The Survivor Who Saw the Future for Cantor Fitzgerald

TEN years and a lifetime ago, Howard W. Lutnick was a prince of Wall Street. Forty years old, and already the head of a powerful financial house, he could peer down on rivals from his office on the 105th floor of One World Trade Center.

Then — you know the rest.

American Airlines Flight 11 struck Tower One. Three out of every four people who worked in New York City for Mr. Lutnick at the brokerage firm Cantor Fitzgerald died that September morning, 658 in all. Among the dead was his younger brother, Gary.

That Howard Lutnick survived was, he concedes, blind luck. Some people died because they happened to be at the World Trade Center on Sept. 11, 2001. Mr. Lutnick lived because he happened to be taking his son, Kyle, to his first day of kindergarten.

And so Mr. Lutnick, who ran Cantor Fitzgerald then and, remarkably, still runs it today, became an unusual, and unusually public, 9/11 survivor: the executive who cried on national television and then quickly began making hard-nosed — some said hard-hearted — business decisions. Four days after the attack, with the nation stunned and ground zero smoldering, Mr. Lutnick cut off paychecks to the families of his employees, before anyone even knew just how many had died.

“I was disgusted,” one widow, whose husband had worked at a Cantor subsidiary, told the television anchor Connie Chung a few weeks later.

And yet, since those dark days, Mr. Lutnick has defied those who said he and Cantor were finished. He has rebuilt his firm, and then some. And many of those who criticized him at the time, notably, spouses and parents of Cantor employees who had died, now say he did the right thing.

By almost any measure, it is a remarkable turnabout. Perhaps more than any other company, Cantor came to symbolize the horrors of Sept. 11. In the number of employees who died, it has no rival. Almost one-fourth of the 2,753 people killed in New York City that morning worked for Mr. Lutnick.

Now 50, he occupies offices in a far lesser skyscraper, a smoked-glass affair in Midtown Manhattan. He sits 103 stories lower than before, on the second floor.

Perched on the credenza near his desk is a bronze sculpture of a hand, a Rodin that was recovered from the wreckage of the towers. It is a vestige of the vast collection that his mentor, Bernie Cantor, amassed over a lifetime. The finish is seared. Several fingers are missing.

The sculpture is a reminder, as if one were needed, of Mr. Lutnick’s improbable journey back.

And it is improbable. Together, Cantor Fitzgerald and BGC Partners, a company he founded after Sept. 11, now employ roughly 5,000 people. That is 2,900 more than Cantor Fitzgerald employed before the attacks. Only 74 remain from the pre-9/11 days.

Mr. Lutnick has slowly rebuilt old businesses and pushed into new ones, including, of all things, sports betting in Las Vegas.

“I believe in what I call the surfer’s theory,” he says. “You see a really, really big wave. You keep surfing, keep going forward. You just don’t look back.”

He is a tough customer. Orphaned in his teens, he bootstrapped his way to the top of the Wall Street bond business. In their heyday, Cantor brokers occupied a lucrative niche as the main middlemen in the enormous market for United States Treasury securities. Cantor Fitzgerald never had the cachet of, say, Goldman Sachs, and it was in some ways a throwback to the time when sons followed fathers and brothers onto the trading floors, when polish and an Ivy League degree mattered less than some fire in the belly.

There is no sugar-coating the fact that before, and even after, Sept. 11, Mr. Lutnick was widely disliked in the industry. A ruthless competitor even by Wall Street standards, he has made more than a few enemies over the years. In 1996, as Mr. Cantor, his mentor, lay dying, Mr. Lutnick fought with Mr. Cantor’s wife, Iris, for control of Cantor Fitzgerald. She later barred him from the funeral.

Such was Mr. Lutnick’s reputation that in the days and weeks after Sept. 11, some of his rivals actually gloated over Cantor’s devastation. They jumped at the opportunity to put an end to his firm, which pocketed many millions in commissions while enabling the great investment houses to trade bonds in relative anonymity.

“Oh, I would love to put one up their bottom,” a senior executive at ICAP, a big Cantor rival, wrote in an e-mail at the time. The e-mail surfaced after Cantor sued ICAP in London for hiring away one of its brokers after Sept. 11. A judge later ruled that ICAP had broken the rules by hiring that one employee but not others, saying Cantor’s “bullying” behavior had driven the other employees away.

All of which makes Cantor’s rebirth, and the redemption of Mr. Lutnick, all the more remarkable. “We dealt with this by quietly doing everything we said we would do,” he says of the last decade. “The only way to take care of everyone was to have a company.”

“WHAT FLOOR?!”

Mr. Lutnick was shouting into the throng pouring out of the blazing World Trade Center on Sept. 11. He had rushed to what would become known as ground zero from a classroom at the Horace Mann School, on the Upper East Side, where he had just dropped off Kyle for kindergarten.

What Mr. Lutnick wanted to know was, what floor had people been on? Sixty-seven? Seventy-nine? The highest number he heard was 91, at least 10 flights below the Cantor offices. Then the north tower began to fall, floor by floor by floor, and Mr. Lutnick ran. He dove under a car, choking on the dirt and dust.
No one on the 101st floor, where Cantor’s headquarters began, had made it out.

Mr. Lutnick spent the next four hours picking through the stunned crowds streaming uptown. As he walked to his home on the Upper East Side, the enormity of what had happened began to sink in.

BEFORE Sept. 11, few people outside financial circles had ever heard of Cantor Fitzgerald. Next to the bigger, richer, more famous firms — the Goldmans and Merrills and Morgans of the world — Cantor might have seemed a bit player.

But behind the scenes, Cantor was and is a major force in the bond market. There is no central exchange for bonds, nothing akin to, say, the New York Stock Exchange. So, for years, financial companies turned to middlemen like Cantor, firms known as interdealer brokers, to trade bonds without tipping their hands.

In 2001, more than 70 percent of all Treasury securities were traded through Cantor. Today, with the rise of other firms and other pressures, that figure has fallen to roughly 50 percent, although Mr. Lutnick has compensated by expanding into other parts of the financial markets.

Even before the terrorist attacks, he was leading Cantor Fitzgerald into an electronic future to stay competitive and profitable. In 1999, he took public Cantor’s electronic trading subsidiary, eSpeed. Some of his brokers feared that such electronic trading systems would eventually put them out of work.

In fact, Mr. Lutnick’s electronic push helped Cantor stay afloat after Sept. 11. Cantor lost almost all of its brokers, but eSpeed did not need brokers. Without the new trading technology, Cantor might have gone under.

“In a way, eSpeed saved them,” says Richard Repetto, an analyst at Sandler O’Neill, which itself lost 66 employees at the World Trade Center.

So many Cantor brokers were killed that Mr. Lutnick had little choice but to shut many of his trading desks. There simply were not enough people left to handle the work.

“The show starts on Wall Street at about 7:30 in the morning, when the curtain goes up,” Mr. Lutnick said. That meant that almost all of his brokers were at their desks when Flight 11 hit: “Everyone who made money for the firm was there.”

The numbers tell the story. On Sept. 10, 2001, Cantor employed 2,100 employees worldwide, 960 of them in New York City. On Sept. 12, only 1,422 were left, roughly half of them in London, and 302 in New York.

And so the desks for corporate bonds, mortgage securities and municipal bonds were closed. So were the offices in Paris and Frankfurt. Cantor was losing a million dollars a day, and that was excluding compensation still being paid to its families.

Unable to reach Mr. Lutnick on Sept. 11, Lee Amaitis, the head of the London office and a close friend, began mapping out a plan. He helped reconfigure Cantor’s trading systems so that trades could be processed through London, rather than New York.

Mr. Lutnick and his remaining employees in New York soon decamped to a windowless computer center in Rochelle Park, N.J. Thanks to eSpeed, Cantor could clear its trades electronically. Forty-seven hours after the planes hit, as the bond market nervously reopened for business, so did Cantor.

“From survival to when we could take a breath was weeks,” Mr. Amaitis said.

For many, Mr. Lutnick would become the public face of a Wall Street besieged.

“Every person who came to work for me in New York, everyone who was at the office, every single one who was there isn’t there anymore,” he told Larry King on CNN on Sept. 19, his voice cracking. “We can’t find them. All of them. Everyone.”

Mr. Lutnick today defends his decision to stop the paychecks of employees who were dead or missing, a step that drew howls at the time. “It was just math,” he says. “We lost all our producers. There simply was no money””

But Mr. Lutnick had already come up with another plan, one that would become one of the most expensive corporate efforts of its kind. Cantor, he promised, would give the families 25 percent of its profits over the next five years. And it would provide health insurance coverage to families for 10 years. Mr. Lutnick asked his sister Edie Lutnick, a lawyer who had been running her practice out of Cantor’s offices, to head a charity to administer the program.

Ms. Lutnick, like Howard, was also lucky to be alive: she was due in the office on Sept. 11, but she went back to bed after a breakfast appointment fell through.

Mr. Lutnick’s plan was met with a wall of skepticism. Cantor, after all, was losing money. Angry families jeered that 25 percent of nothing was nothing.

Then, that October, Cantor sent out more than $45 million in bonus payments, the first of many checks to come.

“After the first checks went out, guess what happened?” Mr. Lutnick asked. “Silence. Because the checks were larger than the salaries we were paying.”

Its ranks depleted, Cantor could not hire fast enough. For the first year, Mr. Lutnick estimated that he signed up 10 new people a week. By the end of 2002, the firm had roughly 750 people in New York.

Cantor is privately held and does not make public all of its financial information. But based on data released by the company and payouts to families, Cantor and eSpeed made about $150 million a year, on average, in the five years after the attacks.

For all its losses and sorrows, Cantor actually had the wind at its back. ESpeed thrived in 2002 and 2003, thanks in part to the nation’s ballooning debt. As the government sold more bonds to finance its deficit, the bond market grew and Cantor had more Treasury securities to trade.

Cantor also continued to rebuild, expanding its investment bank and pushing into new areas like gambling technology.

In 2004, Cantor was essentially running two very different business. It had a stock and bond trading desk and was expanding into investment banking. And it had the broker-driven bond trading operation. This unit had recovered from Sept. 11, but it needed a huge capital commitment to move forward.

Mr. Lutnick and Mr. Amaitis decided to create a new company, BGC Partners, to house the brokers. Cantor would retain the trading desks that handled big stock trades and the investment-banking division.

They gave each company its own management team. The move enabled BGC to raise the money it needed.

To do all of this, Cantor for the first time went into debt, borrowing almost $400 million to expand BGC. Over the next few years, Mr. Amaitis embarked on a dizzying shopping spree, buying a string of interdealer brokers. In 2005 alone, BGC added 1,000 brokers. Then, in April 2008, Cantor merged BGC with eSpeed. The deal, valued at $1.3 billion, paired eSpeed’s trading technology with BGC’s brokers.

Today, Cantor and Mr. Lutnick, BGC’s chairman and chief executive, are among its biggest shareholders. The new company took the BGC name.

HARRY WAIZER is a rarity at Cantor. He is a Sept. 11 survivor, one of the 74 people who worked for Cantor before the attacks and who still work there today.

A tax lawyer, Mr. Waizer was in an elevator on his way to Cantor’s offices when the plane hit. Flames engulfed him. Badly burned, he stumbled out on the 78th floor and worked his way down.

He was given a 5 percent chance of survival. He spent two and half years recovering and returned to work in 2004. His scars are still visible. He does not have much stamina. He cannot sit for long and works just three days a week; on one of those days, he spends time with a physiotherapist.

He says Cantor is a different company today. Some of the employees who recently joined were just teenagers in 2001. Some are the children of parents who died that day.

Cantor’s survivors of Sept. 11 have a special bond, he says. “There is a certain intensity it brings among the people who were there,” Mr. Waizer says. “You don’t know it until it is going to happen. It usually hits when we talk about the issue of loyalty.”

Cantor’s success has enabled Mr. Lutnick to honor his pledge to the families of those who were killed. Over the five years, each family got roughly $175,000. Many are still getting health insurance.

The criticism of Mr. Lutnick has mellowed with time. Some widows and other family members who chastised him in the weeks after Sept. 11 now say he did all he could.

Appearing on “20/20″ in October 2001, Susan Sliwak, whose husband, Robert, was a bond trader at Cantor, sharply criticized Mr. Lutnick. She told Connie Chung that Mr. Lutnick “was not liked” by many inside the company.

Today, she said Cantor “did everything” it said it would.

Early on, Irene Boehm, who lost her husband, Bruce, a Cantor broker, spoke publicly about her financial concerns. When Cantor sent her a bonus check months later, she called Cantor, saying her husband deserved more. Today, she, too, says the concerns about Mr. Lutnick’s sincerity were overblown.

“They have been wonderful and went overboard,” said Ms. Boehm, who has two daughters now in their 20s. Her husband’s parents also received some money from Cantor.

Mr. Lutnick also hired experts from the University of Chicago to analyze the financial packages offered by the September 11th Victim Compensation Fund and try to get more money for Cantor families.

“I was going to want to put my head in the oven if they didn’t get the right amount of money because that is my reason for being at this point,” Mr. Lutnick recalled. “We studied each person that died and how they were doing. We got a lot more per family.”

While the payments to the families ended five years ago, the Cantor Fitzgerald Relief Fund is still a full-time pursuit for Edie Lutnick. She is called upon to help families hold charitable events, or, more recently, to help find hotel rooms for the ones coming to New York City for memorial events.

Mr. Lutnick says he will never get over Sept. 11. But he has found some peace. He says that for years he had recurring nightmares that spiders were spinning webs on his face, suffocating him. Sleepwalking, he would drag his wife into the closet. Today, the bad dreams are gone.

EACH year, Cantor has a service in Central Park for families of its workers who died. This year a larger one will be held at ground zero, where the National September 11 Memorial and Museum will be dedicated.

Ms. Lutnick and Cantor became an important voice in building the memorial. Initially, it was suggested that names be placed randomly, but she successfully argued that the Cantor employees be listed together on the north tower memorial. And friends and families should be listed by one another, if requested.

“It still looks random, but Tim O’Brien being next to Glen Wall means something,” said Mr. Lutnick, referring to two friends at Cantor who died Sept. 11. “I think of the two of them, and it is nice they are together. They should be.”