Starting Over

When the planes slammed into the World Trade Center on Sept. 11, few companies were as hard-hit as a small, close-knit firm called Sandler O'Neill. Of the 83 people in the office that morning, only 17 got out alive. Employees lost mentors, assistants lost bosses, friends lost friends. This is the story of what happened next.

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The $700 Million Afterthought
Here's an astonishing fact: Two months after the attack, Sandler O'Neill was profitable again. The tough economy may have hurt much of Wall Street, but it helped Sandler O'Neill; falling interest rates were good for the business of raising capital for small and midsized banks. What's more, Sandler's clients were now buying more bonds, and Sandler was making those trades. Overall, Sandler's bond desk would wind up having a better year in 2001 than in 2000, with over $100 billion of bonds traded.

But it wasn't just the economy. The firm really had performed an amazing feat. Just as Dunne had vowed, Sandler managed to complete every deal that had been on the books prior to Sept. 11--nine in all, with a total dollar amount of $2.1 billion. And that included the complicated $700 million deal--the biggest in the firm's history--that Karen Fishman had been working on the night before the terrorist attack.

When I first arrived at Sandler O'Neill in early October, Dunne and the others had talked about how completing that deal would be an enormous milestone for the firm. That's how they viewed it internally as well. "This is an absolute franchise moment," Jon Doyle had said in one early staff meeting. "This transaction proves we are a company that will not be denied." Over the course of the next five weeks, I watched the deal unfold. It was, unquestionably, a tough one to complete, full of complications. I saw the usual moments of high drama that accompany any such deal--issuers dropping out and needing to be replaced at the last moment, S&P not delivering a hoped-for rating, and so on.

But as October turned into November, something happened that even the Sandler O'Neill brass couldn't have imagined. The deal that had meant so much in the immediate aftermath of Sept. 11 became progressively less important to the psyche of the firm. In the end, Sandler raised $66 million more than planned, and the deal was a huge success. But the week it was priced, just before Thanksgiving, Sandler was working on six other deals. On the morning of the pricing--the climactic moment for any underwriter--I could barely get anybody to talk about it. I asked Dunne why there was no celebration. "Do you know the difference between a good trader and a great trader?" he replied. "A good trader does a trade and feels happy. A great trader feels nothing. He's already moved on." That was Sandler in late November--ready to move on.

It was moving on in other ways as well. For one, it was cutting the cord with its families. It was hard, but the grief counselors had made it clear that this was important to the healing process. Fred Price hired someone else to handle family issues so that he could return to focusing on business. The long, anguished phone calls between family members and Sandler employees became less frequent. The grief counselors had said that the family members needed private, professional counseling. And the bonus issue had been settled--dead employees would receive compensation packages as good as or better than the one they had earned in their best year.

Sandler employees, though, were only just starting to deal with their own grief. In many ways, the incredible amount of work they'd done in the weeks after Sept. 11 had served as a balm, a way of forgetting the enormity of their loss. "This is the only place I'm happy," one bond salesman had told me early on. Marc Maltz, a grief counselor hired by Sandler, says that the real impact probably won't be felt for another few months. "The real craziness ... that's four to six months down the road: paranoia, drinking, drugs, relationship problems," he says. And that's under normal circumstances, which these aren't.

Some Sandler employees simply weren't going to make it: That was now clear. There were people for whom the emotional trauma was beginning to dominate their lives--and prevent them from doing their jobs. Some people were coming in late every day; others would hear a piece of bad news on CNBC and have to go home. Still others showed up every day but had lost their drive. They weren't the same people they'd been before Sept. 11.

At some point, some employees who survived the attack would have to be let go. But it wasn't going to be easy. "Any other time," says Price, "if we had an underperformer at year-end we would call them in and figure out a separation agreement. We don't know how to do that now."

And always there were ghosts. They hadn't disappeared. Jon Doyle is patrolling the bond desk, as he always does, and kicking himself that he hadn't sold enough bonds that day to the client of one of his dead partners. "Conman would be very mad at you today," teases a colleague--a reference to Jimmy Connor, who had been a great bond salesman. Catherine Lawton, the firm's general counsel, announces that a particular deal has been closed. "I'm pretty confident Quack was up there laughing at us, and I'm highly confident he was pleased that we got it done," she says, close to tears. Three Sandler employees are in a meeting to discuss how to pitch a client on restructuring some bad loans. It's a tricky bit of business. The client has not yet acknowledged publicly that it is carrying bad loans and has buried them in the balance sheet. The wrong approach could alienate the client. "What do you think we should do here?" one of the men asks. They fall silent. "Chris would know what to do," one of them says finally.

Letting Go
"I've changed," Jimmy Dunne is saying. It's shortly before Thanksgiving, and he's in the library of his Manhattan apartment. The room is dark and cozy, with wood-paneled walls covered by pictures and mementos. Above the door, a sign reads, help wanted: no irish need apply. On a wall hangs a photograph of Dunne as a boy, fishing with his dad. He has a plate of chicken in front of him. After Sept. 11, Dunne could barely eat; he lost 15 pounds in a month. Lately, though, he's gotten his appetite back. He's eagerly devouring the chicken.

"I've never gone through grief like what I've gone through with Sept. 11," he says. "I gave ten eulogies--written right here." He taps the chair he's sitting in. "And there were some nights at four o'clock in the morning when I sat here and I thought someone had reached down my throat and ripped out my heart." He's hoarse with emotion, but his voice doesn't falter. "As difficult as those eulogies have been, a sort of peace came over me before I spoke them, and I think I've hung on to that."

For Dunne, a new reality has sunk in: The living must let go of the dead. There are widows who still believe that Sandler O'Neill is not doing enough for them. "You killed my husband," one of them told him. While that pains Dunne, he believes he has done the most he can do without jeopardizing the firm. Ultimately, Sandler O'Neill will pay out to the families more than 30% of the capital it had at the beginning of 2001.

Dunne is still haunted by the fact that so few Sandler employees who were in the World Trade Center that morning got out; he wonders whether more might have survived if the firm had had some kind of plan. But he talked to someone at Morgan Stanley--which lost six of the 3,700 employees it had in the Twin Towers--and that person told him that Morgan didn't have a plan either. "They just all ran," the man told Dunne. "That made me feel better," says Dunne.

Most significantly, he has begun to come to terms with losing his mentor, Herman Sandler. Partly that is because Dunne has come to believe that the task he assumed on Sept. 11--the task of making Herman Sandler's firm great again--is his destiny. "I think I trained my whole career to do this," he says. "I honestly believe that everything that's happened to me was leading to this."

As much as he talks about becoming more like Herman Sandler, he's still Jimmy Dunne--just a more patient, more forgiving version of himself. Though Dunne doesn't blow up anymore, he still lets you know it when you've screwed up. His office is still a place where you might hear bad news, but it's also become a place where you might now come just to talk--the way you used to with Herman Sandler.

"It used to be Herman would have all these big ideas, and I would be figuring out how to get them done," he says. "Now I've had to think bigger. I realize now what a luxury it was for me to have Herman Sandler." He adds, "I'm very much at peace with Herman."

For Dunne, the hardest death to come to terms with is that of his best friend, Chris Quackenbush. On a purely business level, Quackenbush left a huge void in the firm. Its investment-banking group lost its leader and rainmaker, and Sandler lost a key strategist and guiding force. Dunne knows he has to find someone to replace Quackenbush. But it's painful. Not long ago, a hotshot investment banker interviewed for a job. "What would you like to do here?" Dunne asked him. "I want to replace Chris Quackenbush," he replied. "When he said that," Dunne says now, "I felt like I wanted to vomit." The man didn't get the job.

Dunne himself will have years to think about Quackenbush, to grieve, and to come to terms with all he has lost. But businesses don't have that much time. So even though it's just three months after Sept. 11, Dunne's thoughts are now clearly focused on where Sandler O'Neill is going rather than where it's been. On this night, he talks eagerly about ideas for projects he wants to start with other firms. He has thoughts about possible new partners. He thinks there's a profitable new niche that Sandler might be able to exploit. As he talks, he looks up at me and smiles. Despite the ghosts, Jimmy Dunne III is back to business.

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