Business Mogul J. Peter Grace Jr., 81, Dies; Legend Among Execs : Obituary: The former chairman of W.R. Grace was ousted last month after record reign.

J. Peter Grace Jr., who ruled his family business empire with pluck for five decades only to be toppled after using company funds as his own, has died at age 81.

The former chairman of W.R. Grace & Co. and adviser to three presidents died of cancer Wednesday night at St. Vincent’s Hospital in New York, relatives and company officials said Thursday.

As CEO of the world’s leading maker of specialty chemicals, the workaholic Grace was the longest-running head of a major U.S. company. As head of the Reagan-era Grace Commission, he was a zealous national crusader for cutting government waste. As a leading Roman Catholic, he hobnobbed with Popes.

But he fell from power last month at the company that practically reared him, after major shareholders revolted, partly as a result of millions of dollars in company payments for his chef, nurses and other lavish perks.

Earlier in March, Chief Executive J.P. Bolduc--who was streamlining the company--was forced out due to sexual harassment allegations.

The turbulence, and Grace’s death, marks the end of an era for the Grace empire, which was founded as a Peru-based shipper by Grace’s Irish immigrant grandfather and led by three successive generations of Graces.

As scion of the Grace fortune and chief executive of the company from 1945 to 1992, Grace identified totally with the firm--perhaps one reason he tripped up over using company money as his own, some say.

“He looked on the Grace company as his family corporation,” said columnist Jack Anderson, who co-chairs an institute on government waste that Grace founded after the Grace Commission finished its work in 1984.

“I guess he had some trouble understanding that it was owned by the shareholders,” Anderson said, adding that Grace “was certifiably a curmudgeon, but had the biggest heart of anybody I’ve known.”

Born in Manhasset, N.Y., on May 25, 1913, Grace started in the Grace company mail room in 1936 after graduating from Yale University.

At age 32 he took over the company, which by then had expanded into aviation, cotton, sugar and nitrate in Latin America.

Grace took the company public in 1954 and began expanding into chemicals--the backbone of the company today. In the 1960s and ‘70s, he diversified into restaurants and home improvement and purchased a 56% interest in the Herman’s sporting goods chain.

By the mid-’80s, the company began backing out of its many niches, selling its interest in Herman’s and its full-service restaurants, agriculture and fertilizer businesses.

The Boca Raton, Fla.-based company still ranks among the largest U.S. industrial conglomerates, with annual sales of more than $5.7 billion.

He is survived by his wife, Margie, and nine children. He is also survived by a brother, Charles M. Grace of Santa Monica; a sister, Janet Maureen Grace of Old Westbury, N.Y., and 20 grandchildren.

A funeral Mass is scheduled for Saturday at St. Patrick’s Cathedral in New York.