Edward Wedbush’s roof leaks, but his wallet doesn’t
He built the largest stock brokerage in Los Angeles, and his name adorns one of the city’s most distinctive high-rises. He’s worth tens of millions of dollars.
So why can’t Edward Wedbush manage to fix his roof?
The peeling shingles atop his one-story stucco house in Ladera Heights are covered in blue and black tarpaulin. The bandaged roof has been an eyesore for years in a neighborhood of carefully tended mid-century homes.
Neighbors say they’ve written letters, passed along bids from contractors and even lined up buyers for the home, all to no avail. The tarps remain. The 78-year-old Wedbush occasionally climbs onto the roof in bathrobe and slippers to rearrange them, neighbors say.
“It’s not as though this guy is poor,” said Ronni Cooper, president of the Ladera Heights Civic Assn. “There’s no excuse for this.”
Which is the real Wedbush: the successful financier or the guy in the bathrobe with the leaky roof? A look at his past, his management style and the state of the carpeting inside the gleaming Wedbush building on Wilshire Boulevard suggests the answer is: both.
His investment firm, Wedbush Inc., manages more than $15 billion in assets, employs 1,000 people and is valued at $300 million. His personal stake is worth more than $150 million.
Yet Wedbush has never let go of a compulsive frugality with roots in a Great Depression boyhood and his early days as an entrepreneur, when pinching pennies was the difference between survival and oblivion.
For Wedbush, cost control is much more than a slogan. It’s a guiding principle, maybe even a way of life.
He refuses to issue company credit cards to his employees. He personally signs expense-reimbursement checks, just to remind subordinates that he’s watching every dime they spend traveling or entertaining clients. He brings his lunch from home and drives a 1992 Lincoln Town Car.
Alfred E. Osborne Jr., a member of Wedbush Inc.'s board of directors, recalls seeing the company founder and chairman gathering up paper clips after a board meeting at the exclusive California Club.
“That’s his consuming passion,” said Peter Allman-Ward, who retired recently after 15 years as the firm’s chief financial officer. “He probably gets more fun controlling costs than anything.”
It isn’t necessarily fun for the people who work for him. “He truly is the cheapest man alive,” said one employee who spoke on condition of anonymity, citing a fear of retaliation.
Wedbush believes his vigilance is one of the reasons his privately held firm survived the global financial crisis while bigger-name rivals such as Bear Stearns & Co. and Lehman Bros. collapsed.
While others borrowed heavily to make risky investment bets, Wedbush Inc. stuck to its brokerage and investment banking businesses. The company is debt-free — almost unheard of in an industry notorious for its swashbuckling ways — and Wedbush says it turned a record profit in 2009.
“It’s been well-illustrated that the guys that were quasi-frugal and the guys who paid attention to the business practices are the ones that are not only surviving but are thriving,” Wedbush said in an interview. “And a lot of the others are gone.”
The company headquarters overlooking the 110 Freeway in downtown L.A. reflects Wedbush’s peculiar combination of shining success and reflexive stinginess.
From the outside, the black-and-gray skyscraper looks immaculate and stylish.
Inside, the carpets are stained from years of spilled coffee and pacing feet. Sections in the trading room became so ragged that some women caught their heels in the holes. The hazard was removed, but not by replacing the carpeting: The tears were patched with duct tape, a fix reminiscent of the tarpaulin on Wedbush’s leaky roof.
Wedbush and a partner founded the company in 1955 as a regional mutual fund brokerage. The firm later branched into investment banking, primarily helping small companies go public. Wedbush’s two sons, Eric and Gary, are senior executives.
In recent years, the company has tapped into the hottest new business on Wall Street — processing computerized stock trades for hedge funds and other aggressive traders.
In contrast with the mahogany-paneled walls and leather sofas that are standard office decor for Wall Street’s elite, Wedbush’s personal office is small and Spartan.
“This is a working office,” he said. “What can I do here with an unbelievably good-looking couch?”
In his private bathroom next door, he keeps a small refrigerator for the meals his wife, Jean, cooks for him at home.
No expense is too small to track.
The company saved about $500 a month by eliminating a monthly pizza lunch for employees during the depths of the financial crisis in late 2008 — even though the company was doing well. Wedbush said the pizza was axed as a symbolic gesture and has since has been restored.
During the year-end holiday party season, Wedbush tells managers he will “pay for the meat” but nothing else, according to current and former employees.
“The image I convey here is that Ed Wedbush watches the expenses,” Wedbush said.
Wedbush grew up in St. Louis, the oldest of five children. His father was an electricity dispatcher at Union Electric of Missouri who worked the overnight shift two out of every six weeks.
Wedbush’s father wanted him to find a job after high school to help pay the household bills. Instead he won scholarships to the University of Cincinnati, where he earned an undergraduate degree in engineering, and UCLA, where he got an MBA.
When Wedbush and a friend formed the company in 1955, neither wanted to put his name on it for fear it would be ruined if the enterprise failed. So they flipped a coin. Wedbush lost.
The partners had $10,000 between them, and their revenue for the first year totaled $659, he said.
“When all you have is $10,000, you’re worried about the price of a postage stamp,” he said of those early years.
Wedbush, who says he still puts in 80-hour weeks and hasn’t taken a vacation in three years, says he recognizes the limits of cost control.
He says he gives away more than $500,000 a year to charities — including the University of Cincinnati and UCLA — and treats employees fairly. For example, he said, employees are paid for unused sick time — a total of $135,000 last year. At many companies, employees forfeit unused sick time.
He also contends that his thrift translates into greater job security.
“If I was real popular on the carpet and the pizzas and all these other things, and the company was on the threshold of closing down, they’d want to shoot me at dawn because they want their jobs,” Wedbush said.
Rob Paset, an executive in Wedbush Inc.'s stock-processing division, said it’s hard to argue with the founder’s logic.
“He is frugal but I’m frugal too,” Paset said. “I’d much rather be frugal and be in business.”
Jeremy Zhu, a Wedbush Inc. fund manager, said: “For people who haven’t contributed, he’s not willing to pay people just because they have a big resume. But for people who deliver and who do honest work, he pays them their fair share.”
But as with his neighbors, Wedbush’s tightfistedness has led to some bitter clashes with employees.
Belinda Bullock, Wedbush’s executive assistant for nearly a decade, filed an arbitration claim with the Financial Industry Regulatory Authority, an industry watchdog, contending that her boss gave her $36,000 in company stock over several years, then took it back after she quit in 2009.
In a letter to two company board members, Bullock said Wedbush was “wearing his red ‘Santa’ sweater” when he gave her the stock as a gift a few days before Christmas 2004.
Wedbush said Bullock failed to live up to her end of the deal: buying a small amount of additional company stock to qualify for the shares.
“We’ve taken back stock from other people,” Wedbush said. “How can we not take it back from Belinda?”
The two sides are scheduled to present their cases to an arbitrator in mid-January.
Wedbush also is embroiled in disputes over money with two stockbrokers in his Las Vegas office.
Beverley “Chik” Hylton and Pete Lappin had their pay withheld completely for about 10 days and partially thereafter on Wedbush’s orders, according to documents filed in a FINRA arbitration case.
According to Wedbush, both men had disputes with customers that led to formal complaints. He said their pay was docked under a company policy requiring brokers to share the cost of arbitration losses arising from customers’ complaints.
In Hylton’s case, a FINRA arbitration panel ordered the company to pay $100,000. He no longer works for Wedbush.
As for Lappin, internal Wedbush Inc. memos show his pay was docked even though the case is still pending and no fines have been imposed.
Wedbush said Lappin will get his money back if the case is resolved with no fine against the company.
When it comes to the Ladera Heights home, however, Wedbush doesn’t try to defend himself.
The 3,400-square-foot house was the family’s main residence for many years. Wedbush’s principal home is now in Rancho Santa Fe, but he spends several nights a week at the Ladera Heights property.
“It looks like a tear-down,” said Maggie Southern, who lives across the street. “Everybody’s incensed.”
Los Angeles County sued Wedbush in September, asking a Superior Court judge to order Wedbush to fix his dilapidated roof. The complaint said that county building inspectors documented the roof’s rotting shingles and a beehive as far back as 2007, and that Wedbush ignored repeated orders to make repairs.
Wedbush said he took steps to fix the roof but stopped because the house has extensive mold, which he blamed on hillside drainage problems.
“I’ve had to live in that place and I’ve got some potential infections from the mold,” Wedbush said. “My wife won’t even enter the house. We’ve suffered.”
He said he probably would demolish the house and buy another one nearby.
“It’s embarrassing,” he said. “It’s very tough for me. A person of my business responsibilities, to find themselves in that kind of a situation....”
Times staff writer Tom Petruno contributed to this report.