Wall Street Secret Society Kappa Beta Phi Adds Dealmakers With Lehman Rite
A bald man in a tuxedo walked into Manhattan’s St. Regis Hotel, muttered to a uniformed attendant and was ushered to an elevator. A woman in a fur hat the size of a lampshade followed, then a man in a topcoat, who licked his lips as he walked under a ceiling painted with naked cherubs.
Kappa Beta Phi, the banking fraternity founded before the 1929 stock-market crash that counts Wall Street’s most senior executives and regulators among its past members, held its annual induction dinner behind closed doors at the landmark New York hotel on Jan. 13. This year’s names included Josh Harris, senior managing director at Apollo Global Management LLC, the buyout firm led by Leon Black, according to two attendees, who spoke on the condition of anonymity because the society’s activities are secret. Harris, 46, was No. 655 on Forbes Magazine’s billionaires list last year.
Joining Kappa Beta Phi alongside him was Paul Parker, the global head of mergers and acquisitions at Barclays Capital in New York, who previously led M&A in the U.S. for Lehman Brothers Holdings Inc. As always, the neophytes, as the group refers to new members, entertained the assembly, the attendees said. Parker, 47, stepped up by playing a video, filmed years earlier, of Lehman colleagues loading up a time capsule, they recounted.
American International Group Inc. Chief Executive Officer Robert Benmosche, 66, a Kappa Beta Phi member who disclosed in October that he was undergoing treatment for cancer, was there. He looked energetic, the two attendees said.
In 1930, the dinner was beefsteak. This year, the meal featured lobster salad, shrimp, pigs-in-a-blanket, lamb chops and pistachio ice cream.
Spokesmen for Apollo and Barclays declined to comment for Harris and Parker. E-mails sent to Kappa Beta Phi members before the dinner weren’t returned.
As the evening began, a reporter seated in the lobby watched people enter the hotel, where a night in the Astor Suite costs about $1,050. When a man appeared holding a photograph of the reporter in a gray T-shirt giving a thumbs-up sign -- a profile photo from his Facebook page -- the reporter promptly left.
Kappa Beta Phi hasn’t always been publicity shy. In March 1930, just after the group was founded, articles in the Wall Street Journal announced members and new inductees who had done “rugged and valorous deeds to win the approbation of the charter members.” One article mentioned a publicity committee and its leader.
Safe for Billionaires
The rituals and secrecy of more recent decades create an aura of exclusivity and sends the message that “we’re special, you don’t get in here very easily,” said Willard I. Zangwill, a professor at the University of Chicago’s Booth School of Business. The event also offers a sanctuary for wealthy members to mingle in confidentiality, he said.
“You’re interacting more freely with people on your level,” Zangwill said. “If you’re a billionaire, it might be harder to get along with somebody who’s struggling economically.”
The group gives officers titles including grand swipe, grand smudge and grand loaf, according to a 2009 dinner program posted on the Journal’s website. One loaf was Herbert F. Boynton, who later became chairman of the National Association of Securities Dealers, a predecessor of the Financial Industry Regulatory Authority.
A successor there, Mary Schapiro, now chairman of the U.S. Securities and Exchange Commission, is also a member, the Journal wrote in its description of a ceremony. She hasn’t been a member of the group for 10 years, SEC spokesman John Nester told Bloomberg News.
Weinberg’s Watch Chain
According to a 1936 article in the Journal, a swipe was Sidney J. Weinberg, then head of what is now Goldman Sachs Group Inc. According to Charles Ellis’s book, “The Partnership,” Weinberg wore a Kappa Beta Phi key on his watch chain.
The entertainment committee in 1937 included Victor G. Paradise, whose name appeared in Time magazine after his firm, Frazier Jelke & Co., paid to print the Declaration of Independence in Washington newspapers as senators debated financial rules. Thomas Gates, who later served as President Dwight Eisenhower’s secretary of defense, was the smudge in January 1942 when the Journal reported that the group had canceled formal parties. In a letter, the group blamed the “grim business of winning the war.”
When the New York Times reported in 1986 that John K. Castle had resigned from the helm of Donaldson, Lufkin & Jenrette, the paper cited executives as saying Castle had “stormed out” when his ritual ribbing began.
“I never left upset, and I don’t know who said whatever,” Castle said in a Jan. 14 interview. He hasn’t attended the dinner in a few years. “I am busy,” he said.
James “Jimmy” Cayne, then the president of Bear Stearns Cos., told the Times in 1990 that he was a member, even though he hadn’t been mentioned alongside Robert Rubin in a Kappa Beta Phi profile that appeared that week in the New York Observer. Cayne, 76, and other inductees wore dresses with pumps, and he recited a poem about bridge players making poor executives, according to the Times.
“I didn’t want to do it because I can’t stand making an ass out of myself,” Cayne told the newspaper.
“I haven’t been there for I don’t know how many years,” he said in an interview with Bloomberg last week. “It was harmless, and it was fun, and it was a good atmosphere.” He said he doesn’t remember reading a poem about bridge or wearing a dress, and said he hadn’t worn one before and hasn’t since.
According to a 1961 U.S. tax court memorandum, one member paid $30 in fees in 1954. One of the people at last week’s dinner couldn’t recall the current cost. He said, while yawning, that his accountant wrote the check.
To contact the reporter on this story: Max Abelson in New York at email@example.com.
To contact the editor responsible for this story: David Scheer at firstname.lastname@example.org.
Bloomberg moderates all comments. Comments that are abusive or off-topic will not be posted to the site. Excessively long comments may be moderated as well. Bloomberg cannot facilitate requests to remove comments or explain individual moderation decisions.