Risqué Management: The Murder of Edouard Stern
A Thousand Enemies
Edouard had accumulated a large number of enemies and detractors--both disgruntled employees and professional rivals during his life. He attended but did not graduate from the l'École Supérieure des Sciences Economiques et Commerciales (ESSEC), one of France's Grande Ecoles-- "Great Schools" which the vast majority of France's elite politicians and business leaders attend for university training. Dropping out of ESSEC in 1976 because of financial difficulties at Banque Stern, the cornerstone of the family fortune, Edouard, with the aid of his uncles and grandfather, took control of the bank from his father, whom he would ultimately fire. Edouard and his father would not speak to each other for 15 years, until a partial reconciliation at his father's deathbed.
During his tenure at Banque Stern, Edouard's management style of his subordinates was just as abrasive and aggressive as his high-charged investment strategies and hostile take-over schemes. Edouard reportedly would abruptly fire staffers on the spot, often more out of pique than for shoddy job performance. One trader in France was reportedly fired for refusing to work while on vacation, in a country where holidays are sacrosanct. Much of his frenetic work pace was reportedly devoted to petty in-fighting, seeking to get back at subordinates and colleagues who he thought had crossed him.
Marrying the daughter of Michel David-Weill, the Chairman of the historic international banking house of Lazard Frères in 1984, Edouard in 1992 became a senior executive at the globally renowned firm. Seen as the heir apparent to David-Weill, Edouard nonetheless left the firm abruptly in 1997, following a series of personality clashes between him, David-Weill and other executive board members. Edouard's abrasive personality and style were reportedly out of sync with the bank's more polished culture.
Leaving Lazard, Edouard in 1998 started International Real Returns (IRR), a private equity fund which invested in a range of ventures, from restaurants to major stock holdings in multinational companies. One such investment involved a scheme which reportedly linked Stern to eastern European executives with ties to the Russian mafia.
In 2003, IRR took a huge financial hit after losing most of the close to $90 million it had invested in the French chemical company Rhodia. When Rhodia's stock tanked, Edouard sued, claiming Rhodia executives had misled investors about the company's true value and had misstated its financial earnings. Stern, along with fellow investor Hughes de Lasteyrie du Saillant (who died in 2007 of a heart attack) also met with then Manhattan District Attorney Robert Morgenthau about Rhodia, which was was traded on the New York Stock Exchange as well as the French Bourse.
Stern's lawsuit was an uphill battle, though. France's economic and political leadership have been closely intertwined for decades under an economic policy called dirigisme, in which technocratic elites from government, finance and industry, all products of the Grande Ecoles, move professionally with ease between the public and private sectors and confer closely to optimize economic conditions. The head of Rodia's audit committee Thierry Breton, for instance, became France's finance minister in 2005 shortly after leaving Rhodia.
Edouard reportedly had expressed concerns about his safety due to his involvement with the lawsuit against Rhodia. After Edouard's death, de Lasteyrie du Saillant disappeared and did not emerge again until after learning about the true circumstances surrounding Edouard's murder. IRR's losses investing in Rhodia were also of concern to Lazard, which had invested in IRR as part of Stern's negotiated departure from the firm.