Riggs Bank's slogan for much of the past 20 years -- "The most important bank in the most important city in the world" -- was intended to distinguish Riggs from the common run of banking.
This upper-crust vision of Riggs, cultivated by former chairman Joe L. Allbritton to attract Washington's unique class of moneyed demi-celebrities, guided many of the bank's strategic moves under his tenure.
One of these moves was the 1997 purchase of J. Bush & Co., a Connecticut money-management firm founded, owned and run by Jonathan J. Bush, the former president's brother and the current president's uncle, for an estimated $5.5 million.
At the time, Riggs was positioning itself as a personal bank and investment adviser to the wealthy after it lost ground in its core retail banking operations to larger, out-of-state competitors. J. Bush & Co., with a successful track record and a sterling name, fit the bill. Bush is now an employee of Riggs and continues to run the company with his name on it.
But like many of the strategic objectives undertaken by Riggs in the last two decades, the J. Bush & Co. purchase, with much of Riggs's investment advisory business, hasn't lived up to its billing. This morning, as Riggs National Corp.'s investors gather for their annual meeting at the bank's ornate branch on Pennsylvania Avenue, company executives will present a bank moving decidedly away from the aristocratic leanings of its past. In Riggs's future, owning a company run by a Bush may not be as valuable an asset as it once was.
A former Riggs executive knowledgeable about the J. Bush & Co. purchase, speaking on the condition he remain anonymous, said the company was exactly what Riggs was looking for at the time. Small enough for Riggs to buy outright, J. Bush & Co. had an investment focus -- on large, fast-growing companies -- that complemented Riggs's existing expertise in investing in undervalued stocks. The Bush name was a bonus, the former executive said, but not the main reason why Riggs bought the company.
Mark N. Hendrix, a Riggs spokesman, said an investment bank brought the company to Riggs's attention in 1997, at a time when Riggs was beefing up its private banking services for rich people. Others familiar with Riggs say Allbritton also was attracted by the politically famous name that Bush brought to the bank.
Hendrix, saying Bill Clinton was in the White House when Riggs bought J. Bush & Co. and that back then few envisioned George W. Bush as the next president, said, "It would be preposterous and wrong to ascribe any political motives to our purchase of the J. Bush & Co. As we stated in 1997, this acquisition expanded the scope of services we could provide."
And, though Jonathan Bush briefly ran Riggs's investment advisory business during a management shakeup at the division in 2000, for the most part he has run his company as a distinct, wholly owned subsidiary of the bank, responsible for generating his own business and having limited interactions with select Riggs clients, Hendrix said.
"Jonathan Bush is very active, a very active manager," Hendrix said. He would not comment on details of Bush's business, but sources familiar with the company say J. Bush & Co. employs eight people and has about $200 million in assets under management. When Riggs acquired the company it had approximately $250 million under management. Riggs manages client assets of more than $6 billion, including trust accounts.
Jonathan Bush declined to comment.
Sources with knowledge of the matter, but who spoke on the condition of anonymity, said that despite Bush family business and social ties to Saudi royals, Jonathan Bush had little involvement in Riggs's banking relationship to the Saudi royal family. However, more than a year ago he did give some investment advice to a Saudi client connected to the embassy, the sources said.
The client was not the ambassador or his wife, the sources said. That relationship belonged to Riggs embassy banking division, and dealt mostly with Prince Bandar bin Sultan, the Saudi ambassador to the United States. Riggs was fined $25 million this month for failing to report to bank regulators suspicious transactions involving ambassadorial accounts of Saudi Arabia and Equatorial Guinea.
Like much of Riggs, the bank's money-management business, which includes J. Bush & Co., is changing under Allbritton's son Robert, who took over as chief executive of the bank holding company in 2001.
Just before Riggs bought Bush's company in 1997, it created Riggs & Co., a unit that consolidated all of its money-management business, including its trust business, under one umbrella. The goal was to make Riggs a one-stop shop for Washington's wealthy.
But, according to Gary Townsend, a bank securities analyst at Friedman, Billings, Ramsey & Co., Riggs faced intense competition in the so-called wealth management business, and didn't have the size or stock-picking muscle to compete against its much larger competitors.
"That business has not been strong," Townsend said. "It's difficult for community banks to excel at investment advisory business, and it's particularly difficult if you have a poor credit rating." Customers generally are concerned about the financial strength of the institution they choose to help manage their finances. Fitch Ratings downgraded Riggs National Corp.'s debt twice in two months.
Riggs & Co. profit declined from $11.5 million in 2001 to $6.2 million last year, according to Riggs's 2003 annual report.
Townsend cited Riggs's inability to attract and keep the best investment advisers as a reason for its lackluster performance. In 2000, Philip Tasho, chief executive of what was then known as Riggs Investment Management Co., or RIMCO, and his top lieutenant quit to start their own company. Tasho had been building a strong reputation as an investor in undervalued stocks when he left. Bush briefly ran RIMCO after Tasho's departure, but in 2001 he stepped down, sources said, so he could devote all his attention to running J. Bush & Co., where the value of assets under management had fallen significantly with the plummeting stock market during 2000 and 2001. Last year, Riggs began to revamp its investment advisory business and eventually did away with the use of the Riggs & Co. name as a way of marketing wealth management. Sources at the company say Riggs is gearing all its services, including its investment advisory business, around retail customers in its branches -- rather than around the extremely affluent. Henry D. Morneault, who ran Riggs & Co. until last year, has moved over to run corporate and institutional banking. Much of the former Riggs & Co. businesses are now under Glenn E. Kinard, who is running Riggs's retail banking operations.
Finally, Riggs's investment advisory business has gone to an "open architecture" model, which entails buying financial products, from any provider, that best serve the clients' needs. To that end, Riggs sold off its eight proprietary mutual funds last year. The target investment advisory client, said a source familiar with the bank's strategy, is no longer "wealthy," but fits squarely into Washington's core consumer demographic: an individual who is well-educated, professional, and upper-middle class with significant upside earning potential. There is no minimum investment requirement.
J. Bush & Co., on the other hand, accepts only accounts of $1 million or more.