For a short, uncomfort able moment, Peter Kraus was the favorite whipping boy of Wall Street critics, a poster boy for excesss.
After leaving Goldman Sachs following a 22-year career, with an undisclosed retirement payment in March 2008, Kraus stopped off at Merrill Lynch for a cup of coffee just two weeks before Merrill announced it was merging with Bank of America.
The September merger triggered a $25 million golden parachute for Kraus — and a subpoena from state Attorney General Andrew Cuomo, who was investigating banks that used taxpayer-funded bailouts to pay fat bonuses.
The 57-year-old Philadelphia native immediately went out and bought a swank five-bedroom apartment at 720 Park Avenue for $37 million from Democratic fundraisers Carl Spielvogel and his wife Barbaralee.
Then, in December, the NYU business school grad landed a new job as chairman and CEO of AllianceBernstein. Kraus pulled down only a $275,000 salary, but negotiated a juicy $6 million bonus.
Not a bad year considering how much blood was on the Street. But that was not enough. Kraus also will get 2.7 million shares of restricted stock in annual installments during his first five years on the job, according to an SEC filing. That stock was worth a mere $50 million when he started, but is now worth roughly $75 million.
You might think that after his public flogging by Cuomo he would keep a low profile. Other investment bankers — like former collegue Lloyd Blankfein — probably wish they weren’t in the newspapers or before Congress.
But quiet is not Kraus’ style.
With his beard and a slightly longer hairstyle than Wall Street norm, Kraus color-codes his suits to match the band of one of his many designer watches, while his multi-colored ties usually work well with the timepiece’s dial.
He also has taste in abstract post-modern art. Well over $1 million worth hangs in his expansive sunlight-drenched 39th floor corner office overlooking Central Park, spilling out into the hall past his assistant’s cubicle.
Visitors have to sidestep a five-foot-high stack of lopsided blocks by German sculptor Manfred Pernice that’s worth about $55,000 on the Zurich art market and resembles the Hearst Tower, which is right behind it in the west-facing window.
On one wall hangs “Les Balayeurs du Désert” (The Desert Sweepers), a limited-edition video by Su-Mei Tse played on a large flat-screen monitor. It shows dozens of uniformed janitors sweeping sand in the desert with brooms. Only five copies were sold, for about $20,000 each, according to the Peter Blum Gallery in Chelsea.
“What’s the meaning of life?” Kraus says with a smirk, referring to the video. “If you can get comfortable with that, you can get comfortable with anything.”.
To hear Kraus tell it, his passion for art started as a way to spend more time with his wife, Jill — “my curator” — on shopping sprees every summer in Berlin, a mecca for young artists. Now they are frequent patrons of celebrated exhibits like last year’s showing “Younger Than Jesus” (work by artists under the age of 33) at the New Museum on the Bowery.
Kraus declined to discuss his personal wealth, but by all accounts he has succeeded in pulling AllianceBernstein away from the brink of disaster and is steering it back on track this year. He is unapologetic about his generous payouts at Goldman and Merrill and ready to make more.
After falling like a rock for two years, the mid-size investment firm’s net revenues, which it collects from investors in management fees, rose 21 percent during the first three months of this year, to $725 million from the same period in 2009. And net income attributable to shareholders rose 302 percent, to $148 million.
“We have a year under our belt of very strong performance pretty much across the board,” Kraus said in an interview.
AB was going down the drain when Kraus arrived. Henri de Castries, a French aristocrat who runs AXA, the Paris-based insurance group that owns a controlling 62 percent stake in AllianceBernstein, had lost patience, said a former company executive, after the firm’s seven flagship institutional funds performed worse than 90 percent of their peers in 2008.
Kraus started his job the same day outgoing CEO Lewis Sanders, a legendary value investor, began his unceremonious retirement. Kraus lost no time turning AB around by “Goldmanizing” it — introducing practices for which Goldman is known — according to his colleagues.
* Kraus instituted partnerships, putting more stock in the hands of managers — they owned 7.8 percent as of March 31 — to give them more of an incentive to succeed.
* He also knocked down a decade-old barrier between the legacy growth fund giant Alliance Capital Management and value-equity shop Sanford C. Bernstein, requiring their chief investment officers to meet every two weeks to share their ideas for a change.
*He also started underwriting IPOs, using Bernstein’s legacy brokerage unit to help make up for lost revenue from the investment business.
* After cutting one-tenth of the firm’s jobs to suit a 38 percent reduction in assets under management. Kraus insists the firm can be “immensely profitable” without returning to its former size.
It won’t be easy for any Wall Street banker to prove his worth as long as Cuomo is collecting scalps on the campaign trail for governor. But if anyone has done it, it’s probably Peter Kraus, who may be the best-paid investment banker since the crash.