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Wall Street Made Charles Murphy Successful and Rich, but Happiness Eluded Him

The Wall Street Journal logo The Wall Street Journal 4/10/2017 Gregory Zuckerman, Serena Ng and Leslie Scism

Charles Murphy used to walk home through New York City’s Central Park to his 19-room townhouse for dinner with his family. Last year, he began voicing worries about money to his boss, hedge-fund billionaire John Paulson, who often joined him along the way.

At 56 years old, Mr. Murphy had a net worth in the tens of millions of dollars. He entered Columbia University at 16 and later earned law and business degrees at Harvard and Massachusetts Institute of Technology.

On Wall Street, he had a ringside seat to some of the biggest financial events of the past 20 years, from the 1990s merger boom to the dot-com bust to the Bernard Madoff scandal and the travails of American International Group Inc. He made millions of dollars at banks and investment firms in New York and London, despite his share of setbacks.

During those walks, though, Mr. Paulson found himself trying to reassure Mr. Murphy, according to a person who knew both men, offering reminders of all he had accomplished. “You don’t need to worry,” Mr. Paulson would say.

Mr. Murphy was blessed with a commanding presence and boundless ambition. Yet his concerns over maintaining the life he had created for himself, his wife, Annabella, and their three young sons consumed him. The very qualities that helped him build a fortune were no match for his fear of losing it.

“In his mind, he had worries,” said Belén Hormaeche, a close friend of Mr. Murphy and his wife. “But it was all in his mind.”

Mr. Paulson, who eulogized Mr. Murphy last Monday, sought to explain his apparent suicide to friends and family during a funeral service in New York.

“The mind can play tricks with oneself, distorting reality,” Mr. Paulson said. “No matter how much those close to him tried to help, and no one tried more than Annabella, Charles could not see a path forward…his mind created a trap from which he couldn’t escape.”

This account of Mr. Murphy’s life and death is based on interviews with close friends and colleagues, as well as those familiar with his family.

Born to a middle-class New York family in 1961, Mr. Murphy stood out at a young age for his drive and intellect. His father worked as an engineer for a utility company and sparked his son’s early interest in books and classical music. The family lived in a modest Upper East Side walk-up apartment.

Mr. Murphy attended Stuyvesant High School, one of New York City’s top public schools, before enrolling at Columbia. At 6 feet 6 inches tall, he became captain of the crew team. Out of the water, he discussed philosophy, poetry and arts, classmates recalled.

Mr. Murphy became interested in investment banking while pursuing advanced degrees at Harvard and MIT, said Tom Seeman, a Harvard classmate.

In 1985, he was recruited by Goldman Sachs Group. Inc., embarking on a two-decade career at the world’s biggest banks including Morgan Stanley, Deutsche Bank AG and Credit Suisse Group AG.

Mr. Murphy spent most of that time in London, where he was seen as polished and articulate, favoring expensive suits. He closed complicated deals involving insurance companies and won praise for his financial analysis. He could also be rigid in his point of view, and disregarded opposing ideas, colleagues said. Some who worked with Mr. Murphy recalled times when he retreated into his office and closed the door, wanting to be left alone for days. That’s how he focused at work, said someone close to the family.

In 1993, he married Heather O’Brien, a 24-year-old American preparing to start doctoral studies in theology, according to a wedding announcement. Six years later, after the couple had two children, the marriage collapsed. Ms. Murphy later married Sol Kerzner, a South African hotel magnate.

After the breakup of his marriage, Mr. Murphy became a fixture in London’s club scene, colleagues said. In 2004, Mr. Murphy married a young Londoner, Annabella Demetriou, and became devoted to her, friends said. In 2006, he threw her a lavish 30th birthday party in London featured in Tatler magazine.

In the late 1990s, he became excited about the chance for bigger rewards outside Wall Street. At the height of the internet-stock frenzy, Mr. Murphy quit Morgan Stanley to become chief financial officer of a London startup, Antfactory Holdings Ltd. The firm backed technology companies and eyed a lucrative initial public offering itself.

Mr. Murphy accepted a token salary and was given stock with the potential to be worth tens of millions of dollars if the company went public or was sold. Within 18 months of his move, internet stocks had crashed, ending Antfactory’s ambitions.

Mr. Murphy got another chance at a potentially lucrative IPO in 2007. Fairfield Greenwich Group, a Connecticut firm that managed $15 billion for wealthy individuals investing in hedge funds, considered going public. Mr. Murphy was hired to oversee its strategy.

As his family prepared to move to the U.S. from London, Mr. Murphy paid $33 million for the seven-level, 11-fireplace, limestone Upper East Side townhouse of Matthew Bronfman, an heir to the Seagram liquor fortune.

The Fairfield Greenwich IPO never happened. The firm had channeled billions of dollars of its investors’ money into a fund overseen by Mr. Madoff, whose giant Ponzi scheme was uncovered in 2008. Mr. Murphy was out of a job. He tried to sell his house in 2009 as he and his wife considered moving back to London.

By chance, Mr. Murphy and his wife were invited to a dinner party at a friend’s East Side home, where he struck up a conversation with Mr. Paulson, of Paulson & Co.

Mr. Paulson had just made $20 billion betting against mortgage securities and banks in what was considered one of the great trades in financial history. Now, he wanted to invest in insurance companies. Mr. Murphy knew how, and he was eventually hired for the job.

One of Mr. Murphy’s early ideas was to invest $80 million to help recapitalize struggling insurer Conseco Inc. The deal earned Paulson & Co. more than $100 million.

More recently, in search of another lucrative trade, Mr. Murphy asked another hedge-fund investor: “What can we do that’s bigger?”

The answer seemed to be AIG, the insurer that in 2008 required a nearly $185 billion U.S.-funded bailout. The company had repaid taxpayers by 2012, and management was focused on improving its financial performance.

In March 2015, Messrs. Murphy and Paulson met with AIG Chief Executive Peter Hancock and offered a different plan: break up the insurance conglomerate. AIG resisted. Mr. Murphy spent months pitching his proposal to hedge funds and eventually persuaded billionaire Carl Icahn, who was already eyeing AIG.

“I didn’t know him well,” Mr. Icahn said, “but in our meetings I found him to be very bright and knowledgeable, and I liked him.”

Mr. Murphy lobbied Wall Street analysts to write research in support of the plan. Some analysts said their conversations with Mr. Murphy amounted to lectures. A half-hour on the phone with Mr. Murphy was “29 minutes of Charles talking,” one said. People who challenged the AIG breakup recall being barraged by Mr. Murphy with an avalanche of facts and figures.

At an AIG investor meeting hosted by Mr. Hancock in November 2015, Mr. Murphy repeatedly interrupted Mr. Hancock as the chief executive tried to answer investors’ questions, some of the attendees said.

“Most investors are polite and deferential to management,” said former Sanford C. Bernstein analyst Josh Stirling. “He was definitely confrontational.”

The following February, AIG offered Messrs. Icahn and Paulson board seats to avert a proxy fight. Mr. Paulson suggested Mr. Murphy take his spot but AIG demanded someone else. The reason, according to people familiar with the matter: Directors felt Mr. Murphy was too abrasive.

In the fourth quarter, Paulson sold nearly half of its AIG position, locking in double-digit gains from the stock’s improvement in 2016.

Mr. Murphy made several million dollars a year at Paulson, a person close to the matter said. His compensation had been rising in recent years, though the firm performed poorly of late.

People around Mr. Murphy told him he needn’t worry about money, but he worried nonetheless. Mr. Murphy had a $12 million mortgage on his Upper East Side home, according to public records. Two of his youngest children attended private schools; two more from his first marriage were in college.

© ADRIEL REBOH/PATRICK MCMULLAN AGENCY

Early in 2016, he put his townhouse on the market for $49.5 million. By summer, the price had dropped to $42.5 million.

Around July of last year, some of Mr. Murphy’s friends and family saw a change. He looked tired. Instead of leading conversations, he was withdrawn, seemingly lost in thought.

Making even minor decisions, whether to go to the beach or take a walk, unsettled Mr. Murphy. His wife brought him to a psychiatrist, who diagnosed him with depression, prescribed medications and closely monitored him, friends said.

Mrs. Murphy tried to draw her husband out of his shell. “Charles, what do you think?” she asked him during a dinner a few months ago with friends. Mr. Murphy smiled and made an effort to join the conversation, a friend recalled.

Mr. Seeman, the former Harvard classmate, would see Mr. Murphy when he visited New York City. In the past few months, he said, Mr. Murphy began putting off his requests to meet: “When I asked him how things were going, he would say, ‘OK,’ or, ‘Not so well,’ when in the past he would always be more expansive.”

The Paulson firm has lost money so far in 2017, according to an investor. In February, AIG’s shares fell on setbacks in its turnaround plan, though they remain above Paulson’s purchase price.

Mr. Murphy confided to a rival hedge-fund investor it had become more difficult for him to find attractive investments in a rising stock market.

A few weeks ago, Mr. Murphy had lunch with an old friend and said he was depressed and seeing a doctor. On Feb. 21, Mr. Murphy added his wife as a co-owner of their Upper East Side home, according to public records. That month, the asking price for the house was listed as $36.5 million.

In recent weeks, Mr. Murphy spoke with colleagues at Paulson about new investment opportunities, showing signs of renewed enthusiasm. He and his family celebrated Mr. Murphy’s birthday on a ski trip in Vail, Colo., which seemed to buoy his spirits.

A friend staying at the same resort recalled fondly the sight of Mr. Murphy guiding one of his sons down the bunny slope, the father’s long legs stretched around the boy’s skis.

Flying home on Sunday, March 26, Mrs. Murphy told a friend that her husband had a “great week” and that the holiday was “fabulous.”

The next day, Mr. Murphy sat down for breakfast with his wife and children. As he left for work, the nanny took notice of Mr. Murphy’s suit and crisp shirt.

“You look good,” she said, according to a close family friend.

“I feel great,” Mr. Murphy responded.

That morning, Mr. Murphy worked in Paulson’s Midtown Manhattan office.

Later, he headed to the Sofitel New York hotel a few blocks away, checked into a room and jumped from the 24th floor.

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