2 posts tagged “pursuit of wealth”
After writing the previous post, I saw this in today's Wall Street Journal:
Wall Street's profit undertow: drugs and anxiety
By Tim McLaughlin 1 hour, 31 minutes ago
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NEW YORK (Reuters) - Wall Street's push for record profits is ruining careers, tearing apart families and keeping drug dealers busy, mental health experts say. |
While record bonuses make some Wall Street bankers feel invincible, others become emotional wrecks from pressure to perform and some hit rock bottom, experts say.
Harris Stratyner, a psychologist at Caron's New York Recovery Center, said some executives he treats are experimenting with cocaine, opiate-based drugs, Ecstasy and marijuana, as well as abusing alcohol.
"It's like they're chasing a dream. Even when they make tremendous profits, they're still worried," he said.
Alden Cass, a clinical psychologist who counsels Wall Streeters with drug addictions, said drug abuse and high anxiety are undercurrents to the current boom.
"When things are really good, they feel invulnerable," Cass said. "That can lead to adultery, substance abuse, problems with the law."
When it comes to profits, things are really good.
Six of the largest U.S. investment banks -- Goldman Sachs, Lehman Brothers, Citigroup, JPMorgan & Chase Co., Morgan Stanley and Bear Stearns -- combined for $17.6 billion in first-quarter profit this year. That's after shelling out $28.8 billion for pay and benefits, financial statements show.
Those profit and pay figures are more than double those seen in the first quarter of 2000, the last days before the dot-com bubble burst. New York's comptroller estimates Wall Street's 2006 bonuses will generate $1.6 billion in state tax revenue.
COCAINE AND HILLBILLY HEROIN
"To my knowledge, we have not seen an uptick in drug use," Morgan Stanley spokeswoman Jean Marie McFadden said.
The other five firms declined comment or did not return telephone calls.
But Cass said opiate abuse among his clients is rising and they openly talk about being hooked on prescription drugs like OxyContin, known as hillbilly heroin.
"That's what has changed from previous booms on Wall Street," he said.
Cass and Stratyner said their clients sometimes conceal their habits by taking prescription drugs they get for back surgery or sports-related injuries. The Internet has also expanded the black market for drugs.
Wall Street professionals in their 20s use Ritalin and Adderall, prescription drugs used to treat attention-deficit disorder and hyperactivity, to enhance their performance as they grind out 100-hour weeks, Cass said.
Big bonuses and the need to blow off steam have helped invigorate demand for cocaine in Manhattan, according to two junior bankers who did not want to be named.
Juan Rodriguez, convicted of selling drugs to investment bankers and other professionals, said his clients never complained about the price of cocaine, even as it escalated.
"My customers were all business individuals," Rodriguez said, citing Morgan Stanley bankers as among his clients.
Morgan Stanley said the company has a strong policy against substance abuse and uses random drug testing.
PASSING THE TEST
One hiring manager at a major New York bank said new staff must take a urine test, which is typical for the industry. But he said new hires can choose when to schedule the test during a 45-day period before their start date.
"Our drug test is not so much a test of whether you actually take drugs as it is an intelligence test to see if you can figure out how long it takes to get traces of the drug out of your system," said the manager, who asked not to be named.
The hiring manager said his employer also had a policy of random drug tests for employees but that in several years he had never encountered anyone subjected to such a test.
Drugs are not the only reason for executive meltdowns.
Overwhelming pressure and anxiety to meet profit goals undid star trader David Becker as he rose the Citigroup ladder.
Nine months after becoming global commodities chief, Becker found himself on the fast track to prison. The largest U.S. bank discovered in 2004 that Becker and others conspired to overstate profits by $20 million.
Becker, 41, pleaded guilty and is serving a 15-month sentence in federal prison. He declined to comment.
Before he committed his crime, he sought psychiatric help to deal with the pressure of balancing family and career, court papers show.
A metaphor for his life was a painting he owned depicting a man being pulled by all four limbs, Becker's psychiatrist, Dr. Barbara Deutsch, wrote to the judge in the case.
"He felt enormous pressure to make the group's budget at all costs," Deutsch wrote. "He felt identified with this tortured man."
I have mentioned in previous articles how people who are focused on the world are likely to be greatly affected by negative events. This is especially true of wealthy people. As I’ve said before – if your life is focused squarely on money and that money is taken away – worldly people have nothing left to fall back on – no money equals no hope.
Our enemy is very good at setting people up by promising them everything and then delivering only misery. Follow him and you might live a life of privilege – for awhile. The problem is that he is in the business of killing, stealing and destroying – so any privilege or gain that might benefit you temporarily from following his ways – will eventually lead to your destruction. We are seeing this often as the financial crisis continues to erode wealth across the globe. We are beginning to see wealthy people lose their wealth – and their lives. I can hear the whispers - how will you survive? How will you feed your family? How will you deal with the humiliation? You have no power, no wealth – you are nothing – let me show you the way out. Instead of falling on their knees and asking God for help – they listen to our enemy – and seal their fate for eternity – which was the goal of our enemy from the beginning. As I have mentioned before – he knows his fate and he wants to take as many of us with him as possible.
I don’t know what else to say except – don’t believe our enemy’s lies. There is hope – but you won’t find what you’re looking for in this world. If you are on the edge of hopelessness – maybe at the point of giving up – you’ll need to trust me. It’s not a coincidence that you are reading this now. We can get out of this mess – but we can’t do it alone. Say a quiet prayer and ask God to come into your life and help you. Ask him to show you the truth and to give you faith and hope. Pray that we all turn away from our evil ways and focus on our Creator and His will for us. Ask him to shift your focus from the world – to Him.
There is a Heaven – and He wants you to be with Him there.
jg – January 7, 2009
JANUARY 7, 2009
His Empire in Tatters, German Billionaire Takes Life
By MIKE ESTERL
Wall St. Journal
FRANKFURT -- Adolf Merckle, one of Germany's wealthiest men, committed suicide after his family business empire began unraveling amid mounting debt, his family said Tuesday.
The suicide of the 74-year-old multibillionaire, whose holding company had roughly €30 billion, or $40 billion, in annual revenue, is one of several deaths of businesspeople tied to the global financial crisis.
The news of Mr. Merckle's suicide came after a consortium of about 30 creditor banks put the finishing touches on a bridge loan of roughly €400 million to the family holding company, VEM Vermögensverwaltung GmbH, which oversees dozens of firms in industries from drugs to cement.
But VEM had to hand over significant collateral to the banks as a prelude to a broader restructuring in the coming months that is expected to strip the holding company of many assets, said people familiar with the matter.
Mr. Merckle, who shied away from the spotlight, inherited his family's pharmaceutical company in the 1960s and expanded aggressively. He eventually controlled major stakes in Phoenix Pharmahandel, a German pharmaceutical wholesaler with about €20 billion in revenue; publicly listed HeidelbergCement AG, with more than €10 billion in sales; and generic drug maker Ratiopharm International GmbH, with about €2 billion in revenue.
But Mr. Merckle lost hundreds of millions of euros last year in misplaced stock-market bets, said people familiar with the matter. Much of the loss was tied to short positions in Volkswagen AG, in which he wagered that the stock price would fall. Instead, it skyrocketed late last year in what market participants have described as one of the most dramatic short squeezes ever. In a short squeeze, investors who were betting against a company are forced into the market to buy back stock after the price rises.
Bankers say Mr. Merckle also overstretched with highly leveraged acquisitions. He increased his indebtedness in 2007 when HeidelbergCement acquired U.K. building-materials company Hanson PLC for about £8 billion, or $11.6 billion. VEM confirmed late last year it was in refinancing talks with creditors.
HeidelbergCement's share price fell 6.2% Tuesday on Frankfurt's stock exchange to €31.26 a share. That is sharply off its 52-week high of €115.47 reached last March. Mr. Merckle increased his family firm's stake in Germany's largest cement company to about 80% in recent years.
Mr. Merckle's body was discovered Monday night near train tracks outside the southern German city of Ulm in what local police described Tuesday as a "railway accident." There are no signs that anyone else was to blame, they added in a statement.
His family said Tuesday that he had committed suicide. "The distress to firms caused by the financial crisis and the related uncertainties of recent weeks, along with the helplessness of no longer being able to act, broke the passionate family businessman, and he ended his life," the family said in a brief statement.
Refinancing talks with banks in recent weeks proved difficult because creditors were wary of extending VEM new funds without sizable guarantees and Mr. Merckle was reluctant to concede too much control, said people familiar with the matter. Talks were further complicated by the number of banks involved, they added.
In a rare interview last month, Mr. Merckle told the German newspaper Frankfurter Allgemeine Zeitung he had survived "many so-called stock-market crashes" but that he "couldn't calculate a banking and financial crisis of this dimension."
Mr. Merckle's wealth was estimated by Forbes magazine last year at $9.2 billion. VEM also owns stakes in companies making goods ranging from all-terrain vehicles to textiles.
In recent days, Ludwig Merckle, one of Mr. Merckle's four children, took the lead role for the family in negotiating the bridge loan with banks, according to a person familiar with the talks. Ludwig helped his father manage the investments through VEM, taking on an increasingly important role in recent years.
The roughly €400 million loan is designed to give VEM and creditors about three months to craft a broader restructuring blueprint for the Merckle family empire. But swift asset sales are expected to be difficult amid the tough market conditions. A VEM spokeswoman declined to comment Tuesday on any possible asset sales.
The dramatic fall of Mr. Merckle's business fortunes shocked many in Germany's financial community, where he enjoyed a reputation as a savvy investor.
Other Deaths
Thierry Magon de La Villehuchet, 65
Founder, Access International Advisors
Date of Death: Dec. 23
Workers discovered the body of Mr. de La Villehuchet in his firm's New York office. Mr. de La Villehuchet's firm oversaw a fund with assets invested by Bernard L. Madoff, according to a person familiar with the situation. An attorney for the firm told detectives that Mr. de La Villehuchet's firm had lost $1.5 billion in the Madoff scandal.
* * *
Alex Widmer, 52
Chief Executive, Bank Julius Baer
Date of Death: Dec. 3
Overseeing the private bank, Mr. Widmer turned the Zurich firm into a leading bank for wealthy clients. Julius Baer officials said Mr. Widmer's death wasn't linked to problems at the bank.
* * *
Kirk Stephenson, 47
Chief Operating Officer, Olivant Ltd.
Date of Death: Sept. 25
In late September, Mr. Stephenson drove to a rail station about 30 miles from his London home and stepped onto the tracks as an express train approached. Mr. Stephenson co-founded the investment firm in 2006. Olivant began accumulating a 2.8% stake in UBS and leading a revolt to turn around the Swiss banking giant. The UBS shares were put in a Lehman Brothers Holdings account with a proviso that allowed Lehman to use the assets as collateral. With Lehman in bankruptcy Olivant may never recover the assets.
One senior German banker described Mr. Merckle's business style as "down-to-earth and very cost-conscious." The billionaire businessman lived in Swabia, a region of Germany with a reputation for "frugality, where you turn every penny twice," and that's how Mr. Merckle was viewed by many investors, the banker added.
Mr. Merckle voiced distress about the rapidly changing opinions of his business dealings as reports surfaced in recent weeks about his debt problems. "We are being thrown into the same pot as hedge funds," he told Frankfurter Allegemeine Zeitung last month.
But he insisted that his holding company was suffering from a "pure liquidity problem" and that his focus had always remained building up solid businesses.
As Mr. Merckle grew increasingly desperate to keep his empire afloat, he lobbied the regional government in his home state of Baden-Württemberg late last year for temporary financial backing but was turned down.
German police said Mr. Merckle's family reported the businessman missing late Monday, "after he left the house in the afternoon and didn't return as usual." Around 7:30 the same night, a railroad worker noticed a body near Blaubeuren, where Mr. Merckle lived, police added in a statement Tuesday. Blaubeuren is about 100 miles west of Munich in southwestern Germany.
Mr. Merckle's death isn't the first linked to the financial crisis. French financier Thierry Magon de La Villehuchet, founder of Access International Advisors, was found dead in his Manhattan office just before Christmas. He reportedly lost $1.5 billion on behalf of customers in Bernard L. Madoff's alleged Ponzi scheme. Police, who called it an apparent suicide, found a box cutter as well as what appeared to be sleeping pills.
Earlier, an investment-fund executive at Olivant Ltd. in London and a veteran Bear Stearns Cos. manager in New York committed suicide.
Write to Mike Esterl at mike.esterl@wsj.com
