phones chimed and traders shouted on phone lines like any trading floor. Two contractors walking in and out of the office installing Sheetrock. The firm is expanding the trading floor, managing director Laurence Belinsky said, to accommodate 85 to 90 people.

Its new offices are far more spacious and organized than the temporary quarters provided by some of its clients. Sandler O'Neill spent Sept. 17 through mid-January operating out of space provided by Bank of America on 9 W. 57th St. Sandler employees were scattered throughout the 19th floor, with many working at the conference room table or squeezed five to six to an office, Belinsky said.

The temporary office was filled with hope and sadness: cards from schoolchildren across America offering encouragement and a large poster-sized paper, divided into grids, listing the names of the deceased, locations of the memorial services — and which employees planned to attend.

Initially, Sandler O'Neill struggled to re-establish its clients' contact numbers, since many key employees were dead. But Belinsky said that while much of the information was backed up on other systems, some long-term employees who had worked in administration knew many client numbers by memory.

Rebuilding, With Competitors' Staff

Belinsky was brought aboard in October, and is a friend of the Quackenbush family. Belinsky's children went to Shelter Rock Elementary School in Manhasset with Quackenbush's and they played on the same sports teams.

Belinsky volunteered to help Sandler O'Neill after Quackenbush's memorial service. That led to his being hired full-time to help the grieving families as well as with the hiring of new staff. At least three former Sandler O'Neill employees returned to the firm after the attacks.

One of them is Jim Byrne, who interned at the firm while in college but didn't seek a job there because he was concerned about being stuck in the shadow of his brother Tim, a senior bond trader who died at age 36. Now some colleagues occasionally call him by his late brother's name, but Byrne said that it has been therapeutic working alongside people who are still grieving the loss of friends and colleagues. He said his colleagues in Chicago were removed from the tragedy and couldn't understand what he was going through.

These days, he says, he sometimes thinks, "What would it be like if Tim would be sitting to my left?" saying he would do anything "for a day like that with Tim." The firm, however, did benefit from the large Wall Street layoffs of the past two years, which increased the pool of talent, Belinsky said. "The senior people who were hired were known to the firm through friendly relationships or business relationships."

Many of these new employees had traded stocks or bonds for competing companies and got to know Sandler O'Neill employees that way. Tom Thurston, who joined the firm as an equity trader in December and had worked next door to the World Trade Center, knew many of the Sandler O'Neill traders who had been killed. He said that the new recruits have been made to feel welcome by the survivors.

Sandler O'Neill was fortunate that its competitors also pitched in and helped the firm. At least half a dozen Wall Street firms, from J.P. Morgan to Greenwich Capital, included the firm in equity and bond underwritings, helping it earn all-important fees in the first few months after the tragedy, said Jon Doyle, now managing principal, who joined the executive committee following the attacks. Sandler had not partnered with many of these firms before.

Doyle said that Bank of America lent personnel to assist in administering trades in the early days, which ensured smooth and timely settlement of trades. While the number of merger and acquisition deals have dried up across the industry, Sandler O'Neill is still bringing in business, according to statistics provided by SNL Financial, a Charlottesville, Va.-based financial research firm.

The company has been an adviser on 15 deals worth $2 billion this year, up to Sept. 1, 2002. For the same period in 2001, SNL reported that Sandler O'Neill did 11 deals worth $2 billion. James Record, a director of bank research, said that the firm is back on its feet.

Tom Killian, a principal in the investment banking division, said that with the fall in interest rates, many companies have wanted to issue bonds, which has been good for business.

Despite the strong showing in bonds and investment banking, the equity division's revenues are down about 30 percent this year, Dunne said. "Prior to Sept. 11, we covered 425 markets, now we are at about 320," he said. But Dunne said that in the fourth quarter, he plans to get that number up to more than 500 bank and related stocks.

Dunne says many firms are down by these volumes, and they were not directly affected by the attacks.

He has rebuilt the equity desk from scratch, incorporating many ideas from the new recruits — as opposed to being a stickler for the way Sandler O'Neill did business pre-Sept. 11, Belinsky said.

Remarkably, Sandler O'Neill returned to profitability just two months after the attack, largely because of low interest rates. Banks were able to raise capital by issuing bonds at low rates, and the firm's clients were buying bonds. Dunne said, "We have made tremendous strides; and I have a lot of reasons to be very optimistic. However, I think the hard yards have just started."

Others in the financial world have noticed Sandler O'Neill's recovery. Tom O'Brien, the chief executive of Atlantic Bank, said, "Good people have been able to step up to the plate, attracting new customers and new investment bankers. "I would say they have recovered. Their mettle has been tested and they have come through," O'Brien said. He recalls a multimillion-dollar debt deal the firm did a few months ago. I sent Dunne a note that read: 'I know two guys who are smiling today,'" referring to Sandler and Quackenbush.

Remembering the Lost

In February the firm unveiled an unusual piece of sculpture in the lobby behind the receptionist: a Steuben crystal memorial. Enclosed in a glass case is a thick crystal spiraling circle, representing infinity, with no beginning and no end.

On the wooden base, it reads: "In loving memory of Gordon M. Aamoth Jr., Joseph Anchundia ... ," listing all those killed in alphabetical order.

In February the firm invited family members to attend the unveiling and visit the firm's new office; relatives from a little over half of the families came. "We were happy that we got the office space and were unveiling the memorial piece," Gorsuch said. "But it was bittersweet."

Discussion of the days that followed the attacks or the weekend at the St. Regis hotel rattled Dunne recently. "It's like having fought a war," he said. "You've been through a brutal experience, so you're willing and able to share stories as you live through it. Now, I'm less willing to talk about it, unless it's with family members who were there."

Today Gorsuch works with families and also coordinates events, such as the firm's holiday party and the ceremony for the office opening. She says the firm is dedicated to success: "Jimmy is focused and I look up to him. But when he talks about Chris it breaks my heart."

Quackenbush had been Dunne's friend since they met as teenagers at a driving range in Babylon. Dunne and his wife, Susan, named their second son, Christopher, after Quackenbush.

Just days after the attacks, Dunne said he was trying not to dwell on his friend's fate. "Quackenbush wouldn't have wanted me to roll over and die," he said.

Yet Dunne also had a poster taped to his door that read: "Chris Quackenbush, missing, born Jan. 5, 1957, 195 pounds, 6 feet 4." He kept it up until the firm moved into the Third Avenue offices.

Dunne lamented that he and Quackenbush had won the Shinnecock Labor Day tournament in recent years. But "I won't be playing in it this year," he said, "I've lost my old partner." Since Quackenbush's death, Dunne has put a Q on his golf balls.

A huge weight on Dunne's shoulders following the attacks was how best to look after the families of the victims — and how to deal with the sensitivity of the subject.

Dunne, when he spoke to a reporter shortly after the attacks, said adamantly: "The last thing we need is for family members to read something in a newspaper" that doesn't tell the full story. He added that Sandler O'Neill would be speaking to the families first and would outline its full plan when it was ready. He said, "We want to protect the families."

Belinsky, hired to deal with the families, said the surviving families were paid salary and bonus as if the family member had worked all of 2001.

Furthermore, the families were promised five years of health benefits.

The Sandler O'Neill Foundation was also set up, independent of the company, which aims to pay the college tuition for 71 children who lost a parent. The average age of those children is 7. The fund has raised $7 million so far. Jamie Connor lost her husband, James, a partner and senior bond salesman in the attacks. She said she had no complaints with the benefits package Sandler O'Neill offered her and her two sons, ages 4 and 7.

"Five years' worth of health insurance was a tall order for a small company to take on, given that it had lost a large percentage of its work force," said Connor, who lives in Summit, N.J.

To build camaraderie between the old and the new employees, the firm recently took employees on a cruise up the Hudson River. Other groups of workers went to the beach for cookouts. Tomorrow, the company will have a golf outing to raise money for the victims' families foundation at the Deepdale Golf Club in Manhasset.

Yet for O'Neill, like others, there has been no escape from the tragedy — whether at work or at home in Huntington Bay.

Carol O'Neill said, "I don't know how he has managed to carry on," considering how many friends, colleagues and family members died at the firm. "He is a very sensitive man, and he truly loved these people.

"He does say it is tough going to work and not seeing some of the old faces," Carol O'Neill said, as she looked over toward several photographs in the O'Neill living room of now-dead friends and relatives caught in the prime of their lives.

One photo on the O'Neill mantelpiece is of their daughter Meredith's wedding, held on Oct. 27, 2001, at St. Patrick's Church in Huntington. It shows a large ray of sunlight beaming through a stained glass window between Meredith and her now husband, which to this day Meredith says is the spirit of Kristy.

On Wednesday, O'Neill said he will go to Ground Zero for the first time since the tragedy, to face the site where his nephew and friends perished.

In the afternoon he will then go to a memorial mass for his nephew Peter Jr. at St. Martin's Church in Amityville. But as Carol O'Neill said, "We are dreading the anniversary. However, I think people need to remember it and talk about it."

On Sept. 11, Sandler O'Neill's employees and family members will have a private service at the firm to commemorate the day. Religious leaders who performed the service for the firm in October 2001 at Carnegie Hall will be there. The names of the dead again will be read out one by one.