After September 11: Starting over (Fortune, 2002)

“How was it, Jimmy?”

On a bright mid-October afternoon, Jimmy Dunne III gets out of an elevator on the 19th floor of a New York City skyscraper, marches through a set of generic glass doors, and heads into a small office overflowing with people. His demeanor—the sense of purpose in his stride, the unblinking focus in his eyes—conveys the kind of fierce intensity you might associate with a concert pianist playing Rachmaninoff’s Third. Except it’s more serious than that; you can sense immediately there’s more at stake. And, indeed, there is. Dunne’s small Wall Street firm, Sandler O’Neill & Partners, used to have its headquarters on the 104th floor of the World Trade Center, and it was among the hardest-hit by the Sept. 11 terrorist attack. Out of 171 total employees, 66 died that awful morning, including two of the three people who ran the firm: name partner Herman Sandler and investment-banking head Chris Quackenbush. The 45-year-old Dunne, who had been the third member of the ruling troika, was close to both men—Sandler had been his mentor and Quackenbush his best friend. Now, as the sole surviving senior partner, he has made it his mission to make Sandler O’Neill whole again; his every waking hour is devoted to the enormous struggle of rebuilding his decimated firm.

The midtown office Dunne has just entered is Sandler O’Neill’s post-Sept. 11 quarters, temporary space donated to the firm by Banc of America. It’s not much more than a quarter of a floor, and of course it has nowhere near the breathtaking views of Sandler’s old WTC headquarters. But Dunne is grateful to have it. As he walks into the reception area, he nods at a man sitting there—a Sandler banker who is using the area as his office. Behind the man, taped to a large glass conference room wall, are memorials to the deceased—photographs of dead Sandler employees, letters and drawings from well-wishers (“Dear Mr. Dunne III, I’m sorry for what happened to your company,” reads one from a Bronx sixth-grader), and, most prominent of all, a large matrix in which are written the names of both the living and the dead—as well as a series of dates. The dates, one quickly realizes, mark the days when funerals will take place; the purpose of this makeshift calendar is to ensure that at least one of Sandler’s remaining 22 partners will attend each of Sandler’s 66 funerals.

Dunne makes a quick turn and strides down a hallway. On his left are a series of secretarial cubicles; Sandler is using this space as its “bond desk.” In this crowded area, bond salesmen are jostling for space, shouting out prices. In recent years buying and selling bonds has generated as much as 40% of Sandler’s revenues; it’s critical for the firm to have a functioning bond desk, even in its battered state. A salesman named Joel Comer has actually become a bond trader—as he must, since all of the firm’s bond traders were killed in the attack. On the wall above the bond desk is an American flag, and under that, in handwritten block letters, is a sign that reads: “Our Little Big Firm.”

On Dunne’s right is a series of offices. Some are still being used by Banc of America employees, one to an office. The others—the ones being used by Sandler O’Neill—have two or three people sandwiched around one desk. In a conference room down the hall, 12 people are sharing one table; they’ve dubbed themselves the Knights of the Round Table. In a cramped cubicle a partner and his secretary have removed the arms from their chairs to give them enough room to share a desk.

“How was it, Jimmy?”

As Dunne walks into his office, a colleague stops him and asks him that question. Earlier in the day Dunne had made his first visit to ground zero. He’d gone with the widow of one of his deceased partners. Dunne looks deep into his questioner’s eyes as he collects his thoughts. “Let’s just say if I was determined before,” he replies, “I’m on fire now.”

There have been many times since Sept. 11 that Dunne has seemed on the verge of losing it, and this is one of those times. His voice quivers, and his eyes begin to tear. But then—just as he has done again and again since the terrorist attack—he gathers himself. “I’m glad I went,” he says simply. Then he walks into his office and sets about doing his new job—leading this ravaged company to some sort of future.

The size of your heart

“Monday was a horrific day for me,” Jimmy Dunne is saying. It’s Thursday, Oct. 25: five weeks after the WTC attack. Dunne is in his office, trying to manage, as usual, five things at once. His desk is impeccably organized, neat stacks of paper, all in their proper place. He’s wearing a custom-made suit and shirt, with a Hermes tie. Every crease is in place.

What he did on Monday was play golf. Golf is Dunne’s passion; he’s a one-handicap golfer who belongs to more than 20 golf clubs, including such fabled sites as Shinnecock, Seminole, and the National, where he once won the club championship. Last year, he estimates, he played 170 rounds of golf—with business celebrities like Jack Welch, with clients and potential clients, and with buddies from Sandler O’Neill. Sandler was always that kind of firm—a place where people didn’t just work together but lived their lives together. That’s one reason the living are having such a hard time letting go of the dead.

On that Monday, Oct. 22, Dunne played Augusta with a client. But instead of having fun, he found it unbearably painful. Partly this was because it was the first time since Sept. 11 that he’d spent a day out of the office. But more than that, he found that the act of playing golf evoked too many memories.

“It made me think of Quack,” Dunne says. His voice begins to shake, and he looks over at me with an intensity that I’ve never seen in my life. Here is his grief: raw, open, blunt. He makes no effort to hide it; on the contrary, it’s impossible to sit in a room with Jimmy Dunne and not feel overwhelmed. I have to look away.

Golf originally brought Jimmy Dunne and Chris Quackenbush together—when they met on a driving range as teenagers growing up on Long Island. At 16, Quackenbush accompanied Dunne to visit his mother, who was in a hospital, dying of cancer. When they were 21, Quackenbush consoled Dunne after he’d been rejected from every law school he’d applied to. At 27, Quackenbush helped Dunne quit drinking. And at 32, Quackenbush quit his job at Merrill Lynch to take a flier on his best friend’s new firm. “I’ll never get to play with him again,” Dunne says now. At Augusta, Dunne had marked his ball with a “Q,” in memory of his dead friend. He says he’ll do it that way forever.

Click image to enlarge.

Before Sept. 11, no one at Sandler O’Neill ever thought of Jimmy Dunne as vulnerable. He was a tough Irishman and a rough-and-tumble Wall Street trader. Within the firm, Dunne played the enforcer, the bad cop to Sandler and Quackenbush’s good cops. If you were getting fired, he would deliver the news. If you’d screwed up, he’d let you know it. His blowups were famous. Once he yelled at a trader, “The next time you do something smart, monkeys’ll fly out of my ass.”

During the course of its 13-year existence, Sandler O’Neill had etched out a profitable existence as an investment bank that focused on small and medium-sized banks—institutions that fell below the radar of the Wall Street big boys. Sandler managed their IPOs, traded their bonds, researched their stocks, and helped them merge with and acquire other banks. And over the years, the firm’s culture evolved in ways that reflected its three leaders. Like Dunne, it was hard-charging and scrappy. Like Sandler, it was built not just on business relationships but on lasting friendships with clients. Quackenbush, for his part, brought a cool diplomacy to the firm. He was the negotiator, a man who could make two parties of a transaction leave the table feeling they’d both won. He had a calmness about him, and a charisma, that caused people to want his approval.

Almost immediately after the attacks, Dunne began saying, “I need to be more like Herman now. I need to be more like Chris now.” He has said it so often it has become his mantra. He wants Sandler O’Neill to remain the same kind of firm it was before Sept. 11, to still embody the best of its three leaders, even though two of them are dead. So he can’t just be tough and scrappy. He has to learn to be patient and supportive as well. This isn’t just an emotional issue; it’s a business necessity. Sandler’s employees are so fragile now that they couldn’t handle the old Dunne blowups. It’s hard to change, though.

There is a knock at the door. It’s Jon Doyle, 36, the head of Sandler’s bond desk. A week after the WTC attack, Dunne named Doyle a managing partner and gave him responsibility for the day-to-day running of the firm—the job Dunne used to have.

“What are we going to do about bonuses?” Doyle asks—a question that is a lot more complicated than it used to be, since it means figuring out bonuses for dead employees as well as living ones. “We’re going to do what we’ve always done,” says Dunne. His tone of voice is different now; he’s switched into business mode. “We’re going to have a meeting of the executive committee, and you, me, and Fred are going to decide what to do.” Fred is Fred Price, 47. He used to be the co-head of research. Now his title is COO—another appointment Dunne made the week after Sept. 11. Price is in charge of finding new office space, rebuilding the firm’s back office (which was destroyed in the attack), and helping the families of Sandler’s dead. Dunne, Doyle, and Price now run Sandler O’Neill.

Doyle leaves, and immediately someone else steps into the office. It’s Bobby Castrignano, a Wall Street veteran who is new to Sandler. A 51-year-old retired Goldman Sachs (GS) vice president, Castrignano showed up at the firm’s emergency headquarters on Sept. 17 and volunteered to pitch in. No one at Sandler had ever met him before. Now he’s working on the equity desk. Prior to Sept. 11, Sandler was a market maker for small bank stocks; in its current crippled state, it can’t carry that load. Twenty of the 24 people who worked on the equity desk were killed in the attack. Its one surviving salesperson, Suzanne Ircha, is back at work—but the only surviving trader hasn’t been able to bring himself to return. Castrignano is helping Dunne hire people for the desk.

“Okay, what do we got?” Dunne asks. He picks up a resume. “That guy,” he says, referring to a man he’d interviewed recently, “was a totally soft Wasp, everything I don’t like. We need to ask people, What’s the size of your heart? If he’s going to be down in the hole with me, I need to know if the guy’s got heart.” He moves the resume to the out pile.

They didn’t just work together at Sandler; they lived their lives together. That’s why the living are having such a hard time letting go of the dead.

The phone rings. It’s a friend from Morgan Stanley calling to tell him about some upcoming layoffs. The massive layoffs taking place all over Wall Street have been a boon to Sandler O’Neill. Good people—people who would have been out of the firm’s reach just months ago—are now knocking on its door. “If there’s someone good getting cut, let me know,” Dunne tells his friend. “But only if they’re good. I can’t waste time on duds.”

Dunne calls Mark Fitzgibbon, the co-head of research, into his office. Fitzgibbon was in the World Trade Center when the planes hit, but he got out before the buildings collapsed. Since Sept. 11, Fitzgibbon has temporarily abandoned his research duties to take over the syndicate desk. Research is an important service that an investment bank like Sandler provides, but it doesn’t bring cash in the door. The syndicate desk does: It’s where the firm manages all the deals it’s involved in. As Sandler struggles to get back on its feet, nothing is more important than getting deals done. For eight years the same two people had run the syndicate desk for Sandler. Now they’re both dead.

Dunne gives Fitzgibbon the name of a contact at J.P. Morgan Chase (JPM). “He’s putting us in his deal, so find out what we need to do,” says Dunne. Since Sept. 11 this has happened a lot: Competitors have thrown commissions Sandler’s way, and big firms like Merrill Lynch and Goldman Sachs have included Sandler in their deals without Sandler having to do anything in return. The J.P. Morgan deal means a $23,000 fee—small potatoes by Wall Street standards, maybe, but Dunne’s not too proud to take it. “I want that check!” Dunne calls after Fitzgibbon.

Just then, the phone rings. Dunne picks it up and listens intently for a few minutes. “Don’t worry about this,” he says fiercely. “I am personally going to talk to them about this; they are going to have to deal with Jimmy Dunne now.”

The call ends, and Dunne falls silent. Then he explains: The caller was the wife of one of his dead partners. She was asking him to help her handle some of her late husband’s relatives, who have begun arguing over how parts of his estate should be managed. For Dunne, this is as much a part of rebuilding Sandler O’Neill as getting the equity desk up and running again. “Fifteen years from now,” he says, “my son will meet the son or daughter of one of our people who died that day, and I will be judged on what that kid tells my son about what Sandler O’Neill did for his family.” He looks up at me, and there’s that grief again. The sad near-past accompanies him every step as he tries to go about the business of moving ahead.

Ground zero

On the morning of Sept. 11, Karen Fishman arrived late to work. It was 8:45. She’d been at the office well past 11 the night before, running some numbers for a very important deal the firm was putting together. It was going to be the largest transaction in Sandler O’Neill’s history, a $700 million bond offering involving 54 clients and three types of securities. By the time Fishman got to her desk, the place was already buzzing. Sandler’s bond salesmen were schmoozing up their clients. James Colbert, a junior research assistant, was standing at the copy machine making copies for his boss, Chris Orgielewicz. Herman Sandler was in Chris Quackenbush’s office, commiserating, likely as not, about the Yankees rainout the night before. Quackenbush had tickets to the game, and if it had been played, he probably would not have come in to work so early.

It was, as we all now know, a brilliant morning. The window in Quackenbush’s office offered a spectacular New York panorama, from lower Manhattan all the way to Harlem. It also had a clear view of World Trade Tower One, next door.

A minute later, Fishman heard an explosion. It was the first tower. She didn’t feel panic or fear, but her body began to shake. She stepped out into the hallway to see what was going on. Quackenbush and Sandler came rushing into the hall and headed toward the trading floor. As they passed her, Fishman heard one of them say, “A plane hit the other building.”

In the hallway, Fishman ran into two Sandler executives. They were putting on their jackets. “We’re getting the hell out of here,” one of them said, heading for the stairwell. Fishman followed. “I don’t know why I left,” she says now. “I don’t know that it was a conscious decision. It was instinct.” She adds, “So much depended on who you saw right at that moment.”

Colbert, at the copier, didn’t hear the explosion, just a commotion on the trading floor. When he stepped out into the hallway, he saw John Kline, a senior analyst. “Let’s get out of here,” said Kline, who had seen a huge fireball burning on the roof of one of the smaller buildings below. As Colbert and Kline headed for the stairs, they took three other people with them. There were 83 Sandler people in the office that morning. Only 17 left in time.

Between 8:46 and 9:02, no one panicked. The people who stayed behind spent those moments calling their families, friends, and clients to let them know they were all right. A trader who had been on the squawk box started describing what was happening for the out-of-town employees listening in on the morning call. Quackenbush talked to his best friend’s wife. “We’re okay,” he told Susan Dunne. Herman Sandler searched for the telephone number of the building’s fire marshal. He also called his wife, Suki. “It was terrorists,” he told her.

Why didn’t everyone at Sandler O’Neill run when they had the chance? Because they had been through something like this before—and that time, running had been the wrong thing to do. In February 1993 a bomb went off in the basement of the World Trade Center, just four days after Sandler O’Neill had moved into its new headquarters on the 104th floor. After the bomb exploded, those who tried to go down the stairs were engulfed in smoke. Those who escaped to the roof sat freezing for hours, waiting to be rescued. But those who stayed put were barely inconvenienced. “I think the safest place to be is right here,” Sandler told one of the firm’s investment bankers after the first plane hit. Still, a partner named Jace Day recalls hearing Sandler telling people, “Whoever wants to leave can leave.” Day, who stepped onto a down elevator at 8:53, was the last survivor to see Sandler alive.

Karen Fishman was on the 64th floor when the fire marshal announced that it was safe to go back upstairs. She considered turning around, but the stairs were too crowded, so she kept walking down. She was on the 62nd floor when the second plane hit. The building swayed; the stairwell doors buckled. When Fishman finally got outside, the scene was terrible. Large chunks of metal were in flames. Shattered glass, burned paper, and body parts were strewn across the concourse. The smell of death was everywhere.

We’ll never know exactly what happened up on the 104th floor after the second plane hit. There are only fragments now, moments embedded in the memories of those who heard them. An assistant was on the phone with her husband when the plane hit. “Oh, my God,” were her last words. A trader called his wife: “There is smoke everywhere. People are dying all around me.”

Out on the concourse, Fishman started running north. Mark Fitzgibbon, who was with her, said, “Look. The top of our building is gone.” But she didn’t look back.

“Why didn’t I tell everyone else to get out?” laments one Sandler survivor.

Jimmy Dunne was on the sixth hole of the Bedford Golf and Tennis Club in Westchester, N.Y., when the planes hit. He was trying to qualify for the U.S. Mid-Amateur Championship golf tournament. What was Dunne doing on the golf course on a workday? In his 20-plus years on Wall Street, he had achieved everything he’d ever hoped for. Now he was on “the back nine,” as he liked to put it.

Dunne raced back to the pro shop in time to see the WTC buildings collapse. He called his wife, Susan, but she was too upset to speak to him; a family friend who was keeping her company got on the phone. “Who was in there?” Dunne asked. “Chris? Herman? Tommy? Ken?” He reeled off the names of his partners and closest friends. All of them had been inside. He spent the next few hours on the phone, and then got on a train and began making his way back to New York City.

Dunne got into Grand Central Station a little after 5 P.M. Still in his golf clothes, he began running the six blocks to 48th Street, where Sandler had a small office—and where employees had been gathering all day. When Dunne got to 46th Street, though, he starting walking. “I thought, I can’t run in there all crazed. I needed to arrive with a sense of calmness. I knew people were going to look to me,” he recalls.

Later, Sandler O’Neill employees would remember Dunne declaring from the start that the firm would rebuild. His conviction gave them strength. “He made us feel like, ‘I’ll show you the path through the trees,'” says one young investment banker. But Dunne can’t remember anything he said that day. Here’s what he remembers. He got home around 4 A.M. He kissed his wife. He called his sister. He looked in on his three children. He took a shower and shaved. Then he put on a suit and headed back to 48th Street. Jimmy Dunne had always hated wearing suits; he’d argued for years in favor of casual dress, something Herman Sandler abhorred. But everything was different now.

Herman’s motto

A week after the attack, rescue workers at ground zero found Herman Sandler’s battered body—one of several hundred (out of 3,000 deaths) to be recovered from the rubble. On hearing the news, Sandler O’Neill employees were not surprised at all. “That’s so Herman,” said Suzanne Ircha. “He was always larger than life.”

To hear people talk about him now, that would certainly seem to be the case. At 6-foot-2, perennially tanned and spectacularly bald, Sandler was a grand and imposing figure with a big, magnetic personality. He was the kind of guy everyone wanted to be around: strong and confident and funny and charming. “Herman was Daddy Warbucks,” says John Kanas, CEO of North Fork Bank on Long Island, who, in addition to being a client, was one of Sandler’s closest friends. “My dad never brought a briefcase home,” recalls his youngest daughter, Jordana. “My dad believed in having fun.” He owned houses in the Hamptons and in Florida, and was famous for his over-the-top parties. He had three yachts. The one that was docked at the marina by the World Trade Center was named No Problem. That was his motto. If you can write a check for it, it’s not a problem, he liked to say.

Dunne first got to know Sandler after landing a job as a bond salesman with Bear Stearns. Dunne had been fired from his previous job at Paine Webber and was in bad straits. Sandler, a decade older and a much higher-ranking member of the bond sales team, became his protector and mentor. As was invariably the case when Sandler took a shine to someone, he also became his friend. He helped Dunne regain his confidence, and he showed the younger man that you could do business on Wall Street without being cutthroat. For Dunne, this was a revelation. He remembers, early in his Bear Stearns career, taking Sandler along on a visit to a client in Florida to whom he hoped to sell some bonds. Dunne watched in awe as Sandler spent the afternoon talking to the client—the portfolio manager of a small community bank—not just about the bonds but about the bank’s business, its opportunities, and its problems. And then he listened—really listened—to what the man had to say. By the end of the conversation, the bank’s entire top management was in the room, hanging on his every word. As the two men left the meeting, Sandler turned to Dunne and said, “I’m here for you.” No one on Wall Street had ever said anything like that to Jimmy Dunne. “I knew I’d found the guy,” he says now. “I knew I had to stick with him.”

In 1988, after nine years at Bear Stearns, Sandler quit in a dispute over money. There was never any doubt that Dunne would be among the Sandler loyalists who walked out with him. There were six of them who founded Sandler O’Neill—3-2-1, they called themselves, meaning that they were three Jews, two Irishmen, and a Wasp. (Quackenbush signed on a few months later.) At Bear Stearns, Sandler’s clients had been financial institutions; now he and the others set out to establish an investment bank that would cater to small and medium-sized banks, which they saw as an underserved market.

Soon enough, they had a business. But they built it in a way not often seen on Wall Street anymore. They gave clients the advice they felt they needed rather than the advice they thought would put the most money in their own pockets. They stayed with clients when things went bad, not just when things were going well. And to the clients themselves, nobody represented this ethos better than Sandler himself. “When no other investment bank would talk to us,” says North Fork’s Kanas, “Herman stood by us.”

Even more than his loyalty, Sandler’s clients valued his business sense. “You always listened to Herman because he was always right,” says Tom O’Brien, president and CEO of Atlantic Bank in Manhattan. In his universe of small banks and thrifts, Sandler’s clients say, he was nothing short of a visionary. “Whenever I spent a weekend with him, I always came back with a $5 million idea,” says Kanas. Tommy Wu, the head of United Commercial Bank Holdings in San Francisco, recalls Sandler’s advice when the firm was taking his company public: “He told me, ‘Don’t limit yourself.’ I’ll remember that as long as I live.”

Among his troops, Herman Sandler was beloved—a father figure to just about everyone who worked at the firm. He was the one you’d go to for advice—not just about business but about life. He’d help you through the rough patches, and then applaud when you were back on your feet. On holidays and summer weekends, if you didn’t have a place to go, Sandler would invite you to his home. “When you were around Herman, everything was taken care of, everything was going to be all right,” says Ircha.

By the time of the WTC attacks, Sandler O’Neill was both thriving and highly profitable. It had 31 partners and 171 employees in all—148 in the World Trade Center, plus 23 in offices in Memphis, Chicago, and Boston. By the end of 2000, it was generating well over $100 million a year in revenues. Some $60 billion worth of bonds flowed through its fixed-income desk. It was ranked sixth among financial advisors in bank and thrift deals—behind the likes of Merrill and Goldman, but ahead of such first-rank firms as J.P. Morgan and Morgan Stanley (MS). It had a roster of over 1,000 clients. In its small pond, it had become a very big fish. Though it was still an aggressive firm—this is Wall Street—there was a sense that the mountain had been climbed. Now Sandler and its clients could enjoy what they had achieved.

That’s what Tom O’Brien of Atlantic Bank felt this past Labor Day, which he spent at the beach with Chris Quackenbush. It was a beautiful day, and the kids were playing, and there was a warm feeling of contentment in their little group. “Who would have ever thought we would be this fortunate,” said Quackenbush. Sept. 11 was eight days away.

Living with the dead

Early in the morning of Sept. 17—the Monday the stock market reopened—CNBC reported that Sandler O’Neill was going out of business. A furious Jimmy Dunne demanded a chance to rebut the story on the air. In an emotionally charged interview two days later, Dunne insisted that the firm would rebuild. And then he took a page from the Herman Sandler handbook: He thanked his competitors.

For all of Dunne’s on-air bravado, the situation at Sandler O’Neill was dire, and its survival far from a sure thing. Think about it: The company had just lost 40% of its employees—including a third of its partners, all its bond traders, its entire syndicate desk, and almost all its equity desk. Lost along with the people was all their knowledge—their contacts, their ways of doing business, their institutional memory. The intricate communications network that connected the firm to the rest of Wall Street and fundamentally made it possible to do business—that was gone too.

In the chaos of the first few weeks, Sandler O’Neill simply would not have made it without the help of its competitors. Firms that used to compete with Sandler for deals now put the crippled firm in their deals to get it some money. Just as important, they gave it information—”market color,” as traders like to call it. What was the spread on the A-rated trust preferred bonds? What was the last bid? How big were the blocks? That kind of crucial information is what Sandler’s traders used to see on their computer screens; now, with the traders dead and the computers destroyed, the firm needed its rivals to convey the market color over the phone. Its competitors went one step further. “They made sure we weren’t being taken advantage of,” says Joel Comer, the bond salesman turned trader.

With the syndicate team dead, no one at Sandler knew how to put together the many pieces of a deal. Again, competitors rushed to help. “The other syndicate desks had to tell us what to do,” says Mark Fitzgibbon, the co-head of research who was suddenly running the syndicate desk. “They taught us how to syndicate. They’d say, “Did you send the regM?”—a standard document. “And we’d say, ‘What’s that?'”

Of course, the firm’s resuscitation depended, ultimately, on the will of its surviving employees. People up and down the ranks of the firm willingly performed—there’s no other phrase to describe it—daily heroics. James Colbert’s boss had created a proprietary financial model to analyze bank credits, and now he was dead. But his model was critical for the $700 million deal the firm still hoped to pull off. Colbert—a low-paid 23-year-old assistant with less than a year at the firm—suddenly had to take over his boss’ job. He was the only person left at Sandler who understood the model.

“You know that sign they have posted over the trading desk, ‘Our Little Big Firm’? ” Colbert says. “It was never like that before, at least not for me. It was like that for Jimmy and Herman and those guys. Now I know what that sign really means.”

Every phone number of every person Sandler’s traders had done business with over the years was vaporized in the Sept. 11 attack. In the aftermath, the firm desperately needed to find these people and reconnect with them. Again help came from an unlikely source: a back-office assistant who, after years of answering the trading floor phones, could recall the names and numbers by heart.

Sandler’s investment bankers were determined not to abandon a single deal—both as a matter of pride and to send a signal to the Street that the firm was open for business. So it was that on Sept. 12—yes, Sept. 12—they filed to underwrite a long-planned secondary offering.

Sandler employees did all this while coping with grief the likes of which most of us will never know. Many of those who got out of the World Trade Center remained haunted, wondering who else they could have saved. “I feel guilty because I left. If I knew it was dangerous, why didn’t I tell everyone else to get out?” says one survivor. “That’s hard to accept. I should have told them to leave.”

Others found themselves having trouble functioning at work. Sometimes, says one salesman, he just sits at his desk staring into space. “Fifteen minutes can go by and I have no idea where the time has gone.” Another says he’s having trouble calling new customers; he doesn’t want to talk to people he doesn’t already know.

Every day, the living had to go to work with the ghosts of Sandler O’Neill. The hovering presence of the dead could be felt in business meetings, on the trading floor—everywhere. The walls of Sandler’s offices were covered with their names. They would appear whenever someone phoned and asked for Bruce Simmons or Mark Rosen or Michael Edwards, and someone at Sandler had to reply, “He’s dead.” When Sandler’s salespeople sold stocks and bonds, they were selling not just for themselves but for their dead colleagues. (Early on Dunne decided that for the rest of the year, any commissions generated by a client of a deceased Sandler employee would go to that employee’s estate.) And the living constantly asked themselves what the dead would have done in this or that situation. “Every morning I used to go into Herman’s office to talk about problems I was trying to sort out,” says Jon Doyle. “Now every day I still have those conversations—in my head.”

There are Sandler employees who aren’t going to make it. Some survivors will have to be let go.

As it rebuilt the business, Sandler had one other burden: how best to take care of the families of the deceased. From the very start, Dunne knew he wanted the firm to be generous; after all, family takes care of family, and that’s how Sandler always thought of itself. Like the other hard-hit firms, it created a charity fund, hired grief counselors for the families, and set up a family center to help with the grim logistics of recovering, burying, and mourning the dead. But Dunne wanted to do more. So unlike Cantor Fitzgerald—which famously cut the deceased off the payroll four days after the attack—Sandler quickly sent every family a check covering the salary of the deceased employee through the end of the year. Within two weeks the firm decided to extend health-care benefits for five years. And it guaranteed the families that it would pay year-end bonuses—though Dunne, Doyle, and Price had not yet figured out how much.

Though Price was the firm’s point man for family issues, everyone at Sandler O’Neill had long, difficult discussions with the relatives of their deceased friends. Many wives wanted to hear stories about their husbands at work. Others urged Sandler to continue rebuilding. But there was anger too. How could there not be? One woman told Price she hated everyone who still had a husband. In the middle of a workday, Joel Comer got a call from one of his partners telling him that a Sandler widow was furious with him. She was saying terrible things: how he didn’t care about her husband, how he didn’t care about her, and how it was unfair that he was alive and her husband wasn’t. Comer listened and tried to stay calm. But when the call ended, he looked desperately sad. “Can’t she understand that I’m in pain too?” he asked.

A little help from Ross Perot

The night before Ken McBrayer’s funeral, Jimmy Dunne called Jon Doyle and another Sandler partner, C.K. Smith, up to his hotel room in Annapolis. It was Sunday, Oct. 28. The next morning Dunne would be burying his 62nd employee and ninth—and last—partner. He would also be delivering his tenth eulogy in six weeks. For Dunne and for everyone at Sandler, these funerals and memorials had been emotionally and physically exhausting. In one weekend in late September there had been 21 services. Now, with only a few to go, the ritual had become bittersweet: Everyone was ready to stop going to funerals, but no one really wanted to let go of their fallen friends.

McBrayer was a graduate of the Naval Academy, and his widow wanted him to have a 21-gun salute at his funeral. The Academy told her that under the rules that was not possible unless she had his remains—and McBrayer’s body had never been recovered. Dunne and his colleagues spent weeks trying to persuade the Naval Academy to make an exception for McBrayer. Finally, after some lobbying from Annapolis grad Ross Perot, the Academy had agreed to accept dirt from ground zero in lieu of a body. Earlier that day, Joel Comer had been dispatched to get the dirt and bring it to Annapolis. But he hadn’t yet arrived, and Dunne was getting nervous.

“Okay,” he said to Doyle and Smith. “We’ve got a problem here.” He wasn’t referring to McBrayer’s remains, though. Rather, he was talking about McBrayer’s old job. “We don’t have anyone in charge of IT,” Dunne said. In the frantic weeks after Sept. 11, IT had been a low-priority item. Now it was becoming critical. E-mail wasn’t working. The phone system kept breaking down. Some Sandler employees were still without a phone number. Six weeks after the attack, the firm still didn’t have the ability to make trades electronically. And nobody was dealing with any of this. For not only had McBrayer died, but so had David Defeo and Chris Newton-Carter, the two people who had done the heavy lifting in the IT department.

On one level, the fact that Dunne was suddenly worried about his e-mail troubles was a sign that things were stabilizing. And it was true: Sandler O’Neill was past its immediate crisis. But a new issue loomed. With its survival no longer at stake, Sandler had to figure out what kind of future it wanted. Here was a small but telling example. In building a new IT system from scratch, Sandler would be facing a series of choices about the firm it hoped to become. How much did it plan to grow, for instance? How fast? Replacing McBrayer meant more than just replacing an old friend and colleague. It was suddenly a decision about the future.

“What we have to resolve here is, Who is going to be in charge of IT?” Dunne said to Doyle and Smith. The three men ran through a list of surviving partners, trying to figure out who could takeover. There were no obvious candidates. Everyone was either too busy, too junior, or too inexperienced. After about an hour, they still hadn’t come up with a solution. “We have to resolve this—this week,” Dunne said, adding the letters “IT” to a lengthy to-do list he’d been writing on hotel stationery.

Just then the phone rang. It was Comer. “You got it?” Dunne asked anxiously. Yes, replied Comer, he had the dirt from ground zero. “That’s great,” said Dunne. “One less thing for me to worry about.”

“That desk was my family”

A new Sandler O’Neill needed new blood, and by mid-November the firm was starting to replace its dead. Dunne had made more than two dozen new hires, including four bond traders, three investment bankers, and two researchers. He’d also brought in someone to run the syndicate desk, which meant that Mark Fitzgibbon could go back to writing research reports. His first one was issued Nov. 16.

But the new hires brought a whole new set of issues. How, for instance, would they fit in at a place where so many people had suffered so much pain? “At first it felt weird,” says Alan Roth, a young, newly hired bond trader who had been close to John Wright, the man he’s replaced. “Now it feels sort of bittersweet.” Adds Adam Mandel, who was hired a few weeks after the attacks: “You are always aware of what they’ve gone through.” Bobby Kleinert, the 45-year-old Wall Street veteran now running the syndicate desk, wanted to go after a deal quickly but needed to bypass some internal red tape. Sandler’s lawyer, Patti Murphy, told him he couldn’t do it. “That’s policy,” she said. “Who set the policy?” he asked. “Herman Sandler and Chris Quackenbush,” Murphy replied. He dropped the issue. “It’s hard for me to argue when she invokes dead people,” he said later.

At the equity desk, Suzanne Ircha was now working with three colleagues, all new. Unlike the bond and syndicate desks, the equity operation never made the move to the Banc of America space; it remained behind in the small office on 48th Street. Still, like the people who worked on those other desks, the four equity hands worked in impossibly close quarters—four people, along with three desks, four computers, four telephones, and four chairs, all crammed into a tiny room. But it was strange; despite their physical closeness, they were oddly quiet. There was none of the banter you normally hear on a trading floor. Ircha’s new colleagues kept a respectful distance.

“I can’t think about what happened,” Ircha said one day in mid-November. She’d had a client breakfast on Sept. 11, and it had saved her life; in a taxi on the FDR Drive, she’d seen the buildings on fire. “I have to just think, ‘I’m at a new job, and that’s why they’re not here and these new people are.’ ” A striking woman in her mid-30s, Ircha fidgeted with a strand of her long blond hair as she spoke. She sounded upbeat, even cheery.

“I’m looking forward to moving into the new office,” she offered brightly. This was another sign of the emerging Sandler: A few weeks before, Fred Price had signed the lease for new quarters on Third Avenue. From Sandler’s new perspective, it was just what the firm had been looking for: a sixth-floor office facing a brick wall in an anonymous building. Price had passed on another location, in part because it was too close to Grand Central Station, a possible terrorist target. The move was set to take place in January.

I told her I’d seen the new space. “What does it look like?” she asked eagerly. It was pretty basic, I told her: The bond and equity desks were going to be set up in a long open space on one side of the floor; the investment-banking offices would be on the other side. “That’ll be great!” she said.

What had the old trading floor been like? I asked. She had been one of the few women on the trading floor, she replied. All the men used to treat her like a little sister. They would mess up her pencils because they knew she liked to have them arranged just so. They would tease her about her boyfriends. They knew everything about her.

“I used to laugh so much at work,” she said. “That desk was my family. Tom Crotty will be the hardest for me to get over. He sat next to me.” She looked to the empty space next to her. “I miss them,” she whispered. Then she covered her face in her hands and quietly began to sob.

The $700 million afterthought

Here’s an astonishing fact: Two months after the attack, Sandler O’Neill was profitable again. The tough economy may have hurt much of Wall Street, but it helped Sandler O’Neill; falling interest rates were good for the business of raising capital for small and midsized banks. What’s more, Sandler’s clients were now buying more bonds, and Sandler was making those trades. Overall, Sandler’s bond desk would wind up having a better year in 2001 than in 2000, with over $100 billion of bonds traded.

But it wasn’t just the economy. The firm really had performed an amazing feat. Just as Dunne had vowed, Sandler managed to complete every deal that had been on the books prior to Sept. 11—nine in all, with a total dollar amount of $2.1 billion. And that included the complicated $700 million deal—the biggest in the firm’s history—that Karen Fishman had been working on the night before the terrorist attack.

When I first arrived at Sandler O’Neill in early October, Dunne and the others had talked about how completing that deal would be an enormous milestone for the firm. That’s how they viewed it internally as well. “This is an absolute franchise moment,” Jon Doyle had said in one early staff meeting. “This transaction proves we are a company that will not be denied.” Over the course of the next five weeks, I watched the deal unfold. It was, unquestionably, a tough one to complete, full of complications. I saw the usual moments of high drama that accompany any such deal—issuers dropping out and needing to be replaced at the last moment, S&P not delivering a hoped-for rating, and so on.

But as October turned into November, something happened that even the Sandler O’Neill brass couldn’t have imagined. The deal that had meant so much in the immediate aftermath of Sept. 11 became progressively less important to the psyche of the firm. In the end, Sandler raised $66 million more than planned, and the deal was a huge success. But the week it was priced, just before Thanksgiving, Sandler was working on six other deals. On the morning of the pricing—the climactic moment for any underwriter—I could barely get anybody to talk about it. I asked Dunne why there was no celebration. “Do you know the difference between a good trader and a great trader?” he replied. “A good trader does a trade and feels happy. A great trader feels nothing. He’s already moved on.” That was Sandler in late November—ready to move on.

It was moving on in other ways as well. For one, it was cutting the cord with its families. It was hard, but the grief counselors had made it clear that this was important to the healing process. Fred Price hired someone else to handle family issues so that he could return to focusing on business. The long, anguished phone calls between family members and Sandler employees became less frequent. The grief counselors had said that the family members needed private, professional counseling. And the bonus issue had been settled—dead employees would receive compensation packages as good as or better than the one they had earned in their best year.

Sandler employees, though, were only just starting to deal with their own grief. In many ways, the incredible amount of work they’d done in the weeks after Sept. 11 had served as a balm, a way of forgetting the enormity of their loss. “This is the only place I’m happy,” one bond salesman had told me early on. Marc Maltz, a grief counselor hired by Sandler, says that the real impact probably won’t be felt for another few months. “The real craziness…that’s four to six months down the road: paranoia, drinking, drugs, relationship problems,” he says. And that’s under normal circumstances, which these aren’t.

Some Sandler employees simply weren’t going to make it: That was now clear. There were people for whom the emotional trauma was beginning to dominate their lives—and prevent them from doing their jobs. Some people were coming in late every day; others would hear a piece of bad news on CNBC and have to go home. Still others showed up every day but had lost their drive. They weren’t the same people they’d been before Sept. 11.

At some point, some employees who survived the attack would have to be let go. But it wasn’t going to be easy. “Any other time,” says Price, “if we had an underperformer at year-end we would would call them in and figure out a separation agreement. We don’t know how to do that now.”

And always there were ghosts. They hadn’t disappeared. Jon Doyle is patrolling the bond desk, as he always does, and kicking himself that he hadn’t sold enough bonds that day to the client of one of his dead partners. “Conman would be very mad at you today,” teases a colleague—a reference to Jimmy Connor, who had been a great bond salesman. Catherine Lawton, the firm’s general counsel, announces that a particular deal has been closed. “I’m pretty confident Quack was up there laughing at us, and I’m highly confident he was pleased that we got it done,” she says, close to tears. Three Sandler employees are in a meeting to discuss how to pitch a client on restructuring some bad loans. It’s a tricky bit of business. The client has not yet acknowledged publicly that it is carrying bad loans and has buried them in the balance sheet. The wrong approach could alienate the client. “What do you think we should do here?” one of the men asks. They fall silent. “Chris would know what to do,” one of them says finally.

Letting go

“I’ve changed,” Jimmy Dunne is saying. It’s shortly before Thanksgiving, and he’s in the library of his Manhattan apartment. The room is dark and cozy, with wood-paneled walls covered by pictures and mementos. Above the door, a sign reads, HELP WANTED: NO IRISH NEED APPLY. On a wall hangs a photograph of Dunne as a boy, fishing with his dad. He has a plate of chicken in front of him. After Sept. 11, Dunne could barely eat; he lost 15 pounds in a month. Lately, though, he’s gotten his appetite back. He’s eagerly devouring the chicken.

“I’ve never gone through grief like what I’ve gone through with Sept. 11,” he says. “I gave ten eulogies—written right here.” He taps the chair he’s sitting in. “And there were some nights at four o’clock in the morning when I sat here and I thought someone had reached down my throat and ripped out my heart.” He’s hoarse with emotion, but his voice doesn’t falter. “As difficult as those eulogies have been, a sort of peace came over me before I spoke them, and I think I’ve hung on to that.”

For Dunne, a new reality has sunk in: The living must let go of the dead. There are widows who still believe that Sandler O’Neill is not doing enough for them. “You killed my husband,” one of them told him. While that pains Dunne, he believes he has done the most he can do without jeopardizing the firm. Ultimately, Sandler O’Neill will pay out to the families more than 30% of the capital it had at the beginning of 2001.

An amazing fact: Just two months after the attack, Sandler O’Neill was profitable.

Dunne is still haunted by the fact that so few Sandler employees who were in the World Trade Center that morning got out; he wonders whether more might have survived if the firm had had some kind of plan. But he talked to someone at Morgan Stanley—which lost six of the 3,700 employees it had in the Twin Towers—and that person told him that Morgan didn’t have a plan either. “They just all ran,” the man told Dunne. “That made me feel better,” says Dunne.

Most significantly, he has begun to come to terms with losing his mentor, Herman Sandler. Partly that is because Dunne has come to believe that the task he assumed on Sept. 11—the task of making Herman Sandler’s firm great again—is his destiny. “I think I trained my whole career to do this,” he says. “I honestly believe that everything that’s happened to me was leading to this.”

As much as he talks about becoming more like Herman Sandler, he’s still Jimmy Dunne—just a more patient, more forgiving version of himself. Though Dunne doesn’t blow up anymore, he still lets you know it when you’ve screwed up. His office is still a place where you might hear bad news, but it’s also become a place where you might now come just to talk—the way you used to with Herman Sandler.

“It used to be Herman would have all these big ideas, and I would be figuring out how to get them done,” he says. “Now I’ve had to think bigger. I realize now what a luxury it was for me to have Herman Sandler.” He adds, “I’m very much at peace with Herman.”

For Dunne, the hardest death to come to terms with is that of his best friend, Chris Quackenbush. On a purely business level, Quackenbush left a huge void in the firm. Its investment-banking group lost its leader and rainmaker, and Sandler lost a key strategist and guiding force. Dunne knows he has to find someone to replace Quackenbush. But it’s painful. Not long ago, a hotshot investment banker interviewed for a job. “What would you like to do here?” Dunne asked him. “I want to replace Chris Quackenbush,” he replied. “When he said that,” Dunne says now, “I felt like I wanted to vomit.” The man didn’t get the job.

Dunne himself will have years to think about Quackenbush, to grieve, and to come to terms with all he has lost. But businesses don’t have that much time. So even though it’s just three months after Sept. 11, Dunne’s thoughts are now clearly focused on where Sandler O’Neill is going rather than where it’s been. On this night, he talks eagerly about ideas for projects he wants to startwith other firms. He has thoughts about possible new partners. He thinks there’s a profitable new niche that Sandler might be able to exploit. As he talks, he looks up at me and smiles. Despite the ghosts, Jimmy Dunne III is back to business.