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The cause was pneumonia, according to his son John.
Gutfreund had been president of his own low-key financial consulting firm, Gutfreund & Co., since 1993. He was best known, however, for his decade atop Salomon Brothers from 1981 to 1991, during which he -- or perhaps the firm, as reports say both -- earned the sobriquet King of Wall Street from BusinessWeek.
Gutfreund first joined the firm in 1953, following two years in South Korea as a member of the military police. His father, Manuel, a meat distributor to New York restaurants and clubs, golfed occasionally with William Salomon of bond house Salomon Brothers & Hutzler, and Gutfreund joined the firm as a trainee in the statistical department for $45 a week, according to New York magazine.
Gutfreund became a municipal bond clerk and by 34 made partner. By the time he became managing partner in 1978, succeeding Billy Salomon, the firm had evolved from a focus on making markets in government bonds to trading in general. Salomon Brothers also pioneered new products such as mortgage-backed securities, closely associated with Lewis Ranieri.
In 1982 Gutfreund sold Salomon Brothers to commodities trader Phibro Corp., and he quickly took advantage of a struggling commodities market and surging stock market to take control of the unified company. By 1985, he had sold off much of the commodities operation and renamed the company Salomon Inc.
Net income hit $557 million in 1985, and the firm hatched plans to move from downtown Manhattan to a new development in midtown at Columbus Circle. Salomon grew to become the nation's largest and most powerful trading house.
With his wife, Susan, Gutfreund lived the '80s high life, spending more than $20 million to decorate their Fifth Avenue duplex, by one estimate, and hoisting giant Christmas trees into a previous apartment using a roof-mounted winch.
But in 1987, Gutfreund was forced to scramble. The previous year had seen Salomon's stock price fall by a third, with a quiet bond market hurting the firm's earnings. The investment bank also limited income by avoiding junk bonds and bridge loans in demand at the time.
A late push into junk bonds and a cost-cutting effort were not enough to satisfy Minerals and Resources Corp., or Minorco, which controlled 14% of Salomon's shares. Minorco's Harry Oppenheimer indicated through banker Felix Rohatyn of Lazard Ltd. that he wanted to sell his stake, but Gutfreund was unwilling to meet his price.
Revlon Inc. chairman Ronald Perelman subsequently offered to buy the shares after learning of their availability through Bruce Wasserstein, then co-head of M&A at First Boston Corp.-and future founder of The Deal LLC.
Fearing a hostile takeover, Gutfreund's response in September 1987 was to negotiate the acquisition of the stake and the sale of 12% of the investment bank's equity to Warren Buffett's Berkshire Hathaway Inc. . Nearly a score of investor lawsuits followed over the terms of the deal.
But the problems didn't stop there. Salomon, the largest underwriter of municipal securities in the U.S., pulled out of the suddenly money-losing business, and the firm shuttered its commercial paper operation to conserve cash and cut expenses. Bonus reductions followed Black Monday a month later, and the investment bank abandoned the Columbus Circle real estate project, triggering a $51 million after-tax write-off.
The firm survived, unlike rivals E.F. Hutton & Co. and L.F. Rothschild Holdings Inc., but further challenges came with the release of Michael Lewis's "Liar's Poker" in which the author recalled his time as a bond salesman at Salomon during the 1980s. The portrait of the firm and Gutfreund was not flattering.
Gutfreund's run atop Salomon ended in 1991, following a scandal involving false bids in Treasury bond auctions by Salomon managing director Paul Mozer and the slow notification of regulators. Gutfreund resigned as chairman and CEO that August, as did president Thomas Strauss and vice chairman John Meriwether, with the firm reportedly on the brink of bankruptcy. Buffett stepped in as interim chairman and won the rescission of a ban from bidding in government securities auctions that had threatened to topple the firm.
In December 1992 Gutfreund, Strauss and Meriwether settled with the Securities and Exchange Commission. Gutfreund agreed to pay a $100,000 fine and accept a ban from running any securities firm. Salomon itself had agreed in May 1992 to pay a $290 million fine.
Gutfreund, seeking up to $30 million in severance from Salomon, rejected an offer of roughly $8.5 million and ended up with nothing in arbitration.
Salomon survived for five more years, before Travelers Group in September 1997 agreed to purchase the firm for more than $9 billion, and it became part of Citigroup Inc. following Citicorp's merger the next year with Travelers. Citigroup dropped the Salomon name from its Salomon Smith Barney operation in 2003, and control of the operation passed to Morgan Stanley (MS) following the 2008 financial crisis.
Following his departure from Salomon Brothers, Gutfreund served on a number of corporate boards, including those of Nutrition 21 Inc.; LCA-Vision Inc.; C.E Unterberg, Towbin & Co.; CompuDyne Corp.; Maxicare Health Plans Inc.; and Evercel Inc. (EVRC). Gutfrend also was on the boards of trustees for the Aperture Foundation, a nonprofit photography publisher; Montefiore Medical Center; and the New York Public Library and was a member of the Council on Foreign Relations.
Gutfreund was born on Sept. 14, 1929, and grew up in the New York suburb of Scarsdale. In 1947 he graduated from New Jersey's Lawrenceville School, a college prep school near Princeton, and Gutfreund earned a BA in English from Oberlin College in 1951.
Gutfreund was married twice: in 1958 to Joyce Low, daughter of a Bear, Stearns & Co. partner, and in 1981, to Susan Penn, a former Pan Am flight attendant. He is survived by Penn, his sister, his three sons with Low and his son with Penn.
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