In 1962 the Belzberg brothers were making a tidy living in Western Canada building small shopping centers and developing suburban land sites for single-family home builders.
But Hyman, Samuel and William Belzberg -- sons of a hard-working immigrant who established a successful family furniture business in Calgary -- found that they still had to go as far east as Toronto and Montreal to obtain the financing they needed. So the brothers started a small trust company in Edmonton.
Today that trust company is the cornerstone of a financial empire that extends from Vancouver across Canada and to many parts of the United States. First City Trust Co. and the holding company that now controls it, First City Financial Corp., has grown from a one-office operation in Edmonton to a $1.8 billion financial services giant, the second largest in British Columbia. The Belzbergs are also the biggest shareholders in the province's largest financial institution, the Bank of British Columbia.
All told, Samuel said, the brothers control assets worth more than $3 billion -- through First City and their individual investments. Their personal fortunes amount to hundreds of millions, although they refuse to say how many.
As individuals, the trio owns more than 60 percent of the big California savings and loan association, Far West Financial, which brother William (who owns 31 percent) runs. The Belzbergs own real estate properties across Canada and the United States. Friday they bought the Harbor Tower development in Boston for $52 million and have projects in Philadelphia, Florida and Chicago. Recently they bought a real estate investment trust in Denver.The Belzbergs says their U.S. holdings are worth between $400 and $500 million.
The brothers' steady accumulation of assets and companies occurred without much fanfare until 1974, when they outbid the Jim Walter Corp. for control of Far West, now a billion-dollar operation.
But it was not until 1979, when the brothers announced they had bought 5 percent of the big Wall Street brokerage house, the Bache Group Inc., that their profile began to rise. Today the brothers are Bache's biggest shareholders -- they own 22.6 percent of the stock -- and are in the middle of a financial maelstrom.
Bache management, always wary of takeover attempt, never welcomed the Belzberg investment and two weeks ago found a white knight, the Prudential Insurance Co., to make a cash offer of $32 a share for Bache. Prudential said that if the offer is successful, Bache management will stay in place.
But before they found Prudential, Bache officers fought hard against the Belzberg purchases. Management went so far as to ask the firm's best customers, the silver-buying Hunt brothers of Dallas, to acquire Bache stock in order to make it harder for the Belzbergs to take control. The Hunts did so, but have since sold their 6.6 percent stake in Bache, much or all of it to the Belzbergs.
The Belzbergs had long insisted their interest in Bache was for investment only and not to control the eighth biggest Wall Street broker. But as their holdings grew, so did their interest in the company.
Last January Sam -- as he prefers to be called -- met with Bache Chairman Harry A. Jacobs and asked for two seats on the board for the Belzbergs. The request was denied and Bache, through Washington attorney Clark Clifford, told the Belzbergs that Bache had come upon intelligence reports linking brother Hyman with some key underworld crime figures. The intelligence reports, which subsequently became public, do not suggest that the oldest brother had any connection with the figures other than talking to them a decade ago at an Acapulco resort, where Hyman and his wife had gone for a vacation.
Bache officials still refuse to discuss those reports and will not confirm that was the reason the board seats were denied the Belzbergs.
Sam said he is angered by what he considers unethical tactics by Bache. The notion that Hyman is linked to organized crime is "the most ridiculous thing I've ever heard and they [Bache officials] know it," he said. "They thought they could scare us, hoping we would run away. Well, WE'VE GOT NOTHING TO HIDE." he said it is "embarrassing" that such allegations would be leveled by people "with a code of ethics that's supposed to be involved with managing billions of dollars of other people's money."
Bankers who have dealt with the Belzbergs for years, as well as competitors, agree with Sam's assessment.
"They are hard-nosed and aggressive businessmen," said a top banker. "Sam can be abrasive. But there's never been a whiff of scandal.I don't know why Harry Jacobs didn't welcome them."
Sam said he is equally perplexed by Jacobs' behavior.
"When we bought into Far West Financial, they invited us on the board. We did a lot of work for no pay, protecting our own investment, of course. I saw where we could be a constructive participant [on Bache's board] too," said Sam.
Most Wall Street observers think Bache management fought Belzberg purchases and finally corralled Prudential to make an offer out of a fear for their own jobs. "Entrenched management in Wall Street is like entrenched management everywhere," said a Wall Street analyst.
Bache, for its part, tried to get the New York attorney general to enjoin the Belzbergs from buying any more shares, arguing that the brothers were effectively making a tender offer to buy the company without filing under New York law. The brokerage house charged that as a result all shareholders could not benefit.
Belzberg scoffs."We've never been involved in an unfriendly takeover in our lives. We're not as big [financially] as a lot of the big families in both countries, but we're pretty careful what we do. We want to go places where we bring something aside from our financial resources. The companies we have taken over either invited us in or we paid a full price."
Sam said the brothers still have not decided how to respond to the two-week old Prudential offer, which expires April 17, Presumably the Belzbergs could decide either to top Pruential's offer or sell, taking home a $40 million profit, according to Wall Street estimates.
If the Belzbergs decide to fight, it won't be the first time. They made their bid for control of Far West after Jim Walter Corp. had made what looked like a successful bid.
Although the Belzbergs could not win an all-out bidding war with the nation's largest insurance company, many feel that Prudential would not have the heart for a fight over Bache.
Sam said he had "no conception of the visibility that would come" from their purchases of Bache stock: "If I had, we would not have proceeded. We're not high profile people."
Sam said that in the spring of 1979, he was approached by a mutual friend and, "I thought we were offered a position on the board and a constructive relationship. But for whatever reason, it was not acted on by them and we weren't going to go hat in hand."
Other Wall Street sources say, however, that attorney Martin Lipton approached Bache on the Belzbergs' behalf, and then Bache officials said they had no interest in giving them seats on the board.
But the brothers, high visibility or not, continued to buy into Bache. Recently, the brothers, who say they shun publicity, hired a New York public relations firm.
The Belzberg odyssey began in Calgary where their father, settled around 1920. He established a furniture store that remains in the family today.
Sam, who at 52 generally is considered the chief strategist of the trio, said his father taught his children the lessons that have permitted them to be partners "in pretty much everything we do without ever having signed a letter or any formal agreement."
They have carved out their own spheres of responsibility within which they exercise authority on behalf of the three. Hyman, 56, runs the furniture business and is responsible for the family's private investments. William, 49, not only runs Far West Financial, but is responsible for the West Coast real estate operations. Sam runs First City, which is the chief investment arm for the brothers.
The brothers have set up a complex series of personal holding companies to control the First City operation. Sam's is Bel-Fran (after his wife of 31 years), William's is Bel-Cal (for Calgary) and Hyman's is Bel-Alta (for the province of Alberta). The three holding companies own about 85 percent of the stock of First City.
First City Financial controls the trust company, an equipment leasing subsidiary and a real estate development subsidiary. It also owns the Bache stock, the brothers' more than 10 percent interest in Los Angeles real estate company Kaufman & Broad, and State Mutual Investors, a Massachusetts real estate investment trust that the brothers have moved to California and merged with a real estate company. First City also controls a number of other smaller holdings as well.
The brothers' holdings of Far West are personal. William has about 31 percent, Hyman about 17 percent and Sam about 14 percent of Far West's outstanding stock. William is chairman of the board, but Sam and Hyman have severed any formal relationship with the institution. Far West controls more than $1 billion in assets.
The Belzberg empire grew slowly. Sam stayed in Edmonton after attending college there (the only brother with a college degree) and got his start in business selling cars and running a small fleet of taxis. Hyman got the brothers interest in oil leases.
Those leases were parlayed into a sizeable holding, Mission Oil, which the brothers sold to Reserve Oil and Gas in the late 1960s. About four years ago, Sam said, the brothers got back into the oil and gas game, this time as both drillers and leaseholders in Alberta and in Tennessee and Louisiana.
Eventually the three brothers -- William and Hyman in Calgary and Sam in Edmonton -- began to build small shopping centers and to develop land suitable for building houses in suburbs.
"Out of that came the trust company. In those days western Canada was not as vital as it has become. Most business was done in the East. So we set up a financial institution to help the West. It wasn't a philanthropic thing. In those days the charter [the City Trust Co. as it was then called was chartered in Alberta] permitted the institution to loan money to related companies. We thought we could help ourselves in our own real estate development," Sam said.
But six months after City Trust Co. was chartered, the law was changed. The Belzberg City Trust could not make loans to the Belzberg real estate operation. "We had a decision to make. We decided to stay in the financial business." The trust company grew, the furniture business grew and the real estate operations continued to be profitable.
In 1968, Sam moved his family to Vancouver, where City Trust had just opened a branch. The company is now headquartered there.
About the time Sam moved to Vancouver, the brothers decided to restructure their operations. They packaged their real estate activities into one company and sold shares to the public. A few years later they redesigned the financial institution as well. Copying the holding company concept pioneered in the United States, the brothers established First City Financial Corp. so that while the trust company is regulated, the parent company is not.
"Times are changing today," he said ruefully. "In the States we are finding more and more legal regulations. Lawyers and accountants are running our lives. It's getting that way in Canada too."
But regulations apparently will not keep the Belzberg's from trying to grow. No matter what happens in the Bache deal Sam said the brothers plan to try to develop a "diversified financial services" institution in the U.S. similar to First City.
"We want it in the U.S., both because we want to diversify and get into a larger market and because we have the wherewithal and the people to look farther afield. There are great opportunities there." CAPTION: Picture, SAMUEL BELZBERG . . . controls assets of more than $3 billion.