In 2000, a year after Goldman Sachs went public, Cohn approached Rappaport with a proposal to join an over-the-counter electronic market for metals and energy trading. The bank was developing, along with Morgan Stanley, BP Plc and others, what would become IntercontinentalExchange, or ICE.
"Things that Gary wanted to implement were things that would encroach upon the floor-trading franchise," Rappaport said. "It would basically, which is how it actually evolved, put the floor community out of business."
Secret Talks
Cohn held secret talks with a group of Nymex executives that included Rappaport, the former chairman said. When the proposal was brought to the board, members were offended that a small group had been holding conversations and that directors were given a "short window" to decide, according to Rappaport.
"If there was a sensitive issue coming up for board discussion, he wouldn't show any sensitivity," he said of Cohn. "That happened, without exaggeration, 100 times."
Neal Shear, who headed commodities at Morgan Stanley at the time and worked with Cohn on the development of ICE, said the issue "wasn't about sensitive or not sensitive. It was about the way the world was going to work."
The electronic exchange, which now owns the world's largest credit-default swaps clearinghouse, started that year without Nymex, whose board rejected the plan.
Conflict of Interest
The exchange's executive committee asked a law firm to examine Cohn's role, and it concluded that Cohn shouldn't have been involved in the talks because he had a conflict of interest, according to a 2000 article in Securities Week, an industry newsletter. No legal action was recommended, according to the article, citing people familiar with the matter.
"We never saw a conflict," Richard Schaeffer, the Nymex treasurer at the time, said in an interview. "It is sour grapes from people."
Chris Grams, a spokesman for Nymex, now owned by Chicago- based CME Group Inc., declined to comment.