CHICAGO In late 2003, Lehman Brothers became the first broker-dealer to disclose its founding partners ownership of a slave under Chicagos new ordinance that requires firms to research and disclose any financial gains from the slave trade.
Lehman Brothers came under attack earlier this summer for failing to dig deeper into its history. This week, it revealed that its founders owned additional slaves and after being grilled by black City Council member Dorothy Tillman, who has championed the issue acknowledged that the firm most likely also profited.
Any private companies that do business with Chicago must disclose slavery profits in an economic disclosure statement they file with the city. Though Lehman officials had previously disclosed slavery ties, they never acknowledged profits. The firm came under attack in June for failing to launch a third-party review of its history after it won a role in the $1 billion revenue bond sale planned for October to launch the citys $6.6 billion expansion of OHare International Airport.
Tillman nearly stalled council approval of the deal because of Lehmans role as a co-manager, but eventually agreed to a compromise worked out by city officials and council Finance Committee chairman Edward Burke: Lehman officials would appear before the panel to answer questions regarding the firms ties to slavery.
Chicagos chief financial officer, Dana Levenson, and the director of the OHare modernization program, Rosemarie Andolino, pledged that Lehman would be pulled from the deal if it failed to fulfill its obligations under the ordinance approved in October 2002.
With the deal expected to price in October following the Federal Aviation Administrations anticipated final approval of the expansion, Lehmans general counsel appeared before the committee on Monday.
In a statement, Joseph Polizzotto announced that outside researchers who were hired to delve into the firms history had found records that showed Lehmans original partners owned more slaves than originally believed. Records revealed that the partnership owned three slaves in 1852, two in 1858, three in 1859, two in 1860, four in 1861, and five in 1865. The firm previously had reported the ownership of only one slave named Martha based on a review of company records.
Neither we nor our consultant have been able to locate any records that would enable us to determine the extent to which the original partnership profited from its ties to slavery, or to account for the partnerships profits from its transactions involving the cotton industry, Polizzotto said. The firm also apologized for its founders ties to slavery and said it intended to amend its economic disclosure statement to reflect the new information.
Tillman sought an outright acknowledgment that Lehman had clearly profited from slavery and she challenged Polizzotto with research conducted by her daughter using the Internet, books, and records in southern states, including Louisiana and Alabama. Her evidence showed the partnership served as cotton agents.
There would be no Lehman Brothers if there were not a slave trade, Tillman charged.
Polizzotto eventually moved closer to such an acknowledgment. We are not denying that in all likelihood that the company profited from slavery, Lehmans general counsel said. It is virtually inconceivable that the company didnt profit in some way, shape, or form.
Tillman said the firm remains in violation of the ordinance and she called on finance officials to pull Lehman from the deal. Andolino, who attended the hearing, said city officials would not make any decision regarding the deals team until after Lehman files an amended disclosure statement, which is expected in the next week.
Lehman Brothers was founded in 1850 in Montgomery, Ala., by German immigrants Henry, Emanuel, and Mayer Lehman. Initially, the firm ran a dry goods retail store, but grew into a wholesaler and broker of commodities, including cotton. In 1868, it moved its headquarters to New York.
Lehman joins three other firms in issuing formal apologies for its slavery ties or profits as a result of the landmark Chicago ordinance. However, the firm has not said if it would follow the lead of the others, which have posted their third-party research online and provided special scholarship or grant funds.
The grants provided by the three other firms JP Morgan Chase & Co., Wachovia Corp., and Bank of America Corp. were instrumental in dispelling criticism, several Chicago aldermen acknowledged.
Several City Council members said Lehman could have avoided the criticism had it hired outside experts to conduct a more thorough review sooner. The firm did not turn to outside researchers until June when Tillman sought to hold up the airport deals approval because of Lehmans inclusion on the team.
One source close to Lehman said it has always taken very seriously the disclosure requirement, but said there is a lack of direction regarding the review that is expected. There is not a lot of clarity, the source said.
But Tillman and city attorneys have said the ordinance is clear that a good-faith effort must be made to conduct an extensive review extending beyond internal company records, and that Lehman is not the first to have learned that lesson the hard way.
As a result of its economic disclosure statement filed in connection with a city bond deal, JP Morgan officials in early 2004 appeared before the Finance Committee to deny that the firm had ever profited from slavery.
The firm then hired historian James Lide, who found after months of research that the companys newly acquired Bank One unit had two predecessor banks that had used slaves as collateral to secure loans and had acquired slaves as a result of defaults. JP Morgan in January was the first to issue a public apology on its Web site and set up a $5 million scholarship fund for black students.
We received guidance from the citys corporation counsel in the middle of 2004 that we needed to look beyond our own records, company spokesman Tom Kelly said. After the research was done, we thought it made sense to be forthright and honest, and we couldnt change the past, but we could set up the scholarships to make things better for some in the future.
Earlier this summer, Bank of America announced that third-party research conducted by Heritage Research Center Ltd. had found two examples of its ties to slavery in which customers listed slaves as collateral for personal debt. It did not find examples that the bank profited.
The company pledged to provide $5 million for programs to preserve African-American history. Bank of Americas disclosures came after officials were forced to defend the company in February as the City Council reviewed a general obligation deal being senior managed by its subsidiary Banc of America Securities LLC.
Wachovia hired the History Factory, and announced in June that two of its predecessor companies the Georgia Railroad and Banking Co. and the Bank of Charleston had owned slaves. The bank acquired the slaves because they were used as collateral on mortgaged properties or loans that were turned over in the case of defaults. The firm announced $10 million in grants to various African-American groups and scholarship funds.
Other firms that do bond business with the city have also come under fire, including Dutch-based ABN Amro, which owns LaSalle Bank. The Dutch were active in transporting slaves to North America. A more sweeping review of the companys history as a whole is currently under way.
Several other cities including Detroit, Los Angeles, Philadelphia, and Oakland have similar slave-trade ordinances now in place.
