Howard Lutnick, Now a Billionaire, Bets Own Fortune on Bold Growth Plan

(Bloomberg) -- It has been seventeen 9/11s since Howard Lutnick watched the Twin Towers fall. Grief has mellowed. Old recriminations have quieted.

And, with time, the tragic story of his firm, Cantor Fitzgerald LP, has begun to recede in the national memory. Lutnick can never forget: 2 of every 3 people who worked for him in New York, 658 in all, died when American Airlines Flight 11 struck One World Trade Center. His brother Gary was among the dead. Cantor, it seemed, was finished.

Yet today, at 57, Lutnick is the improbable face of one of the greatest comebacks in Wall Street history. He hasn’t simply rebuilt Cantor. He’s become a billionaire in the process and is spending hundreds of millions of his own dollars to push into new businesses and set the firm on an ambitious course: to become, in his words, “the biggest little guy” in the business.

The famously sharp-elbowed Lutnick -- his firm has been sued for, among other things, unfair dismissal and broker-poaching -- found an unlikely partner in Anshu Jain, the former Deutsche Bank AG co-chief executive officer. The two have been courting sovereign wealth funds around the world to help finance Cantor’s push into investment banking and the highly levered world of prime brokerage, financing smaller hedge funds that the biggest banks are reluctant to take on.

‘Lonely’ Lutnick

Jain, 55, whose career has taken him from Kidder Peabody & Co. to Merrill Lynch to Deutsche Bank, and who now holds the second-largest stake in Cantor, has revitalized Lutnick. “I wanted a partner,” Lutnick says in an interview from his second-floor Midtown office. “I’ve been lonely.”

When Jain is in London, Lutnick spends the first working hour of each morning speaking with him. The two are so close that they and their wives vacationed together in Europe this summer. They make for an intriguing pair: the soft-spoken Jain and the more expressive Lutnick, a Long Island native who’s spent his entire career at Cantor. Together, they’re growing the firm in sectors like healthcare, power and alternative energy, real estate, and eventually technology.

Even as he builds a new Cantor, Lutnick surrounds himself with the past. His office is filled with mementos salvaged from the World Trade Center. Walking around it, he points out pictures of friends lost in the Twin Towers and steel plates and fire-scarred pieces of art retrieved from Ground Zero.

Lutnick’s journey to the top was a speedy one. He became president of Cantor at 29 after making a series of profitable trades for founder Bernie Cantor. He’s had a reputation as a Wall Street bruiser for almost as long, having waged a bitter and public fight for control of the firm with Cantor’s widow in 1996.

‘Howie Dollars’

Two decades later, he’s only tightened his grip. He’s the sole stockholder of Cantor Fitzgerald Group Management, which is the managing general partner of Cantor Fitzgerald LP and gives him sole voting control. His economic stake in the company is about 60 percent, up from 25 percent two decades ago.

That means Lutnick’s net worth is now at least $1.5 billion, according to the Bloomberg Billionaires Index. He declined to comment on his fortune.

Such wealth may not sit well with his critics, especially as Cantor’s compensation practices have attracted attention over the years. Former employees have sued the firm over partnership payments they said they were owed. When Lutnick’s BGC Partners Inc., a Cantor affiliate, launched a hostile takeover of interdealer broker GFI Group Inc. in 2015, opponents of the transaction circulated “Howie Dollars.” The fake bills feature Lutnick’s face and the warnings “Will not pay to the bearer for any reason” and “This will vest when I say it will vest.”

Jain, too, brings his own baggage. He helped build Deutsche Bank into Europe’s biggest securities firm over two decades but stepped down in June 2015 as a trading slump, stiffer regulation and years of government probes stifled profitability.

Expanding Empire

Cantor is a more opaque realm. It includes stakes in publicly traded BGC and Newmark Group Inc., a commercial real estate firm, and has a venture capital unit.

Lutnick sees his empire expanding further into real estate and he wants to compete with Wells Fargo & Co. -- the fourth-biggest U.S. bank by assets -- in financing multifamily homes. Other businesses continue to push into some of the most hard-to-understand parts of Wall Street, like structured credit, insurance and convertible bonds.

“It’s a collection of activities that is definitely unique,” said Nathan Flanders, global head of non-bank financial institutions at Fitch Ratings.

Now Jain and Lutnick are doling out pay packages sometimes north of $10 million to lure talent from rivals, including two dozen bankers from Jefferies Financial Group Inc. to start a power and renewable-energy franchise. Pascal Bandelier came from Barclays Plc to head the equities business, while Credit Suisse Group AG’s Jim Buccola joined to lead bond trading, bringing three ace traders with him.

Tearful Interview

For Cantor to become a home for star traders on Wall Street seemed unfathomable in 2001. After its offices on the 101st to 105th floors of One World Trade Center were destroyed during the attacks, Lutnick became a public face of the tragedy after giving a tearful television interview.

But almost immediately, he found himself a magnet for criticism after cutting off paychecks for missing employees. To Lutnick, it was the only way to save the firm. To some of the bereaved families and a baying press, it was callous. Amid the uproar, Lutnick didn’t change course.

His doggedness was vindicated -- the resurrected firm ended up donating 25 percent of its profits to the families of the employees who died for five years and paid their healthcare for 10. “Howard was right smack in the center, everything came crushing on him,” recalls Michael Kaminer, a college roommate. “But he couldn’t let that company fail. He felt a very strong sense of obligation to those families.”

Mac & Cheese

Lutnick is a Cantor lifer. He joined after graduating from Haverford College in 1983 and was named president and CEO in 1991. He traces his rise back to a 1986 deal when he persuaded Bernie Cantor to buy into Burlington Resources before it was spun off from Burlington Northern railroad. The firm and Bernie Cantor reaped $150 million from the investment.

“That’s how you become president when you’re 29,” said Lutnick, whose bonus was $1 million that year. “You make the boss so much money that he decides he really likes you.”

Lutnick lost both of his parents by the time he was 18, and he and his older sister Edie were left to raise their younger brother alone. Lutnick, no chef, ended up cooking him so much macaroni and cheese that he started to dream his brother was sweating pasta.

Those days were a distant memory the night before the World Trade Center attacks as the Lutnick siblings dined together at a Japanese restaurant on Manhattan’s Upper West Side before attending a Michael Jackson concert at Madison Square Garden. Everything changed at 8:46 a.m. the next day.

Seventeen years later at Cantor Fitzgerald’s annual charity day on September 11, a relaxed and smiling Lutnick works the trading floor, charming athletes, actresses and politicians.

But, in a quiet moment, he turns and says, “Today is hard for me.”

--With assistance from Zeke Faux, Matthew Leising, Will Hadfield and Neil Weinberg.

To contact the reporters on this story: Tom Metcalf in New York at tmetcalf7@bloomberg.net;Sonali Basak in New York at sbasak7@bloomberg.net

To contact the editors responsible for this story: Pierre Paulden at ppaulden@bloomberg.net, David Gillen, Peter Eichenbaum

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