NEW YORK (Reuters) - The Penn State sex abuse scandal has prompted soul searching by many of its alumni on Wall Street -- but perhaps nowhere greater than at Merrill Lynch, where hundreds of Nittany Lions roam among the Thundering Herd.
The shock waves from one of the nation’s largest universities reached Wall Street when the school revealed a former football coach was accused of sexually abusing eight boys over a 15-year period.
The revelation led to the dismissal of Joe Paterno, the Nittany Lions’ head football coach since 1966, and of the school’s president. It also shocked the school’s sprawling army of 557,000 alumni -- a bigger population than Tucson, Arizona.
Penn State’s shadow looms especially large at brokerage Merrill Lynch, where thousands of graduates followed the lead of William Schreyer, a 1948 graduate who rose through Merrill’s ranks and served as its chief executive from 1985 to 1993.
“I‘m still struggling with it,” said one Northeast U.S. Merrill adviser, one of several brokers who said they were not authorized by the firm to speak on the matter. Another broker said he has had to field questions about the scandal from clients and colleagues.
Currently 326 Penn State alumni are employed at Merrill, according to Jeff Garis, director of the school’s Bank of America Career Services Center. Most prominent is Andrew Sieg, president of Bank of America’s retirement services business.
More than 70 Merrill brokers list Penn State in their biographies, while at least 350 Penn State grads on LinkedIn mention Merrill.
Schreyer, who died in January at the age of 83, left his mark on the school’s main State College, Pennsylvania, campus by endowing an honors college that bears his name. The former trustee also donated tens of millions of dollars.
He became a close friend to Paterno, a fellow Brooklyn native who was the school’s most powerful weapon for recruiting and fund-raising. Schreyer remained a presence on campus, encouraging hundreds of students to pursue careers at Merrill.
“Bill Schreyer was passionate about Merrill and Penn State. If there was a top student, he wanted to make sure they came to Merrill,” recalled Randall Woolridge, a finance professor at Penn State’s Smeal College of Business and president of the student-managed Nittany Lion Fund LLC.
Woolridge estimates 80 to 90 percent of students who helped manage the fund -- which has real money from actual outside investors -- secured jobs at a bank or investment firm. About a third of these students landed at Merrill.
Nathan Kline, whose consulting firm Genuity Partners runs training classes for investment bank analysts, said many of Schreyer’s early recruits came from Paterno’s revered football team.
“It was not uncommon for them to pick football players for sales and trading, because they made a connection between athletic ability, leadership and sales,” said Kline, who spent several years as an analyst at Merrill.
Just as Schreyer helped expand Merrill’s reach from retail brokerage to becoming a global investment bank, he worked to make Penn State more competitive with the elite private schools that traditionally supplied Wall Street with new blood.
Officials at Bank of America, which snapped up Merrill during the 2008 financial crisis, played down the Penn State ties as immaterial in a company with 300,000 employees and hundreds of college recruiting relationships. They said the scandal would not change their hiring policy.
Even so, the events of the past week delivered tough blows to current and former Merrill brokers.
“It was shocking news. I didn’t really want to believe the severity of the problem, and the potential involvement of other people, especially Joe Paterno,” said Ryan Woodring, an independent financial adviser at Heritage Investment Partners in Summit, New Jersey, who graduated from Penn State in 1994.
“It will take years to rebuild the image. It could have an impact on the university, financially, and on recruiting,” said Woodring, who joined Merrill as a broker trainee in 2002.
Penn State alumni as a broader group moved quickly to seek to contain the damage to the school’s reputation. Several graduates last week launched “Proud to be a Penn Stater,” a grassroots effort connecting through social media.
To date, Penn Staters have donated nearly $400,000 for RAINN, a group that supports victims of sexual abuse.
Even the proudest alumni acknowledge it may take years to rebuild the school’s reputation, and to get over their disappointment with their fallen heroes.
Yet just as Schreyer took to the airwaves to say Merrill was “still bullish on America” one day after the Black Monday crash of 1987, Penn Staters at Merrill believe the school will recover from these dark times.
“It’s very sad, but Penn State will be better in the end,” said Robert Goldberg, a 1971 graduate and a Merrill adviser who shuttles between Princeton, New Jersey, and his home in State College. “The school will show what it’s made of and more good will be done because of this.”
Additional reporting by Jed Horowitz; editing by Edward Tobin and Matthew Lewis