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April 1, 2004

Bean Counting in Siberia: Even with the vodka and perestroika flowing, there was something missing

By Desmond MacRae

Eric Kennedy is glad he's back in the Big Apple. Despite the congestion, noise and the frantic pace, it beats Siberia. That's where Kennedy, a single 30-year-old who has just opened an agency trading firm, spent his early career while with the now shuttered Arthur Andersen.

But let Kennedy, an outdoors type who has camped out in Russia's brutal landscape, explain it. "The Siberian lifestyle was mostly dreary and dark," he told Traders Magazine. Arthur Andersen placed him in Novosibirsk, a city of 1.6 million, which has huge supplies of oil and mineral wealth. The city has subways, buses, fast food, television and other conveniences.

The problem was this place from the services to the infrastructure - had fallen behind. Kennedy, a New Jersey boy, felt as if he had been transported back into a scene from a 1950s movie. Not many could imagine that this young trading executive, who went to high school in Holmdel, New Jersey, would one day end up in Siberia.

But how did it happen? It began in his high school when Kennedy took Russian instead of Spanish. Later, at Lehigh University, he majored in accounting, but minored in Russian. "Perestroika [openness] was well underway in the former Soviet Union, so I figured I could get a job in Russia and travel," Kennedy recalls.

The Rookie

After his graduation in 1996, Kennedy worked with Arthur Anderson in New York. But the thrill the young rookie felt, when he was selected to help open a Russian office for the firm in March 1997, soon evaporated. Novosibirsk was in the heart of Siberia. Despite speaking poor but serviceable Russian, Novosibirsk was a big shock.

There were only 40-odd expatriates in the area, mostly Irish, British and Americans who worked for Pepsi, Proctor & Gamble, Coca Cola and other international firms. But it was not all beer and skittles. Everything from the buildings to the clothes was gray.

Still, in the 17 months he soldiered in Siberia, Kennedy did have some fun. He traveled a lot. He camped out and has fond memories of a local wedding. It was a civil ceremony, but afterward a huge party was thrown. "There was a lot of vodka," recalls Kennedy. "It was very different than anything else I had ever experienced."

Both winters Kennedy was in Siberia, it snowed almost every day from October through April. On the best days, the temperature ranged from 5 degrees to 0 degrees, Fahrenheit. Kennedy was once in an oil-drilling village on the Arctic Circle. The temperature was minus 65 degrees, Fahrenheit. "You could see your breath shooting out almost 15 feet away," he recalls. Summers were the opposite. "We were right where the earth tilts closest toward the sun in summer," Kennedy says. "It became extremely hot and muggy."

On the business side, Kennedy learned that the Russian accounting system was tax-based. Profits for shareholders were not usually part of the balance sheet equations. There were 24 people in Kennedy's office, including the two smiling ladies flanking Kennedy, in the photo snapped at a Siberian client's log cabin. (Kennedy, a bit of a ladies man, who looks a little like Yul Brenner in his heyday, said women consider his shaved head attractive.)

In November 1999, Kennedy returned to work in New York in Andersen's transaction and advisory practice, a reassignment which involved Instinet's acquisition of Island. He later went to work for Instinet.

In Russia, Kennedy became skilled at costing processes in manufacturing. At Instinet, he learned that securities pros and manufacturers look at transactions differently. Nonetheless, Kennedy says that transactions for both can be similarly costed.

New Business

When the Instinet/Island transaction was done, Kennedy would find himself out of a job. So he and an Instinet colleague, Marc O'Brien, teamed up with Brian O'Day to build an institutional, agency brokerage. The trio formed eXGEN (pronounced x-gen). Naturally, Kennedy is CFO. The firm, which has offices on the Upper Eastside of New York City, has four traders. "We start at a penny a share, but can be paid according to the value of each trade we do," Kennedy says.

Kennedy is confident about the New York enterprise. And he has no plans for another transfer. New York is his home, a sprawling, noisy place he wouldn't swap for all the vodka in Siberia.