International -- European Business: BRITAIN
DEUTSCHE BANK VS. THE `SUPERWOMAN' (int'l edition)
A star fund manager exits--and raises a ruckus
The towering glass Deutsche Bank headquarters in Frankfurt is usually a solemn place. Yet on the afternoon of Jan. 17, it was anything but. That's when Nicola Horlick showed up at Deutsche's front door.
Horlick, a star fund manager at Deutsche's London investment bank, was suspended on Jan. 14, then resigned two days later amid charges that she tried to persuade colleagues to defect with her to a rival. She arrived in Frankfurt, coatless and furious, in a bid to get her $1.7 million-a-year job back or to be suitably compensated. An entourage of reporters and television crews was on hand to record the event. Soon the saga of the City "superwoman," as the British press dubbed Horlick, taking on the cold-hearted Frankfurt bankers was front-page stuff in Europe.
For Deutsche and its fast-growing Deutsche Morgan Grenfell (DMG) investment banking arm, the new round of media attention was most unwelcome and raises new questions about how well the bank is managing its multibillion-dollar effort to become a force in global finance. For several years, DMG has been angering competitors by luring star investment bankers from Merrill Lynch & Co. and other firms. On top of that, it was hit by a scandal last summer involving another DMG portfolio manager, Peter Young. Fired for allegedly breaching British investment regulations, Young is now under investigation by the Serious Fraud Office. He has not been charged with any criminal offense and proclaims his innocence. But the scandal has cost Deutsche at least $500 million.
Clearly, Horlick, 36, was one of DMG's up-and-comers. After leaving Mercury Asset Management Group PLC for DMG in 1991, she became managing director of the investment bank's Morgan Grenfell Asset Management British pension-fund arm. During her tenure, the unit's pension funds under management increased from $7.6 billion to $34 billion. She brought in $5 billion last year alone. "I have been thrown out of my job for managing well, bringing in lots of new business, and outperforming the house by a wide margin," she says.
Clients praise Horlick's fund management skills--as well as her ability to balance a high-powered career with her responsibilities for five young children. And without Horlick at the helm, some funds may pull their money out of DMG. But an even bigger risk for the bank is damage to its reputation. "We are obviously anxious over the stories," says John Birchall, spokesman for the Norfolk County Council, which has $650 million at DMG. Some observers think DMG's running soap opera could also thwart Deutsche's efforts to build up its private-banking business. "Their image is material, especially in private banking, because clients are very sensitive to integrity and reputation," says Matthew Czepliewicz, an analyst at Salomon Brothers International Ltd.
DENIALS. Despite her success, Horlick says she was unhappy because of tensions with her boss at Morgan Grenfell Asset Management, CEO Robert Smith, as well as "turmoil" and poor staff morale in the wake of the Young affair. Only four days before her suspension, Horlick says--and DMG confirms--Smith offered her a promotion to placate her. But shortly after, DMG says it suspended Horlick because it discovered she was approaching staffers about defecting to a British subsidiary of the Dutch bank ABN AMRO.
The bank confirms talking with Horlick but denies making an offer or trying to hire an entire group. Horlick describes her talks with the ABN AMRO unit as "informal," insists that she had not breached her contract, and says she had wanted to stay at Morgan Grenfell if things could be worked out. Adds Horlick: "I never intended to take a team of people or take clients away."
But DMG steadfastly maintains that Horlick was attempting to poach its staff. Although it says it would have been acceptable for her to quit and then hire a staff through a headhunter, Deutsche says that by approaching colleagues personally, Horlick breached her duty as a director of her firm. Says a bank spokesman: "We stand by our actions. We have acted properly."
Horlick has engaged a law firm and a public-relations consultant who are tilling fertile soil: DMG's history of raiding other firms has not won it any sympathy. Senior Deutsche managers in Frankfurt are trying to distance themselves from the mess, saying it's a London problem. But that could be a risky strategy if the battle drags on. Whatever compensation Horlick is demanding doesn't amount to a fraction of the damage the affair could do to her former employers.By Stanley Reed, with Heidi Dawley, in London and with Karen Lowry Miller in Frankfurt