Two Pals, Giddy Ambition and a Big Crash at Prudential

Wick Simmons, the former chief executive of Prudential Securities, would have been proud. The grand ballroom at the Plaza Hotel was chock-full of money managers nibbling away at their plates of filet mignon, their attention focused on Prudential Securities star strategist Ralph Acampora, who was delivering the keynote address.

The date was Nov. 1, a mere three weeks after Mr. Simmons had, without warning, announced his retirement. He was gone, and his plan to spin off Prudential Securities from its parent company, Prudential Insurance, was apparently gone with him.

But Mr. Simmons’ vision for a free-standing securities firm-perhaps in partnership with Lehman Brothers-was almost tangible in that Plaza ballroom. It was the last day of a two-day high-tech conference run by the firm’s newly formed technology division, the Prudential Volpe Technology Group. And in a starring role was Mr. Simmons’ protégé, Mr. Acampora.

As Mr. Simmons, 60, had made Mr. Acampora, Mr. Acampora, 59, had helped to make Prudential Securities. His bold call in 1995 that the Dow would hit 7,000 brought Mr. Acampora a large dose of Wall Street fame, burnishing as well the high hopes Mr. Simmons had for his firm.

And now there Mr. Acampora was, doing his schtick, plugging along in his mentor’s image, pushing his new book and an idea that Mr. Simmons had loved. Part Henny Youngman-“Hello. Is anyone out there? What am I looking at, an oil painting?” he cracks when one of his many jokes falls a little flat-and part a sophisticated reading of the market’s tea leaves, Mr. Acampora was there to boost confidence. The message? The tech boom and the peace dividend were just now kicking in; stocks will be going higher.

This was it. The very pith of Mr. Simmons’ vision.

But no Mr. Simmons.

Mr. Simmons, finally, had run out of luck. No one on the Street was all that surprised when Arthur Ryan, chief executive officer of the parent Prudential Insurance company, accepted Mr. Simmons’ resignation on Oct. 6. Did Mr. Simmons really think that tiny little Pru could make a run at the big boys by riding the Ralph Acampora boomlet and snapping up the odd West Coast tech boutique? No way.

As far as Mr. Ryan saw it, Prudential Securities was all about retail distribution for its insurance products. Case closed. And with Prudential Insurance’s giant I.P.O. in the offing, there could be little patience for the grand banking ambitions of Hardwick Simmons.

Mr. Simmons is now retired and could not be reached for comment. But allow him a little credit for giving it the old college try. For the genial Boston Brahmin-he is eighth-generation Harvard on the Simmons side, while on his mother’s side, the Stone family is about as old-line as Boston families get-his 32-year run on Wall Street had been a blessed one.

It goes something like this: He started out at the semi-white-shoe outfit Hayden Stone & Co. (founded by his great-grandfather in 1892) in late 1967 and subsequently moved on to Cogan, Berlind, Weill & Levitt in 1970 when the family firm imploded and was bought out. There he hitched his star to Sandy Weill, and by the mid-1980’s he found himself at Shearson-following its merger with Cogan Berlind-running the retail brokerage unit.

In the late 1980’s, Shearson Lehman Brothers grew too big, too fast-a strategy supported by Mr. Simmons-and had to be bailed out by parent American Express. (Shearson Lehman Brothers has since broken up into various entities.) Reading the handwriting on the wall, Mr. Simmons resigned. He landed lightly on his feet, though, this time as chief executive of Prudential Securities in 1991.

Finally, it seemed, Mr. Simmons was ready to step out on his own, free from the shadows of great granddad Hayden Stone and Sandy Weill. Prudential was no picnic, though, when Mr. Simmons took over. There followed a litany of public relations disasters, and between 1994 and 1996 Prudential was forced to pay out a sum close to $2 billion in legal fees and settlements for disputed partnership claims. Not surprisingly, the firm’s competitive position on Wall Street eroded. Through it all, Mr. Simmons sailed placidly along and, in the late 1990’s, began to push for the separation of Prudential Securities from its corporate parent, Prudential Insurance.

Quite simply, Mr. Simmons felt Prudential Securities was ready for prime time. It was time for Prudential to move into the bulge bracket-to go head-to-head with the likes of Goldman Sachs and Morgan Stanley Dean Witter. He had his 6,500-strong retail sales force. And, as it turned out, he had Mr. Acampora.

Mr. Acampora is a rough-hewn man with a broad, friendly face who lacks the pretensions and gloss of many Wall Street talking heads. His suits are off the rack and his ties tend to have pictures of buildings on them. A product of the South Bronx (his father was a truck driver), he is an Iona College graduate who spent two years in the seminary studying for the priesthood before giving in to the stock-market bug. He started at the bottom in the early 1960’s, studying technical analysis for a number of now-defunct brokerage houses.

And then came “the call.” In June 1995, Mr. Acampora-at the time the firm’s technical strategist and largely an unknown name on the Street-stepped forward, with the Dow then around 4,500, and penned a now-famous research report forecasting a 7,000 level for the Dow by 1998.

“I lost a lot of sleep over that,” Mr. Acampora remembered, sitting in his office surrounded by the blink and bleep of screens and monitors. “I was getting a lot of criticism, too. ‘What are you smoking?’ people were asking. You have to remember that Wall Street was convinced at the time that we were headed into a bear market.”

When the Dow burst through 7,000 in February 1997, Mr. Acampora was suddenly famous. Knowing it had a hot commodity on its hands, the firm started flogging him. “The 7,000 call was just the beginning,” says Rich Franchella, national sales manager for Prudential. “Ralph became a media hero, and we knew we had something. So our marketing department said, ‘Let’s put Ralph out there in a more public way. Let’s put him front and center for our clients.'”

Indeed, Mr. Acampora became ubiquitous: a regular on CNBC and Louis Rukeyser’s Wall Street Week . Mr. Simmons was beside himself. “Ralph, that was the best call I’ve ever heard,” he said to Mr. Acampora. He also wanted to know, “What can I do for you?”

“I was in Detroit at the time,” recalled Mr. Acampora. “Wick said, ‘I’d like to get you a gift. Anything.’ So, jokingly, I said: ‘How about a red 1962 Corvette?'” A month later there it was, wrapped up in a bow and parked outside the Prudential offices in 1997. “Dow 7000” read the license plate. Mr. Acampora later changed the plate to “Dow 10000,” and now it reads “Dow 22000”-his latest forecast for the index.

So Mr. Acampora became a star, and business on the retail side boomed. And what a thrill it was. “CNBC was all over me,” Mr. Acampora enthused. “They had already made Abby Cohen the Queen of Wall Street. Now I was going to be the king.”

Recently, he wrote a book: The Fourth Mega-Market, Now Through 2011: How Three Earlier Bull Markets Explain the Present and Predict the Future . Mr. Simmons had pushed him to write it; the firm was aggressively marketing it nationwide, sending the indefatigable Mr. Acampora out on multi-city tours. Clients loved him. The sales force loved him. Mr. Simmons loved him.

And of course, Prudential benefited. Up until 1996, the Pru name was suggestive of nothing more than lawsuits and fraud cases. But would Mr. Acampora’s leap from the other side of the tracks be enough to solidify Mr. Simmons’ long-standing ambition to run a truly big-league investment house worthy of the Stone name?

Mr. Simmons knew he needed to provide a competitive institutional service to institutional clients. In that vein, he branched out globally, opening an office in Shanghai, and became acquisitive by buying a niche investment bank specializing in health care in June 1999.

Last December, Mr. Simmons paid $150 million to buy Volpe, Brown, Whelan & Co., a second-tier boutique investment bank in San Francisco, to sate his institutional clients’ ravenous demand for cutting-edge tech coverage. It was a rich price, and there had been a raft of high-level defections from Volpe since the deal’s close, but a rump remained and Prudential Volpe Technology Group was born. It was Mr. Simmons’ boldest step to persuade his bosses at Prudential Insurance that the securities arm could go it alone.

And an even bolder plan was apparently in the works. Market scuttlebutt has it that Mr. Simmons had been in talks with Lehman Brothers Holdings Inc. about a possible merger earlier this year. But the corporate parent was not ready to sell (especially with Mr. Acampora’s star so brightly ascendant) in advance of its long awaited I.P.O. The insurance company saw its securities arm as a prime outlet for all its many products; why give it up now?

“Prudential Insurance was never going to fund Hardwick Simmons’ dream of creating a mini–Morgan Stanley,” said an analyst who preferred to remain on background (Prudential’s I.P.O., expected a year from now, will be a very large one, so analysts are loath to take their views public these days).

So once again, Mr. Simmons has fallen on his sword. And since his resignation, his successor, John Strangfeld, has started undoing much of his predecessor’s work. In late October, 425 jobs were eliminated when the company’s institutional bond department was shuttered, with more pruning expected in the coming weeks. The goal is to focus the business entirely on the retail end.

So good-bye, overpriced i-bankers and hello, Ralph. What does Mr. Acampora think?

“Look, it’s a business,” he says. “Wick wanted to make Prudential competitive. The other guy [Prudential Insurance chief executive Ryan] said no. Am I upset? No. Do I still admire him? Yes. I have the highest regard for Wick. He took a firm that was in bad shape and made it respectable. In the end, he gave us enough rope to either climb up to the sky or hang ourselves.” Two Pals, Giddy Ambition and a Big Crash at Prudential