The Financial Toll of a Dysfunctional Family

By Bernard Simon

Oct. 1, 2006 12 AM PT

Financial Times

TORONTO — Edgar Bronfman used to say his family was rich because it did not throw its money away.

He can no longer make that claim. The Bronfmans made their fame and fortune transforming a bootlegging operation on the Canadian prairies into Seagram, one of the world’s biggest liquor companies.

But the family is now notorious for losing a big chunk of its inheritance in an ill-advised thrust into Hollywood, followed by a disastrous sale of the business to Vivendi, a French water company whose head, Jean-Marie Messier, harbored similarly delusional ambitions in the media and entertainment business.

Nicholas Faith is not the first to tell the Bronfmans’ story. Much of his book, “The Bronfmans: The Rise and Fall of the House of Seagram,” goes over well-trodden ground, drawing on previously published material. Mordecai Richler’s novel “Solomon Girsky Was Here,” whose characters are based on the Bronfmans, is repeatedly quoted, virtually as fact.

Still, Faith, a former Financial Times contributor, does a fine job in showing the enormous toll that a dysfunctional family can take on a business. The Bronfmans’ story carries a strong message for every family-controlled company.

In their defense, the Bronfmans did not always have it easy. As Faith notes, they “were Jews in an anti-Semitic social atmosphere, distillers and bootleggers in a country where the temperance movement was almost as strong as it was in the U.S. The Bronfmans were the richest of families in a basically egalitarian society.”

But these handicaps do not excuse the appalling way in which three generations of strong-willed Bronfmans treated their siblings and children, not to mention many employees.

Sam, the empire’s domineering but insecure founder, was ruthless in demeaning his three brothers.

When Allan, the youngest, arrived at Seagram’s office in Montreal wearing a Canadian military uniform just before the outbreak of the second world war, Sam flew into a jealous rage.

“Ah, look at the ... hero, you’d think he’d just won the war,” he bellowed. “Christ, they get a few more like him and Hitler’s got a chance.”

Sam’s oldest son, Edgar, had “the sort of physically spoiled, psychologically rough upbringing typical of sons of monsters,” Faith wrote.

Now 77, Edgar made his mark as president of the World Jewish Congress, an office that “proved an ideal outlet for the aggressive and arrogant elements in his character.”

Once described as the world’s most powerful Jew, he became a “bulldozer” against anti-Semitism. He was instrumental in exposing Kurt Waldheim, the former United Nations secretary general and president of Austria, as a former Nazi intelligence officer in occupied Greece.

But Edgar’s stewardship of the business was, in the words of an advisor, “rather unfocused, to say the least.” He was slow to recognize the shift away from the blended whiskies pioneered by his father.

Seagram lagged behind rivals in diversifying into lighter spirits. In a belated quest for a leading cognac brand, Seagram massively overpaid for Martell. By the time it was sold, Martell’s market share had halved.

Edgar’s biggest failing was to put the family business at the disposal of his son Edgar Jr.’s ambitions to become a media tycoon.

The father was mesmerized by Edgar Jr. even as he sidelined his older son, Sam, who was arguably a far safer pair of hands. Sam was not even consulted about the sale of Seagram to Vivendi.

Edgar Jr., surrounded by sycophants and consultants, had little time for the liquor business, treating it as a cash cow. That might have been less of a problem had his push into Hollywood been more successful.

At Edgar Jr.’s urging, Seagram swapped its stake in DuPont Co., the chemicals producer, for control of Universal Studios parent MCA Inc. It later gained Polygram Records.

It sacrificed a rich, predictable dividend stream for a presence in the glamorous but risky, low-margin and egocentric entertainment world.

Those mistakes were dwarfed by the $34-billion deal in 2000 to sell Seagram, including its French pay-TV channel Canal Plus, to Vivendi in exchange for a stake in the world’s second-biggest media group.

Vivendi Universal shares plummeted over the next year, leaving the Bronfmans nursing one of the biggest losses ever suffered by a single family.

Messier may have best summed up Edgar Jr., saying he left behind “the memory of someone who forgets to come and support his team during difficult times, but never missed a plane to share in their successes.”

But, he added, Edgar Jr. “chose well in Hollywood, was a shrewd analyst of a situation and someone worth consulting for his advice.”

Edgar Jr., 51, has begun to rehabilitate himself by focusing on his first love, music. He was part of a consortium that bought Warner Music in 2004. He remains its chairman and chief executive, steering it through several pioneering deals.

The Bronfman story may yet have a happy ending. But at what a cost.

Bernard Simon is a correspondent in Toronto for the Financial Times, where this review recently ran.