Sandra Navidi - SuperHubs - How the Financial Elite and Their Networks Rule our World

Eventually, he took his efforts up a notch by venturing into the money management world, where real riches are made. He teamed up with French-Israeli banker Thierry Leyne, whom he had not previously known and who was not a player on the international stage. Although Strauss-Kahn was cautioned by friends concerned about Leyne’s questionable reputation, he went ahead and formed Leyne, Strauss-Kahn & Advisors. Together he and Leyne planned to raise $2 billion for a macro hedge fund focused on emerging markets by utilizing Strauss-Kahn’s expertise and contacts. A fund that size was an ambitious endeavor by any measure, but especially so for an unknown money manager and an economist who had never managed any money. Strauss-Kahn went from emperor presiding on the IMF throne to knocking on doors, tin cup in hand. That transformation must have been particularly humiliating when they failed to raise much money. The potential prison sentence hanging over Strauss-Kahn’s head in connection with the Carlton affair probably didn’t infuse trust in the viability of his endeaver. At some point, Strauss-Kahn left the firm after, as he said, he became aware of excessive borrowing. Two days after his departure, Leyne, a father of four, whose wife had already committed suicide several years earlier, jumped to his death from a high-rise in Tel Aviv. At the time of this writing, it is unclear whether Strauss-Kahn would be implicated, if at all, and if he would be held liable for the firm’s losses.

In the aftermath, Sri Lanka’s new government terminated its advisory agreement with Strauss-Kahn, according to which he received $750,000 to help attract foreign investments. His failed comeback as a fund manager dealt another blow to his reputation. In 2016, he joined the supervisory board at Bank Credit-Dnepr, owned by Ukrainian billionaire Victor Pinchuk (net worth $1.4 billion), the son-in-law of former Ukrainian president Leonid Kuchma.9 Had the initial scandal not triggered a litany of further allegations, he probably would have landed a senior advisory role at a top-tier investment bank. However, once thoroughly disgraced, he was left with few choices. While any official position at least for the time being seems inconceivable, the stigma surrounding him has somewhat subsided—though it will likely never fully disappear. The French establishment has slowly lowered its guard and begun opening up its ranks and including him again. Thus, while regaining his status as a superhub is highly unlikely, becoming a well-linked hub again seems feasible in the absence of further jaw-dropping scandals.

PONZI SCHEMES AND SEX SCANDALS: BUDDY FLETCHER AND ELLEN PAO

Minorities in high finance are rare; rarest of all are minority couples in which both partners are superhubs. One of those power couples was Buddy Fletcher and Ellen Pao. In network terms, they started out as nodes at the fringes of the system before equipping themselves with the preconditions and qualities needed to move to the center of the financial network.

I met Fletcher at hedge fund manager Paul Tudor Jones’s fund-raiser for Barack Obama in May 2007. In the previous month, I had met the future president at a small fund-raiser, and he could not have been more personable. Talking to Obama felt like chatting with an old buddy from law school, so I looked forward to lending him my support. The fundraiser took place at Jones’s magnificent oceanfront Monticello-style mansion in Greenwich, Connecticut. As we approached Jones’s estate, security personnel hovered everywhere. Security barriers and black SUVs dominated the streets, and Secret Service agents outfitted with earpieces spoke into microphones attached to their sleeves. Dozens of chauffeured cars lined up for clearance to drive up the scenic oak-tree-lined driveway to the stately entrance. Jones’s white column-adorned, 13,000-square-foot estate is majestic yet comfortable, and his teenage children running around with their cousins and friends gave the home an informal family feel.

Obama received more than 300 guests in the lush garden covered with elegant white tents. There, one of the most respected fund managers in the world introduced me to Buddy Fletcher, endorsing him as a successful investor and philanthropist. Buddy was friendly, and during our brief conversation I realized that I had just met his brother Todd Fletcher, a composer and writer, earlier that month at a dinner at U.S. ambassador William Timken’s residence in Berlin. Buddy invited me to a luncheon with philanthropically minded investors he was hosting at the Harvard Club a few days later.

The following month, he he asked me to join his mother’s birthday celebration with just a handful of relatives at the Yale Club, including his other brother, movie producer Geoffrey Fletcher. The gathering was somewhat formal and everyone was terribly nice, especially considering that I was a new friend. I was also asked to join a cocktail party at Buddy’s historic offices located at 48 Wall Street. The prestigious building, an architectural landmark, formerly belonged to Bank of New York. Behind the elaborate stone façade were Buddy’s impressive offices, featuring twelve-foot ceilings, original antique crown moldings, and an English-style conference room with mahogany desks, elegant leather chairs, and fine art decorating the walls.

I found Buddy Fletcher hard to figure out. It was more a gut feeling than conscious analysis, but somehow I felt that my various impressions did not quite match up. He struck me as somewhat pretentious and inauthentic, with a chip on his shoulder. Beneath his smooth exterior, a subtle aggression seemed to be lurking.

In the fall, I received a request from Buddy for a conference call, during which he outlined a supposedly unique opportunity to acquire a huge financial institution. He was secretive and only elaborated that he had privileged information and a way in. But he needed coinvestors, claiming the transaction was too large for his fund. He asked me to formally introduce him to George Soros and other investors of similar caliber. I get approached for such introductions all the time, with most people expecting this service as a gratuitous favor. Then I usually respond that I would be delighted to work together and quote my consultancy fee. In the case of Fletcher, I didn’t know what to make of him or of the transaction. If I do not know enough to personally vouch for someone’s integrity, I won’t make the introduction, so I graciously declined. Fletcher, unable to find coinvestors, ultimately folded his acquisition plan. Eventually I learned that Fletcher had been trying to acquire Bear Stearns, the investment bank that would falter only a few months thereafter.

After that conference call, our contact fizzled out, and the last I heard from his brother Geoffrey was that Fletcher had met the woman of his dreams, embarked on a whirlwind romance, and set a wedding date. Then I forgot about him. Imagine my surprise when a few years later I spotted the following headline in Fortune: “A Tale of Money, Sex and Power: The Ellen Pao and Buddy Fletcher Affair”—about the unraveling of Fletcher and his wife, Ellen Pao. As it turned out, the superstar couple had imploded by way of sensational lawsuits, fraud, and bankruptcy. The extreme rags-to-riches-to-rags story of a minority Wall Street couple was captivating.

The primary influence on Buddy Fletcher’s life had been his ambitious mother, Bettye. She had high hopes not only for herself but also for her three sons. They were expected to overachieve, and even at the birthday party, Bettye exuded the air of a powerful matriarch presiding over her sons’ lives. She reveled in Fletcher’s accomplishments, led his philanthropic endeavors, and held down the fort in his office.

Fletcher attended Harvard University, where he was very popular and even became president of a student club so exclusive it later rejected Mark Zuckerberg, the founder of Facebook. There, Fletcher was accused of misappropriating funds but later was cleared. After graduation Fletcher accepted a job as a trader at Bear Stearns before moving on to Kidder, Peabody & Co. When he felt that he was paid an unfairly low bonus, he quit his job there and sued for racial discrimination. The suit was settled for $1.3 million, though the arbitration panel dismissed the discrimination charge. A human resources manager revealed later that the real reason the firm refused to pay the bonus was because Buddy refused to disclose how he had generated his profits, a wrinkle in the story that would later gain significance.