‘The Best $1.5 Million We Have Ever Spent’ : Disaster Plan Keeps Business Humming
Flames were still pouring from First Interstate Bank’s headquarters as 20 pre-selected managers rushed into a nearby command center two stories below ground and set in motion plans for keeping the inferno from disrupting business at the multibillion-dollar company.
From 11:15 p.m. Wednesday through the early morning hours Thursday, the telephones hummed and a bank of television sets showed images of the smoldering 62-story structure less than a mile east of the unmarked building where First Interstate maintains a permanent emergency center to cope with precisely this type of disaster.
Eighteen months ago, First Interstate spent $1.5 million establishing a sophisticated plan for responding to a natural disaster. Less than a month ago, on April 14, the bank went through a practice drill.
What everyone had been anticipating was an earthquake. What they got was a fire that gutted several floors of the bank’s downtown headquarters, including the sites of such critical operations as the 12th-floor securities trading room and the fireproof vault on the 11th floor where as much as $100 million in bonds and securities are kept.
Top bank executives said Thursday that the disaster plan functioned almost flawlessly, allowing the bank to keep vital operations functioning with little or no interruption and minimizing the effect of the fire on business and customers.
“That was the best $1.5 million we have ever spent,” said William E.B. Siart, chairman and chief executive of First Interstate Bank of California.
Nearly six years ago, a similar fire destroyed the main office of Northwestern Bank in Minneapolis and cost the Minnesota bank $50 million in interrupted business.
Siart also said damage from the Wednesday night fire would not affect any customers except those who use the branch in the headquarters building at 6th and Hope streets. The computers that keep track of checking accounts and other bank business are housed in the unmarked building west of downtown.
Bank officials do not know when operations will resume in the building, where about 2,500 First Interstate workers are normally located.
There were minor breakdowns in the response system. One element of the plan called for employees to telephone designated colleagues and alert them about alternative work sites or tell them to stay home. Still, some employees said they did not get the message and showed up outside the headquarters Thursday morning.
But bank officials said key operations kept functioning. The securities and currency trading operations, which handle $3 billion to $5 billion a day, were maintained through First Interstate sites in Tokyo, London and New York. Other institutions in Los Angeles, including Security Pacific, Bank of America and the Salomon Bros. investment firm, offered to share their facilities with First Interstate’s merchant banking subsidiary.
No money burned. Even the fireproof vault, guaranteed to keep documents safe for three to five hours in 2,500-degree temperatures, worked. Officials were notified at 11:02 a.m. Thursday that the safe was cool and the securities and bonds were apparently undamaged.
High Self-Appraisal
“I’d give us an ‘A’ on this plan,” said Harold J. Meyerman, president of the merchant bank, which handles international trading and corporate banking.
Meyerman was among the first executives to learn of the fire. Moments after the blaze was reported to authorities at 10:37 p.m., he got a telephone call at his Pasadena home from Hisao Kobayashi, the chairman of Dai-Ichi Kangyo Bank of California. Kobayashi was still in his office, which is just across Wilshire Boulevard from First Interstate’s headquarters.
“Harold, there is a big fire on your floor,” the Japanese banker said.
Meyerman switched on the television and a few minutes later watched in horror as flames spurted from the floors where his trading rooms were located. He also grabbed his list of phone numbers and began making calls to key employees to start the ball rolling on switching trading operations to Tokyo, London and New York.
By 1:30 a.m., a senior trader was on a plane bound from Los Angeles to New York. Foreign exchange traders were on the first flight to London.
At 2 a.m., a Security Pacific executive telephoned Meyerman at home to offer space in the rival’s trading facility. Similar calls followed from other institutions.
Another First Interstate executive, Richard Tappey, was driving home from Los Angeles International Airport when he spotted the flames, picked up his car phone and called Siart at his home on the city’s Westside.
Nighttime Phone Call
Joseph J. Pinola, chairman of the bank’s holding company, had just walked into his Century City condominium shortly after 11 p.m. when his public relations chief, Simon Barker-Benfield, telephoned.
“Joe, you had better turn on the television,” Barker-Benfield said.
Within minutes, Pinola had summoned his driver and was speeding downtown. The banker who so loved having his office atop the city’s tallest building spent the next 90 minutes watching the fire.
Even before Pinola got downtown, the bank’s emergency plan was operating inside a sleek nine-story building just west of the Harbor Freeway.
The building, where 3,000 bank employees normally work, carries no sign because it houses the bank’s extensive computer operation as well as below-ground vaults that contain millions of dollars in cash and precious metals.
Because of the building’s security and ready access to computers, the bank set up its emergency command center on the second floor below ground there months ago. It also stocked the facility with ample supplies of communications equipment, from telephones to facsimile machines, and food.
Edmund J. Pistey, the bank’s director of security, had been notified of the blaze by the Fire Department and by 11:15 p.m. Wednesday he was on the telephone in the command center. Arrayed around him were 20 other key personnel, each assigned to specific duties for monitoring operations damaged by the fire and taking the necessary steps to get things working again.
The fire’s progress was tracked on a big wall chart. Each time the Fire Department notified Pistey that another floor had been engulfed, a bright red “GONE” was penned on the chart alongside numbers indicating each floor.
Progress Reports
As the blaze ate up more and more of the bank’s operation, executives from each department were identified from lists drawn up as part of the preparedness plan and notified. On another chart, each section of the bank affected by the fire was assigned a new space in another facility.
By 3 a.m., “GONE” was written beside floors 7 through 15 and “Trying to Hold” was scribbled across 16 and 17. As it turned out, damage was less extensive.
The occupants of the command center and the bank’s key executives set up a system of triage, assessing which operations had to be resumed first in order to save the bank the most money.
“You can’t duplicate the entire bank, so you do an analysis of the financial impact of each unit on an earnings and legal basis,” Cole H. Emerson, head of management information, said in an interview Thursday. “Those that are going to hurt you the worst, you recover first.”
Clearly the worst potential damage would come from the bank’s trading operations, which handle billions of dollars daily in securities, bonds, options and currency transactions. If the bank lost the ability to direct those trades or the records of what it owned, it would be exposed to millions of dollars in losses as the markets fluctuate.
Trading facilities on the 12th floor were destroyed. The computers and quote screens were reduced to ashes, along with the trading records stored there.
However, as part of the emergency response plan, options traders at the bank took records of their transactions home with them on computer disks each night so they could plug into home computers in an emergency. And duplicate records of all transactions are transferred electronically to a data storage company in Minneapolis daily.
Foreign Missions
By the time William Doomey, an executive from the trading area, arrived at the emergency center, several traders were already on phones to Tokyo and London and personnel were being dispatched around the globe to augment the company’s existing operations elsewhere.
By 4 a.m., a vast printout of every trade and all bank positions in every market was on the desk that Doomey had commandeered on the sixth floor of the building. The printout had been flown in from Minneapolis by courier.
Another potentially expensive gap involved the loss of the ability to receive and send hundreds of millions of dollars a day by computer. For instance, if a bank in Tokyo owes First Interstate $10 million in a currency transaction, it sends the money as an electronic blip via computer.
But the fire destroyed First Interstate’s ability to send or receive such blips, called wire transfers. That meant the Tokyo bank could simply hold the money and collect the interest for itself.
Establishing an alternative electronic mailbox takes about 12 hours, largely because of the security involved in handling the huge sums of money. Officials want to make sure there are no mistakes in the destination.
So the response plan had set out specific steps for using accounts at other big banks to handle incoming money for First Interstate, and computer messages were sent early Thursday morning to everyone holding money for the bank.
Computerized messages also went out to the bank’s more than 300 branches in California, assuring them that the back-office operations essential to everyday banking, such as check clearing and the automated teller machine network, were functioning normally.
Emergency Center
On the eighth floor of the emergency center, a dozen employees sat around a conference table with phones pressed to their ears, fielding calls from reporters and customers that were automatically switched from the main building.
Throughout the building, about 1,000 executives and support personnel from headquarters crammed into cubicles and staffed telephone banks in conference rooms. Many were dressed in jeans and sweat shirts. Others, adhering to the banker’s dress code even in an emergency, wore suits or dresses.
At 7:30 a.m., Pinola, Siart and the remainder of the company’s hierarchy jammed into a small office on the sixth floor for a progress report. The office had a view of downtown and the First Interstate Building. By that time, the flames and smoke were long gone. No trace of the damage was visible from that distance and executives reported to Pinola that things appeared to be running smoothly at the emergency center.
