An American Triumph Over Tragedy

John G. Duffy

By Turlough McConnel, Contributor
August / September 2006

Why the second act of this heroic Irish-American career is second to none.

When John G. Duffy graduated from Cardinal Hayes High School in the Bronx he was possessed with a spirit of adventure, like most young men looking toward their future. He toyed with several courses of study, including engineering. His heroes were as varied as his interests: he was as inspired by Jackie Robinson fighting the color barrier in major league baseball as he was by Mahatma Gandhi fighting British imperialism. His parents, both Irish immigrants—his father Thomas from County Sligo and his mother, Anne McCaffrey, from County Leitrim— heartily encouraged their son to take advan- tage of the range of educational opportuni- ties available through the New York City public school system. “My mother was one to say that if someone tells you not to aspire to something, give it a try anyway,” says Duffy. “So I signed up for economics at City College of New York.” A few years earlier, while still in high school Duffy had first encountered the world of stocks and bonds, thanks to one of his teachers, a priest. He recalls how instantly intrigued he was the day the teacher showed the class the stock pages in the daily newspaper. “To think that the guy who got me started on all this had taken a vow of poverty.” So began one of the most successful careers on Wall Street.

Today John Duffy is chief executive of Keefe, Bruyette & Woods, one of the nation’s most respected investment banking and brokerage firms. Though a relatively small brokerage in number of employees, KBW stands with the biggest Wall Street firms, having built its business and its repu- tation on research excellence that attracts many of the world’s brightest minds and investment banking clients. Its greatest asset, however, is its ability to maintain relation- ships in an industry that thrives on continu- ous cycles of mergers and changes. Located in midtown Manhattan, the company has regional offices across the United States and a subsidiary in London to serve its European clients. Since 1997 KBW has been a finan- cial advisor in 178 mergers and acquisitions of banks and thrifts–transactions with a total deal value of over $37 billion.

Few companies were hit harder than Keefe Bruyette by the terrorist attacks of 9/11. Headquartered on the 88th and 89th floors in the South Tower of the World Trade Center, the company lost one-third of its staff, 67 employees, including its chairman and co- CEO, Joe Berry, five of its board members and nearly all of its prominent financial research analysts. For the Duffy family the greatest personal hardship was the loss of their son Christopher, 23, who had begun working at the firm the previous year, shortly after graduating from Villanova.

When I met with Duffy recently at the company’ s new headquarters he spoke about the path he took toward healing from his loss. “Following 9/11 and coming to the realization that I had lost my son Christopher, I spent the next two weeks primarily dealing with my own grief that I had lost my son and many close friends and colleagues and trying to make certain that other members of my family were dealing with the tragedy as best they could,” Duffy reflected. “From a professional perspective, especially taking over from chairman and co-CEO Joe Berry, I delegated most of the important business decisions that needed to be made in the first couple of weeks to my colleagues, Andrew Senchak and Tom Michaud.”

The first weeks and months were intense but over time Duffy turned his attention to other aspects of the tragedy. For the sake of his family as well as for all the KBW families who lost loved ones that day, Duffy, in collaboration with Mary S. Schaeffer, wrote Triumph Over Tragedy, in which he recounts the events of the morning of 9/11 and his subsequent journey back from the tragedy. The book grew out of Duffy’s need to set the record straight for the families of those lost that day.

In the book Duffy relives the morning of that terrible day: having attended a charity golf outing the day before, he was behind schedule and driving on the West Side Highway when he heard the news of smoke from the World Trade Center and then reports of a plane hitting the building. Blocked from Lower Manhattan, Duffy was forced to watch, transfixed, with scores of others as the horror unfolded downtown. When he heard the news that a second plane hit the South Tower, Duffy found his way to the Church of St. Francis on 31st Street to say a quiet prayer for his son, his colleagues and the thousands of others he knew were trapped. He emerged to see the unthinkable happen again – the second Tower collapsed. Both buildings were gone.

Duffy knew that his traders, salespeople, and researchers had gathered earlier that morning for the 7:30 meeting on the 89th floor of the South Tower (the company’ s corporate financial investment bankers occupied the 88th floor and the research analysts and traders were on the 89th). The meeting would have ended around 8:15 a.m. At the time the first plane hit virtually all those on the 89th floor assumed it was an isolated incident. Based on their experience with the Trade Center bombing of 1993, which they had survived, they decided to remain in the office. But downstairs on the 88th floor the silence was deafening – the floor had been cleared by Joao Aquiar, 30, the strong, athletic son of Portuguese parents, who screamed that a bomb had just gone off. Joao most likely went to alert those on other floors, but he never returned. He was the only employee from the 88th floor not to make it out.

Approximately half of KBW’ s employees in the building were lost that day. For those who survived, the grief was unbearable. At KBW employees are a family; there is very little turnover, with people staying at their jobs for 20 years or more.

In addition to the devastating loss of life, the company lost its headquarters, along with all paper documentation that was kept there. Duffy recalls the enormous task of re-establishing all those lost connections. “In terms of our trading positions and records, we relied heavily on Pershing & Co., our clearing broker, to help re-recreate our trading positions and inventory. Our external accountants, KPMG, were instrumental in helping re-create our financial records.” However, in the early months, before filing systems were reorganized, and while the company was relocated, piles of paper were physically carried around, often by Duffy himself. “We had no file cabinets, and we were constantly being asked to move stacks of papers around. At the time, we were also deluged with resumes. I would take all these papers everywhere with me in a duffel bag as I moved from place to place.”

Reviewing resumes was another challenge for Duffy. “It is one thing to bring in bright people. But hiring smart and talented individuals isn’t the same as building a team. Rebuilding that great core team took a very long time. We didn’ t realize what we had created here at KBW until it was lost.”

With panoramic views of New York harbor, the former 98,000 square feet on the 88th and 89th floors, the offices of Keefe, Bruyette & Woods, were by most accounts spectacular when completed in 1999. The staff of 175 loved the space—for which the architects Cetra/Ruddy received the top award of the Society of American Registered Architects. And now all was gone. Six weeks after the attacks, the firm’s architects were called back on the job to redesign headquarters that had been leased for the new company on floors in the Equitable Building on Manhattan’ s Seventh Avenue. Against a series of seemingly impossible deadlines, the employees soon had an 110,000 square foot new home, with offices, conference rooms and a bustling trading floor.

Even while mourning the death of his son Chris, his many friends and co-workers, John Duffy found the strength to lead the surviving staff in their dramatic recovery effort. “After 9/11, we quickly realized that we had several jobs ahead of us,” says Duffy. “The obvious task of rebuilding our fine company; the moral obligation of tak- ing care of this family, especially those with children; and the need to heal and go on.”

This rehabilitation included the launch of the Shepherd Program – which assigned to every bereaved family a KBW staff member to serve as a resource. Each staff participant acted on behalf of the family as go-to-person, answering questions, getting help, providing comfort, acting as advisor, and most importantly, as facilitator. Not all of the surviving KBW employees were able to return to work immediately. They recovered at their own pace, coming in when they could; ultimately, a few realized they could not cope with the situation or with remaining in New York.

Support for the reborn company came from many sources, including former employees who returned knowing that the firm had lost all its research analysts and would need all the help it could to get back  on its feet. Edward D. Herlihy, a friend of the company and a partner in the law firm Wachtell, Lipton, Rosen & Katz, arranged for the displaced company to take over a full floor at the law firm’s midtown office on an interim basis. With an onslaught of orders coming its way in the immediate aftermath of the attacks, KBW’ s business began to thrive.

“Looking back at what we’ve accomplished since 9/11, I am moved by what the remaining employees were able to do. It is truly remarkable, even unbelievable when you consider that they all lost close friends and colleagues and were mourning their deaths at the same time they were rebuilding the company,” said Duffy. “I have no doubt that we all received inspiration from those that we lost. We knew that they would want us to rebuild the firm.” Stunningly, after September 11, the company managed not only to reorganize and relocate its people in various temporary quarters, but to close nine mergers and acquisitions deals begun earlier that year.

“KBW’s success in their restoration is a testament to the skill and determination of the people at the firm and the deeply felt need of their friends and supporters throughout the country to help them succeed,” says Thomas S. Johnson, a close friend of Duffy’s and former Chairman and CEO of GreenPoint Financial. On 9/11, Johnson also lost his son; Scott Johnson, 26, worked for KBW as an analyst on the 89th floor. Today Thomas Johnson is the chairman of the executive committee of the World Trade Center Memorial Foundation and is responsible for raising the money to create a memorial at Ground Zero to honor the 2,979 people who died.

“The business success of KBW is matched by their concern for the families of those who did not survive the 9/11 tragedy,” continued Johnson. “As a member of one of these families and a longtime friend and client of the firm, I am deeply moved by its story.”

The friendship between Duffy and Johnson dates back to 1976, when Johnson was the senior executive at Chemical Bank. This relationship no doubt figured in Keefe,

Bruyette’s selection last year as an advisor to GreenPoint Financial on its $6.3 billion takeover by North Fork Bancorporation, another longtime client.

KBW employees today total nearly 500, twice what it had five years ago. Its research encompasses 329 financial institutions in the U.S. compared with 270 before the attacks. The company has more than $275 million in capital, up 75 percent since 2001.

After 9/11 no one would blame the management and employees of KBW if they simply quit. The terrorist attacks killed one-third of the company’s staff and obliterated its headquarters. Yet the men and women of KBW refused to quit. Under Duffy’s leadership, KBW set a new standard for disaster recovery that redefines our understanding of how much loss one company can endure.

The irony is that the terrorist attempt to destroy the American spirit on 9/11 forced this Irish-American leader and his colleagues to find a deeper purpose and motivation. “It is a constant struggle to process this horrific situation but you find the strength to rise above and move on because there is no other alternative,” says Duffy. “Every day you go to work and do something meaningful. It is a tribute to all the special people that we lost.” ♦


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