Kaufman Shuts as Minority-Owned Investment Bank Succumbs to Trading Dearth

By Patrick Clark and Jesse Hamilton - Feb 1, 2012 12:21 AM GMT+0700

Kaufman Bros. LP, the minority-owned investment bank that helped unwind U.S. stakes in bailed-out financial companies, ceased operations as of yesterday, according to a notice posted on its website.

Chief Executive Officer Benny Lorenzo told employees yesterday after trading ended that Kaufman was closing immediately, according to two people with knowledge of the matter. New York-based Kaufman had a staff of about 40, according to one of the people, who declined to be identified because they weren’t authorized to speak publicly.

Small firms came under pressure as dealmaking and trading slowed on concern that Europe’s debt crisis may deepen. Standard & Poor’s said in a Jan. 27 statement that brokers and investment bankers “are likely to face a prolonged period of low profitability and possibly other financial pressures because of ongoing weakness” in global markets.

Neither Lorenzo nor Chief Financial Officer Gerard Durkin returned messages left on their office and mobile phones yesterday and today. Michelle Ong, a spokeswoman for the Financial Industry Regulatory Authority, declined to comment on Kaufman’s situation. The firm was still listed as an active broker-dealer on the regulator’s website.

Diversity Goals

The Securities Investor Protection Corporation, responsible for recovering customer assets from closed brokerages, hasn’t yet received any information from the Securities and Exchange Commission on Kaufman, according to Stephen Harbeck, SIPC president.

Kaufman had assets of $3.26 million and partners’ capital of $1.21 million as of Dec. 31, 2010, according to documents filed with regulators.

Kaufman was founded in 1995 and billed itself as “the country’s largest minority-owned and operated investment banking and advisory firm” focused on technology, media, telecommunications, green technology and health care. The firm said in June that it helped advisory clients raise more than $50 billion since 1999.

The company, which also has offices in San Francisco, said it was sought out by institutional investors, hedge funds and government agencies to help meet diversity goals. Kaufman’s website, before it was disabled today, said the firm participated in public offerings of Citigroup Inc. and American International Group Inc. as the U.S. Treasury Department disposed of stakes accumulated when it bailed out the firms during the financial crisis.

Lorenzo was born in the Dominican Republic and holds degrees from Cornell University and Harvard Business School, according to a company statement. He acquired a majority stake in March 2009 and became chairman and CEO in June of that year, according to the firm. Co-founder Craig Kaufman ceded those titles and became a managing director with co-founder Robert Kaufman, the firm said. Craig Kaufman didn’t respond to a message left at his office.

To contact the reporters on this story: Patrick Clark in New York at pclark48@bloomberg.net; Jesse Hamilton in Washington at jhamilton33@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; Rick Green at rgreen18@bloomberg.net