Remembering the deal maker who turned Bank One into one of the largest financial institutions in the country—and the corporate intrigue that ended his reign atop the company
Editor’s Note: Banking legend John B. McCoy will be at Gramercy Books in Bexley on Wednesday for a discussion of his memoir, “Here’s the Deal.” The book tells the story of how McCoy, through a series of acquisitions, turned Columbus-based Bank One (now part of JPMorgan Chase) into one of the largest banks in the country. In May 2000, Columbus Monthly documented the corporate intrigue that ended McCoy’s nearly two-decades-long reign atop Bank One in 1999.
It was two days before Christmas, and John B. McCoy was lunching with his family at Rooster’s, the bustling little wings joint just a few blocks from his home in German Village. For McCoy’s children, all grown-ups now, it had to be a strange moment—the first time their father didn’t have a bank to worry about. The first time in six decades, indeed, that someone named McCoy hadn’t been in undisputed, rock-solid control of the financial behemoth now known as Bank One. Suddenly, shockingly, Dad the Banker was just … Dad. And Bank One, the family business for so many years, was just another bank, now run, at least temporarily, by some guy from Detroit named Verne.
It could have been—maybe should have been—a somber moment. Yet it wasn’t. John B. McCoy, unemployed 56-year-old banker, seemed oddly at peace, as if he’d found his way home—just in time for the holidays—after wandering battered and bloodied for months in hostile territory. In the midst of the luncheon conversation, one of his daughters turned to him and said, “You're really OK, aren't you?"
Yes, said McCoy, he was really OK.
It wasn't that easy, of course, and probably not entirely truthful. It couldn't have been. How do you stand up at a meeting of the board of directors of the fourth largest bank in the country, announce your immediate resignation as chairman and CEO, turn your back and simply ... walk away? Particularly when it's your family's bank and has been for three generations.
At the moment John B. said those words, announcing his resignation, he had to be painfully aware of what it meant to his family and its history. For 65 years, Bank One had been run by someone named John McCoy, long before it was even called Bank One.
First it had been John B.’s grandfather, John H. McCoy, a small-town banker who moved north from Marietta in 1935 to lead what was then City National Bank, and in the process started a family banking dynasty. When John H. died in 1958, John G. McCoy assumed the top spot, and John B's gruff and powerful father, a bear of a man, grew the bank into one of the largest in Ohio, changing the name along the way from City National to Bank One.
And then it had been John B.’s turn, and he had taken Bank One to heights no one could have imagined. The McCoy magic, so long acknowledged and admired in financial circles throughout the country, would go on forever, or so it seemed. Some people wondered whether John B.’s son, Johnny T., now a junior at Williams, would someday follow in the footsteps of his father, grandfather and great-grandfather. John B. says the bank had become much too big for that kind of family succession. Maybe so, but now, John B., by informing the Bank One board that he was quitting, was breaking the chain.
Even today, months later, McCoy says he's satisfied that what he did was right. In a late March conversation with Columbus Monthly, McCoy said the same thing he's been saying over and over to friends and family members, including his father: He's certain—absolutely certain—that he did what was best for Bank One, the company to which he had devoted the better part of his life. He's personally doing fine, McCoy says. And he thinks Bank One will do just fine as well.
Perhaps McCoy is doing fine. Certainly he seems to be. And with a $10 million going-away present from the Bank One board, plus a guaranteed $3 million a year for the rest of his life, plus some $30 million or so in Bank One stock, we'll not be seeing John B. looking for three hots and a cot at the Open Shelter anytime soon.
Perhaps Bank One, too, is ready to climb from its yearlong black hole of profit shortfalls and dashed expectations, back toward its once-exalted status as a fearsome competitor among financial services titans, a company that had bought and merged its way under McCoy's leadership to nearly $300 billion in assets and $4 billion in annual profits. Clearly, the appointment of Travelers and Citigroup alumnus Jamie Dimon as Bank One's new CEO in late March gave the company its first shot of stock market adrenaline in many months, pumping the share price from the mid $20s to nearly $35 in just 72 hours.
Perhaps everything will turn out all right in the end. But the acceptance and serenity that McCoy now exudes belie the turbulent months leading up to his departure. The storm began in August with a thunderclap: the announcement that Bank One's 1999 earnings would be lower than projected. It was only a modest shortfall, from a projected $3.90 per share to a revised estimate of $3.60 per share. But those three missing dimes rocked Bank One's stock, creating billions of dollars in paper losses for shareholders. On Wall Street, where some analysts had grumped for years that McCoy was getting too big for his britches, the earnings report triggered an almost gleeful institutional sell-off and sent Bank One's stock into a spiral from which it has yet to recover.
A single bad quarter couldn't end Mc Coy's career, could it? No, but the earnings shortfall wasn't just an anomaly. It was the most tangible evidence of problems that had been brewing ever since 1997, when Banc One Corp. (as it was then named) bought First USA Corp., the huge credit card processing company. Nearly everyone applauded the First USA deal at the time. And nearly everyone clapped again in April 1998 when Banc One and First Chicago NBD Corp. announced a “merger of equals to form a $260 billion financial giant. The new entity would be named Bank One, but it would no longer be headquartered in Columbus. McCoy and his bank were pulling up stakes and moving to the Windy City.
Industry analysts hailed both the First USA purchase and the First Chicago merger as shrewd moves-the former because it enhanced Bank One's already important position in the credit-card industry, the latter because it drastically expanded Bank One's regional reach, transforming it into the dominant banking powerhouse of the Midwest. At the time, First Chicago seemed like the biggest trophy yet for McCoy, who would be president and CEO of the merged company.
But when McCoy agreed during the negotiations to relocate the corporate office—his office—to Chicago, he may unwittingly have been sowing the seeds of his own destruction. The First Chicago directors were willing, grudgingly, to give up their company name. They were willing to let McCoy be CEO of the merged company. But it would never do to have their bank shuffled off to some second-tier city in Ohio. If the Ohio guy was going to run things, he'd have to become a Chicago guy. The Chicagoans even insisted that McCoy agree in writing to sell his mansion on Park Drive in Columbus and buy a home in Chicago.
From the outset, McCoy and his wife, Jane, made a point of praising their new hometown. John B. said the transition to Chicago was much less difficult than he'd anticipated. Jane chose the couple's Chicago home, a condominium on Chicago's Gold Coast along Lake Michigan, where much of Chicago's "old-money," including the Wrigley family, resides. Jane told The Dispatch in October that "Chicago is like a big warm hug."
Yet while the McCoys were saying all the right things, there were rumblings that they weren't being accepted into the Chicago elite. Sotto voce, some questioned the McCoys' sophistication and the "small-town" mentality Bank One had brought to Chicago.
Perhaps more important than any lack of acceptance by Chicago's Titans, McCoy for the first time in his career faced serious—and eventually venomous—opposition within his own company. Instead of a handpicked, fully supportive board of directors, he now had to deal with a board almost evenly divided between Bank One and First Chicago loyalists—another condition of the merger. Inside the corporate offices, some former First Chicago executives owed their allegiance not to McCoy but to Verne Istock, the phlegmatic, conservative former First Chicago chairman.
Istock, who became Bank One's chairman after the merger, was always publicly supportive of McCoy. Inside the bank, however, few believed Istock would really be content to manage assorted staff functions and play second fiddle to McCoy. When earnings troubles arose, McCoy was vulnerable to attacks from within, as well as outside the bank.
For McCoy, who'd always been supremely comfortable and confident in Columbus, there was a less easily definable problem as well. As much as he talked the talk and walked the walk, he never seemed to be in his element in Chicago. No longer could he stroll across Broad Street at the end of a working day and belly up to the bar of the Columbus Club for a drink and some joshing with his pals, as he'd done hundreds of times in Columbus. No longer could he slip out to The Golf Club or up to The Lakes Club or Double Eagle for golf with his dad or his son or a few good buddies. There were plenty of nice clubs and good courses in Chicagoland, of course, but they weren't his clubs or his courses.
Or his friends. In Chicago, he was the new kid, the outsider. For a while, after the merger was finalized in October 1998, it seemed the transition was proceeding more or less smoothly. But then came August and the earnings warning, exposing severe problems at First USA, where a series of management bungles had triggered a mass exodus of credit card holders and a dramatic drop in revenue and profit.
Suddenly, the delicate balance of corporate cultures was upset. One bank insider describes it as a "regression," with the First Chicago and Bank One camps retreating from common ground. Instead of cooperation, it was "us versus them" when the stock faltered. The Chicago Tribune began reporting on Bank One's troubles and the schisms among board members, executives and employees.
Bank One's Columbus directors and executives, accustomed to positive treatment in The Columbus Dispatch, weren't expecting the drubbing the company received in the Chicago papers. They blame the First Chicago crowd for happily leaking information damaging to McCoy and the bank. It certainly wasn't the treatment some at Bank One were used to. ''You're supposed to take care of the home team," one board member says. But that may have been part of the problem. In Chicago, John B. McCoy never was the home team.
If McCoy had foreseen the culture clash between Bank One and First Chicago, he didn't let on. "You can't have a them-and-us mentality,” McCoy told Columbus Monthly in November 1998, just a month after the merger was completed. "We're talking about a new Bank One. We're going to operate from day one as one company, one direction. To me, it's absolutely unimportant whether you come from Columbus, you come from Chicago, you come from Detroit.”
But according to the Tribune, First Chicago's leaders were wary of McCoy from the outset: "His style was far more gregarious and folksy than that of stock, the staid, conventional banker," the paper reported. When McCoy flew off to Europe to schmooze investors and investment bankers after the first earnings warning last August, then went golfing in Texas, the criticism in the press intensified. “We harbor ill will because he mismanaged this company severely,” one anonymous insider told the Tribune.
McCoy loyalists from the old Bank One say the First Chicago group had it all wrong. When McCoy was golfing, he often was working. "For so long they had all been running their own fiefdoms," a former Bank One executive says of the First Chicago group. "They all played golf with one another. They couldn’t imagine the number of deals McCoy had made on the golf course.”
The Bank One camp perceived First Chicago as a company stubbornly resistant to change, a bank behind the times that cared little about things important to Bank One, such as marketing, branding and e-commerce. They describe First Chicago as an isolationist company that pursued a merger only when it became a necessity to avoid terminal obsolescence. “They knocked on our door," says one board member. "I don't think they had a lot of choices. Their earnings weren't that strong.”
As the stock slide continued last fall, the infighting turned increasingly bitter. There were office pools on when McCoy would be ousted, and what McCoy supporters say was a "transparently organized" letter-writing campaign calling for his resignation. There were even arguments over which company's shareholders had lost the most money when the stock price collapsed.
The anti-McCoy sentiment ran to the highest levels of First Chicago, with former First Chicago board members John Bryan and James Crown leading the charge, according to the Tribune. Even among rank-and-file First Chicago employees, the well was poisoned for McCoy. "Fifty percent of employees weren't going to follow him no matter what he did," says a former Bank One executive.
Last November, after Bank One issued a second earnings warning and canceled a scheduled meeting with banking industry securities analysts, the downward spiral accelerated and a bunker mentality took hold. "It was hell," says one Columbus executive, "and no one who was near him [McCoy] would blame him for what he did.”
What McCoy did, on Dec. 21, was say goodbye. It wasn't a decision he came to without deliberation. He had spent several weeks talking with those close to him about the future of the company-including, he says, the man who preceded him as CEO, his father. Just before the Dec. 21 board meeting, McCoy called some Columbus board members aside after a dinner for Bank One customers at Rocky Fork Country Club, the rustic, secluded retreat just outside Gahanna. When he informed the board members of his decision, some responded emotionally, pledging support and telling him to fight on. No, McCoy said, his mind was made up.
McCoy describes his conversations with his father as rational rather than sentimental. When his son told him the McCoy era at Bank One was over, John G. handled the news like the tough, pragmatic banker he'd been in his prime. “Johnny didn't have a choice," John G. would later say. "He did the only thing he could.”
Flying back to Columbus the day he stepped down, McCoy says the atmosphere was neither funereal nor celebratory. There was a certain sense of relief. Soon he and Jane would be off to their vacation home in Florida for a rest. But first came Christmas, with family members gathering in their German Village horne.
Close friends Michael Bloch and Tod Ortlip rallied around, taking McCoy to lunch at Mitchell's Steakhouse and playing backgammon to help him pass the time. If there'd been a golf course open, they’d have been on it. On the morning of Dec. 22, The Other Paper called McCoy's home, scored a 20-second, thanks-but-no-thanks interview and published it verbatim the next day. McCoy, who'd made a point of saying nothing to the press after his resignation, got a chuckle out of the "exclusive.” That day, he and his family had lunch at Rooster's.
Four months after his resignation, McCoy says he has no regrets about the deals for First USA or First Chicago. And he's still certain he did the right thing by bowing out when he did. Some disagree, saying he wimped out, should have fought on no matter how bad things got. The First Chicago board members didn't have the votes to force him out, the argument goes, so why quit when he could have hung on through the bank's darkest days and emerged a new, different leader?
Others are more sympathetic. “It was clearly Johnny's decision to do what he did. I think he did what was best for the company," says one board member. “If he wanted to still be there, he could still be at the bank.” So why isn't he? Poor financial results, says the board member. "At the end of the day, that's what caused it. We didn't do what we said we were going to do.”
Not even McCoy's most ardent supporters hold him blameless for Bank One's financial troubles. Never a hands-on, detail-oriented CEO, McCoy was often too willing to delegate important decisions to his top lieutenants and trust that every thing would turn out all right Some top executives—former First USA head Richard Vague and former Bank One vice chairman Rich Lehmann in particular—are said to have dropped the ball for both Mc Coy and the company. "McCoy is the visionary. These guys had to be the bean counters," one McCoy supporter says. ''What fell apart was that the beans weren't counted.” If McCoy's most senior employees were letting him down, McCoy shares some of the blame for not realizing what was happening. And the final accountability for a company's performance always rests with the CEO.
McCoy's decisions not to impose Bank One's management style on First USA and then on First Chicago also are viewed as critical errors by some insiders. It was as if Bank One had reverted to its old days of "uncommon partnership," when the managers of newly acquired banks were allowed to continue to run things as they always had—as long as the profits rolled in. Bank One had abandoned that decentralized management style several years earlier, yet somehow McCoy never brought the hammer down on First USA or First Chicago. "It was completely and totally wrong," says a former Bank One executive who initially supported McCoy's laissez faire approach. ''You don't ask ’em, you tell ’em.”
Some expect Bank One’s new CEO, Jamie Dimon, to impose just that kind of disciplined, my-way-or-the-highway management. Dimon's appointment in late March satisfied McCoy loyalists on the board who opposed the choice of Verne Istock, who actively sought the job, as McCoy's successor. Although McCoy has never spoken a word of criticism of Istock in public, it's no secret that he and Bank One's Columbus group on the board believe Istock was working to undermine McCoy during his final months at the bank.
Meanwhile, McCoy has been dividing his time between Columbus and Florida. Friends say he may establish Florida as his legal residence because of that state's less onerous tax laws. He and Jane are building a home at Pebble Beach in California, her home state, and expect to spend a considerable amount of time there when it's completed. They'll also spend a good bit of time during warm weather months at their vacation home in Harbor Springs, on Lake Michigan. But McCoy isn't abandoning Columbus. He and Jane have purchased the German Village home of former Bank One executive Tom Hoaglin; they plan to sell the smaller German Village house they bought when they moved to Chicago.
McCoy has taken an office in Downtown Columbus at Stonehenge Holdings, the investment banking firm. There his longtime secretary, Sandy Anderson, keeps track of his calendar and handles correspondence. Stonehenge is run by several former Banc One Capital Corp. executives, including McCoy's friend David Meuse. But McCoy's not planning to go to work at Stonehenge. In fact, he says he's not sure he wants to go back to work full time at all. If he does, he says, you might see him pop up in cyberspace. McCoy says he's received a number of contacts from Internet companies looking for a gray-haired executive to bring some credibility to their teams. A decision to join an online company might come as early as this summer.
If McCoy decides not to return to work at all, he’ll be able to get by. His severance package from Bank One includes a $3 million annual pension and $10.3 million in cash. Bank One says the package isn't out of line with others in the banking industry. Some observers, including more than a few disgruntled shareholders, disagree, claiming the deal was more lucrative than expected, particularly given a 1999 Bank One financial filing that set the pension due to McCoy at $1.7 million.
Whether Bank One gets back on track or continues to flounder, the legacy of John B. McCoy won't be what he imagined when he packed his bags for Chicago in 1998. His friends are standing firm, but around Columbus these days you'll hear plenty of grousing from people who saw the value of their Bank One stock cut in half in less than six months.
In a perfectly fair world, McCoy might be remembered as the CEO who built Bank One from a smallish Ohio competitor to a hugely profitable national player. His instincts for the next deal, the next innovative product, were far more often right than wrong, and plenty of Bank One shareholders made a bundle during his tenure. In the real world, of course, John B. McCoy will be remembered as the CEO who botched the First USA acquisition and the First Chicago merger, then walked away from the train wreck. He may indeed be OK, as he told his daughter last Christmas, but there must be many mornings when he wakes up and the pain returns, when the depth of the fall, both personal and corporate, is almost more than he can believe.
Perhaps those moments will be fewer as time passes and the world moves on, but surely John B. McCoy will, for the rest of his life, be asking himself what he could have and what he should have done differently.
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