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Franklin unit rebuilds after 9/11 tragedy

San Francisco Business Times | February 1, 2002
By Ron Leuty

In a few seconds, Anne Tatlock's job turned from the daily grind of wealth management to a fight for the survival of Fiduciary Trust Co. International.

But five months after terrorists turned a jetliner into a fireball that swept through Fiduciary's World Trade Center headquarters -- leaving 87 employees among the nearly 2,900 dead -- the subsidiary of San Mateo-based Franklin Resources Inc. has quietly taken care of its own while rebuilding its business.

For Tatlock, Fiduciary's chairman and CEO, that's meant finding a new home for the firm, overseeing the recovery of computer files from a backup system, and keeping its ultra-rich clients on board while it navigates them through uncertain market conditions. It's also meant filling 87 key jobs -- among them a director of human resources, the chief corporate lawyer, a senior vice president and other vice presidents -- and providing assistance for those victims' families.

"Our goal was not to hire 87 exact people," Tatlock said, "because those people do not exist."

Quiet road to recovery
Deliberately, Fiduciary Trust's leaders have been hesitant to speak publicly about the events of Sept. 11. But the result is a new bonding under the Franklin umbrella, and industry publication Global Money Management will honor Fiduciary in London this month for the strongest post-Sept. 11 recovery effort.

"It brought people much closer together," Franklin Chairman and CEO Charles B. Johnson said about the response.

Only five months before the attacks, mutual fund firm Franklin bought Fiduciary -- a 70-year-old asset manager catering to high-net worth clients and institutional investors -- for $825 million.

On the morning of Sept. 11, Tatlock herself had just arrived with a small group of business leaders at Offutt Air Force Base in Omaha for a charity event hosted by Warren Buffett. She then heard the news of the first plane hitting the World Trade Center's north tower.

Fiduciary's offices, spread among the 92nd through 97th floors of the south tower, typically at that time would be filling with the firm's 650 employees. But workers had started making their way to ground level after the first plane struck the neighboring structure.

Moments later, back in Omaha, a television picture flashed on a large screen, and Tatlock witnessed the second plane plowing into the south tower.

"There on the screen, I saw the second plane crash into my office," Tatlock recalled.

Among those killed were Alayne Gentul, Fiduciary's director of human resources; Bennett Fisher, a Fiduciary senior vice president; and John Hart, director of corporate systems for Franklin and a Danville resident who was helping to integrate the Franklin and Fiduciary computer networks.

Many, like Fisher and Hart, were last spotted trying to help others grope their way to safety.

Planning and improving
Fiduciary had learned from the 1993 terrorist bombing at the World Trade Center -- its home since 1973 -- to keep its disaster recovery plan current, Tatlock said. It backed up systems nightly with the disaster recovery unit of Comdisco Inc.

Still, with the firm's headquarters lying in rubble, with Tatlock in Omaha and Johnson in Eastern Europe (and unable to return due to flight restrictions until Sept. 15), employees had to improvise.

In San Mateo, for example, the conference room at Franklin's headquarters was transformed into a command center, where family members and co-workers called in for information. A team of Franklin employees there tried to track the whereabouts of scores of Fiduciary employees.

"People didn't know where anybody else was," Johnson said. "It really took two weeks for a final list."

Franklin and Fiduciary hosted several employee gatherings and established a family support center.

Fiduciary also established a memorial fund for victims' families and issued a $2 million challenge grant to employees, matching their contributions on a two-for-one basis.

On the financial side, too, Franklin extended salary payments until it can create personalized compensation packages for each family. Its packages also include $500,000 to each family, $25,000 to dependents under age 21, $50,000 to each family from a company-paid group life insurance policy and severance payments of two weeks salary for each year of service (with a minimum of eight years).

Plus, Franklin will continue to pay full health insurance benefits for families until at least April 30.

Through the first two weeks after the attacks, Franklin had paid out $16.46 million in benefits payments to victims' families, according to its annual report to the U.S. Securities and Exchange Commission.

While Franklin could write off $19.8 million in lease, property and equipment leases -- and recover an estimated $27.2 million from insurance -- only $35,000 of the benefits payouts are covered by the corporation's insurance.

(Franklin, which last month said its first-quarter earnings fell 21 percent from a year ago, in November cut pay and reduced its bonus pool.)

In the meantime, Fiduciary saw little runoff in customer assets, even with employees working from Comdisco's cramped recovery facility in New Jersey to assemble client records that had been updated the night of Sept. 10.

Fiduciary also leased a new headquarters in late September in midtown Manhattan on Fifth Avenue, albeit at a higher cost than its World Trade Center lease.

With most of Fiduciary's physical assets destroyed, the firm's back-office integration with Franklin -- an ever-risky blending of culture and technology -- also was bumped up. Fiduciary now has 24-hour trading capability, for example, and its data center moved to Rancho Cordova.

"We are now a year or more ahead on integration plans," Tatlock said.

Plus, Franklin and Fiduciary launched FTI Institutional, its global sales effort aimed at institutional investors.

Given the overarching tragedy, however, Franklin and Fiduciary officials, as well as Wall Street analysts, resist calling the changes a silver lining.

"We want to show in September 2002 just how far we've come," Tatlock said. "We want to have a powerful proof statement in September 2002."