Crocker Takeover Left Him Behind : Executive Out in the Cold in Surprise Wells Fargo Deal
Frank V. Cahouet is widely known in California banking circles as the tireless and highly regarded executive whom ailing Crocker National Corp. hired two years ago to prevent its San Francisco-based bank operations from drowning in red ink.
Now, however, it looks like he’ll be out of a job in a few months.
Carl E. Reichardt is the tough--some say ruthless--and outspoken chief executive of Wells Fargo & Co. who earned his formidable reputation by running counter to the pack. Today, Reichardt is riding high as the chairman of the newly expanded Wells Fargo, which Friday announced that it will buy Crocker for $1.08 billion.
Cahouet and Reichardt are the most visible examples of the losers and winners in a deal that has sent ripples of surprise through the state’s banking industry. The acquisition affects nearly 27,000 employees--some of whom are sure to be laid off as a result of the merger--who work at more than 600 Crocker and Wells Fargo offices throughout the state.
Although Cahouet was not available for comment, associates say that he is not happy about the turn of events. Cahouet did not learn of the merger until early this week, though the talks had been under way for months.
“Frank probably feels a little upset that he wasn’t able to complete the job (of turning Crocker around),” one banker said.
Cahouet was not offered an executive position at Wells Fargo, though that was no surprise to bankers who know both of the hard-driving chief executives.
“Where would they put him (Cahouet)? They don’t want to put him one in one of those meaningless vice chairman posts,” said Anthony Frank, a fellow San Franciscan who heads First Nationwide Financial.
The merger talks were handled by Wells Fargo and Midland Bank, Crocker’s London-based parent company, and Cahouet actually heard the news in a Washington restaurant from Geoffrey Taylor, Midland’s chief executive.
“It would have been inappropriate to put him in a situation in which he could be embarrassed,” Ian Morison, assistant general manager of Midland, told reporters in San Francisco on Friday. “We made the decision that we would not inform him until a very late stage in the proceedings.”
Hinted at Unhappiness
Cahouet told employees in a memo dated Friday that he learned of the agreement on Monday and hinted slightly about his unhappiness.
“You may already know of Wells Fargo’s plan to buy our bank,” he wrote. “You probably find yourself feeling mixed emotions. I know I did when I first heard the news Monday evening.”
Both Cahouet and Reichardt are known as tough, decisive leaders who love to economize and care little for frills. “If they want frills, let them go to the Bank of America,” Reichardt once told a reporter.
When Reichardt took the job as chairman and chief executive of Wells Fargo four years ago, he inherited a financial institution whose scope was international and whose major borrowers were large corporations.
Today Wells Fargo’s major focus is regional. Its principal customers are now on the West Coast, and its primary borrowers are medium- to small-size firms.
As a manager, Reichardt has an earthy vocabulary, a bulldog personality and a penchant for making unpopular decisions. Some of his early cost-cutting moves at Wells Fargo included freezing the salaries of top executives and selling the bank’s corporate jet.
While other major banks were expanding their branch networks, Wells Fargo under Reichardt was shrinking and replacing people with automatic teller machines.
Cahouet earned his reputation during 24 years at Security Pacific National Bank, where he served in a variety of lending posts and played a central role in building its profitable non-banking operations. So eager was Crocker to hire Cahouet that it agreed to pay him a total salary of $500,000 a year--$360,000 of which was paid by Crocker, while Midland paid the rest.
In his first few weeks at Crocker, Cahouet was a highly visible figure, explaining to shareholders and the press why Crocker had gone downhill so quickly. The bank lost a whopping $324 million in 1984, largely because of huge write-downs in its real estate, agriculture and energy loan portfolio.
In recent months, however, Cahouet dropped out of sight, refusing all interviews. Associates said he did not want to talk unless he had something positive to say.
“He’s been in a hell of a position,” an executive of one large California bank said. “Every time he opened a door, he found a skeleton.”
Cahouet maintained a merciless work schedule, beginning each day at 6:30 a.m. and working through the early evening and weekends.
His style at Crocker was to cut expenses, employees and frills. Dozens of branches were closed, hundreds of employes were let go and thousands of dollars were saved by scrapping the glossy annual reports.
So what kind of grade does Cahouet get for his performance at Crocker?
“An incomplete, and that’s the saddest grade of all,” First Nationwide Financial’s Frank said, echoing the feeling of other bankers.
Lest anyone feel too sorry for Cahouet, company documents show that he has a “golden parachute” entitling him to his base salary, plus bonus payments and other fringe benefits, for the next three years.
WELLS FARGO’S ACQUISITION OF CROCKER Wells Fargo Bank Wells Fargo traces its lineage to Wells, Fargo & Co., which was founded in San Francisco in 1852. The company operated branch offices, to which miners brought their gold dust to deposit or exchange for cash, and ran stagecoach and other express lines--including, for a time, the famed Pony Express. In 1905, the bank was separated from the express business. Major events in the bank’s history since the separation include its merger with Nevada National Bank in 1905, merger with Union Trust Co. in 1923 and merger with American Trust Co. in 1960. Since then, it has acquired a number of smaller California banks in such places as Fresno, Pasadena, Azusa, Ventura, Santa Maria, Buena Park and San Luis Obispo.
Crocker National Bank A private banking firm known as Crocker-Woolworth & Co. was formed in San Francisco on June 3, 1883--with capital of $500,000--by investors including famed railroad baron Charles Crocker. In 1925, the bank, by then called Crocker National Bank of San Francisco, merged with the even-older First National Bank of San Francisco and the First Federal Trust Co. to form Crocker First National. In 1956, the bank merged with Anglo California National Bank to form Crocker-Anglo National Bank. Crocker-Anglo in turn merged in 1963 with Citizens National Bank of Los Angeles to form Crocker-Citizens National Bank. Midland Bank acquired control of Crocker National Bank in 1981.
Financial Data As of Dec. 31, 1985
In billions of dollars
Wells Crocker Assets 29.4 19.2 Deposits 17.7 15 No. of Employees 14,500 12,400 No. of Branches 310 319
COMPARING CALIFORNIA’S TOP BANKS
As of Dec. 31, 1985
Market Share Deposits in of Consumer As of Dec. 31, 1985 billions Accounts Bank of America $94.0 16.0% Security Pacific 32.9 6.9 Combined Wells Fargo/Crocker 32.7 8.9 Wells Fargo (before merger) 17.7 5.0 First Interstate of California 16.5 5.3 Crocker (before merger) 15.0 3.9
