Guys: Three questions to ponder, as you read the
Should business execs meet at strip clubs?
By Jayne O'Donnell, USA TODAY
Posted 3/22/2006 11:34 PM Updated 3/22/2006 11:50 PM
NEW YORK — Wearing a scanty blue gown with rhinestone clasps, Nicolette Hart explains how she can make up to $2,500 a night with investment bankers and their clients in a Manhattan strip club's private rooms.
She writhes and rubs her nearly naked body against as many as seven men, doing "lap dances" for $400 an hour. (The room costs an additional $200 for the hour.) Hart, who once worked for a venture-capital firm, always asks what brought the men together. They often say they're having a meeting.
"I say, 'You're having a business meeting in a strip club?' " Hart says in an interview in the dressing room at Rick's Cabaret here.
It's not just strippers who have questions. Some women on Wall Street want to know how it can be fair — or legal — for their managers and male colleagues to exclude them when they fraternize at strip clubs, often with the women's clients. Strip club clientele is hardly limited to Wall Street. Adult entertainment is enjoyed by men — and some women — in most every industry in the USA, and it's a tax-deductible business expense allowed by the IRS.
Investment banks and brokerage firms are taking the lead in cracking down on the practice. The NASD and the New York Stock Exchange both recently proposed rules that would force firms to adopt business entertainment policies that cap amounts and specify appropriate venues. The move is expected to rule out company-paid or work-related strip club jaunts at the more than 5,000 brokerage firms in the USA.
The stock exchange and the NASD acted in large part because of lawsuits brought by female employees. The women who have sued say strip clubs are emblematic of a larger problem on Wall Street: a macho culture that leaves them behind in all areas.
"There are two levels of discrimination: the frat house environment in the office and the deeply embedded practices that are just starting to be uncovered, like the distribution of accounts, business leads and promotions," says Hydie Sumner, a financial consultant who was awarded $2.2 million in 2004 after suing Merrill Lynch for gender discrimination. "When 'business activities' involve the strip club, golf course or hunting ranches ... discrimination is often perpetuated as those in power support and advance those with like minds and tastes."
Ultimately, some believe, other industries will be affected. "This is going to have a trickle-down effect," says Aliza Herzberg, a New York employment lawyer who represents many manufacturing and small-business clients. "Companies will try to make taking clients to strip clubs, which is very common, a thing of the past — just like the three-martini lunch."
It was a Fidelity Investments trader's 2003 bachelor party, paid for by brokerage firms including Jeffries & Co., that prompted NASD to consider tightening its rules. The party allegedly included dwarf-tossing and paid female escorts, according to news accounts and investigators.
"We're not happy that (business entertaining) seems to have been an area where firms were not paying sufficient attention," says NASD Vice Chairman Mary Schapiro. "I thought sensitivity to issues like this would have been greater than it was."
NYSE Executive Vice President Grace Vogel says the goal is to ban entertainment that's inappropriate or excessive. Final versions of the rules, likely in weeks, must be approved by the Securities and Exchange Commission before taking effect. Brokerage firms that don't enact or enforce business entertainment policies could face actions ranging from censure to expulsion.
Law firms, manufacturers involved
Many companies now have policies that restrict any behavior that excludes certain employees, even if they don't specifically mention strip clubs, Las Vegas employment lawyer Barry Kellman says.
"Financial services has taken the biggest hit (from lawsuits), but the more buttoned-up industries would have greater concern about this than, for example, the entertainment industry," Kellman says.
Earlier this month, Manhattan strip club Scores settled a lawsuit over a contested $241,000 bill racked up by the former CEO of St. Louis information technology company Savvis. Robert McCormick resigned amid an investigation into the bill, which was charged to his corporate American Express card. Several sexual harassment lawsuits have been filed in recent weeks by women who say male co-workers at the freight logistics company C.H. Robinson frequented strip clubs and openly discussed strippers in the office.
Attorney Rohit Sabharwal, a Rick's regular, says he often takes clients of his small law firm with him and such entertaining was common when he was at a large firm, too. "Nobody really objects," Sabharwal says. "I think it's a lot more civilized in the law profession. I don't think women have a problem succeeding in law firms."
But back on Wall Street, Vogel says the rulemakers had "uncanny timing":
• In the fall, Morgan Stanley fired three salesmen and a researcher who took clients to a strip club. The company instituted a no-strip-club policy in October 2002, two years before it paid $54 million to settle a sex discrimination lawsuit. The lawsuit was brought by the Equal Employment Opportunity Commission and a former institutional equities saleswoman who said she was excluded from client outings to strip clubs and other places.
• Six female employees filed a sex discrimination class-action complaint in federal district court against German investment bank Dresdner Kleinwort Wasserstein in January. Jyoti Ruta, a director in the institutional equities division here, says she was excluded from a trip to a strip club and from other client events.
• Last April, a jury found in Laura Zubulake's favor in a sex discrimination and retaliation lawsuit against UBS and awarded her $29 million. In October, the parties settled the lawsuit privately. Zubulake, a former director in international equities, alleged in the lawsuit that she was not considered for promotion, was removed from client responsibilities, was undermined professionally and was excluded from client outings. Trial testimony alleged she had been invited to a bottomless club by a manager. UBS says it has policies on business entertainment and "appropriate professional conduct."
Several financial companies say the proposed rules are too burdensome. John Goodwin of Albuquerque-based Goodwin Browning & Luna Securities, complained to NASD that it is "legislating morality."
But female plaintiffs and their lawyers say business entertaining can be as important as what goes on in the office. Attorney Piper Hoffman, who represented Morgan Stanley plaintiff Allison Schieffelin, says that on Wall Street, "Who you know can translate into how much business you bring into your company."
In her lawsuit, Schieffelin says she learned two clients were invited by male colleagues to attend a weekend in Las Vegas approved by their manager. When she asked why she wasn't included, she was told it was "because the men would be uncomfortable participating in sexually oriented entertainment with a woman colleague present, especially one who knew their wives," according to the lawsuit.
"It's not a question of morality," says attorney Wayne Outten, who also represented Schieffelin. "It's the disparity in opportunity for those who are excluded."
Ruta, who still works at Dresdner while she fights her sex discrimination lawsuit, is about to have her second child. She says her problems at the investment bank started when she returned the last time from maternity leave and found she had a new boss. She began being excluded from outings with clients, including to the strip club and wine tastings, and lost out on deals and promotions because of it.
"I've always conducted myself professionally and ethically," Ruta says. "The night when I was told to leave because the clients would like to go to a strip club was very, very upsetting."
Dresdner's attorneys recently filed a motion to expunge the strip club and other "scandalous allegations" because they don't relate to the core "pay and promotion" case. Ruta's lawyer, Douglas Wigdor, says, "When it comes to deciding bonuses, it's all discretionary, and the male supervisor is going to give the money to the guys he hangs out with."
A special attraction
Alden Cass, a Manhattan-based psychologist who works with financial executives, says strip clubs hold a special attraction on Wall Street. He attributes it to the business' highs and lows and tendency to tie people's identities to how much they earn. He says many of his male clients find strippers more understanding than their wives.
"When things are great at work, some of them do feel entitled to have things when they want them," Cass says. "The allure is, 'Someone is going to listen to me on my terms.' "
Rick's owner, Eric Langan, says that when people ask him whether a dancer's breasts or buttocks are more important, he answers that "her brain" and personality count more. Dancers who might not merit a second look outside on Sixth Avenue can earn as much as $200,000 a year by "really listening" to down-in-the-dumps bankers and stockbrokers. He says about a third of his business comes from Wall Street.
NASD's Schapiro says that when it comes to strip clubs, "One of the things that is powerful about the new rules is that they are going to force every firm to make the decision whether that's an appropriate place to do business."
Nicolette Hart worries the new rules could affect her business, because "a lot of guys do expense it" and "try to be big shots to impress their clients any way possible."
Mike Paul of the New York-based reputation management firm MGP & Associates PR, says strip clubs would be a hard habit for Wall Streeters to break. "The bottom line — and you won't get any company to say it — is that Wall Street and strip clubs are ingrained together and have been for a long time."
Langan doesn't think new rules will have a big effect: "They'll just break out personal credit cards. Most of them don't care about a $3,000 or a $5,000 bill at a club."
Ruta says that as long as managers aren't taking male employees and neither managers nor employees are treating clients, she doesn't care who goes to strip clubs.
"The real problem I have with it is that it is unprofessional and exclusionary," she says. "But whatever people want to do on their own free time is fine."
Contributing: Stephanie Armour
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