TALES FROM THE ELEVATOR

By Richard Lacayo

For its bracing display of business- world vices, the implosion of W.R. Grace & Co. is hard to beat. For one thing, it has intimations of greed. J. Peter Grace, the ailing 81-year-old chairman, announced his resignation amid disclosures about hundreds of thousands of dollars in company money that had been paid for private security guards, nursing care and the upkeep of a $2 million Manhattan apartment. And of course it has a whiff of treachery. Behind the internal inquiry that led to the patriarch's undoing was chief executive officer J.P. Bolduc, 55, the very person Grace had groomed to succeed him. And naturally there's a hint of deceit. When Bolduc suddenly quit last month, the board of directors said it was because of "differences of style and philosophy." But as it later emerged, Bolduc was forced out in part because of an alleged history of sexual harassment. There it was-sex. Now the story has everything.

Everything but details. None of the five women employees who made the claims, which Bolduc resolutely denies, had ever filed a formal complaint with the company, which has procedures for reporting sexual harassment. Instead, the five told their stories to Harold Tyler, a retired federal judge whose law firm was hired by the Grace board to examine the separate issue of whether the chairman's perks should have been disclosed to the Securities and Exchange Commission. In the midst of that inquiry, Tyler was diverted by reports that Bolduc, who is married and has four children, had a reputation for crude behavior and lewd come-ons with female colleagues.

Last week two of the five women also spoke to TIME. Both insisted on remaining anonymous for fear, they said, that by coming forward they would damage their career prospects and be stigmatized as troublemakers. (One remarked, "The good-ole-boy world is still the good-ole-boy world.") And though they work in separate parts of the operation and do not know each other, they both drew a picture of Bolduc as an executive lech, fond of sticking his tongue in the ears of startled women or slipping a hand up their dresses-all in the name of unbuckled fun.

One of the women, a manager, says she had her first experience with Bolduc's more than collegial style in an elevator. "He paid me a compliment, then reached over and put his right hand on my left butt cheek. Fortunately, the elevator had reached our floor, so I just stepped aside and walked him to the [building's] exit."

She says she also witnessed crude behavior on his part with other female employees. One instance occurred in the early 1980s, when the woman says she saw Bolduc greet a female colleague whom he barely knew by pulling her into an unwilling embrace when she moved to shake his hand. Even more embarrassing, says the manager, was a scene just last year after a business meeting. "On the way out of the building, as he was saying goodbyes, Bolduc turned to one woman employee and instead of shaking her hand, pulled her toward him and stuck his tongue into her ear. She was startled, but she laughed it off. When he did the same thing to a second employee, it was no longer funny.

The second woman who spoke to Judge Tyler, an administrative assistant employed by Grace, recalled the morning that Bolduc popped into her office unexpectedly. She offered to bring him some coffee. "When I bent down to put the cup on the credenza for him, he reached over and ran his hand up my leg." This was no accident, she says. "He traditionally wears a Cheshire-cat grin on his face, and he was grinning then." In shock, she stalked out of the room and did nothing.

But later, she says, "I told my boss, 'I'm not looking to create a big problem or a legal problem, but could you tell this person I am not for sale?'" It seemed to her that Bolduc was too far up the corporate hierarchy to challenge through normal channels. She later told Judge Tyler, "The big question mark for all the women he approaches is, '[What will happen] if I don't play along with him? Will I lose my job?'" She says she is still puzzled by Bolduc's behavior. "I could not believe he could be in the position he was with a personality like his."

Though Bolduc would not return calls for comment, his attorney, Gerald Walpin, says the complaints are part of the smear campaign by remaining Grace directors and that the incidents described by his accusers were no more than "kidding" on Bolduc's part. "That no one ever filed a complaint," he says, is proof "that employees viewed it as friendly banter and nothing more."

Whatever his merits as a boss, Wall Street liked Bolduc's performance as a manager of the giant specialty-chemicals and health-services company. By focusing on Grace's core businesses and selling off subsidiaries, he was credited with bringing the company back to profitability. But colleagues say that over the past year or so Bolduc had begun to seem impatient about his long wait to inherit the top job from Grace, who is suffering from lung cancer. Where previously Bolduc had treated his boss with deference, he was now apt to roll his eyes whenever the elderly Grace rambled on at board meetings. As a sign of his power, he began cutting off the older man's privileges. For one, he reduced Grace's personal corporate staff from about 10 to four. After taking away Grace's Gulfstream IV jet, he crowed to a colleague, "Peter is yesterday's mashed potatoes."

Almost immediately after Bolduc resigned, the institutional shareholders that hold sizable chunks of Grace stock became worried that his departure would mean that the company's 22-member board would balk at reforming itself. Among other things, investors wanted a smaller board with fewer members over the age of 70. Grace arrived in a wheelchair last week to address his last board meeting as chairman. Weakened by radiation treatments, he was unable to read aloud the full text in which he condemned "the scheme" used to oust him from power. But when the meeting was over, Grace and eight other company directors, most of them over 70, had nonetheless agreed to leave the board.

It also emerged from that meeting that Grace paid a handsome sum-perhaps as much as $43 million-to be rid of Bolduc as well. First reports of his "golden handshake" severance package put it at $20 million, which included the company's agreement to buy back from Bolduc $12.2 million in Grace stock he already holds. But Grace had also agreed to give Bolduc retirement and health benefits, including an annual pension of $848,585 plus full medical benefits, all of which could amount to an additional $23 million if he enjoys the 82-year life span that the actuarial tables predict for men of his wealth, who tend to live longer than average.

The size of Bolduc's severance deal has already led to two shareholder lawsuits. And Bolduc is likely to still be pursued by Constantine Hampers, chief of the medical-services subsidiary that accounts for 40% of Grace earnings. Over the objection of some shareholders, who fear he is too close to the Grace family, Hampers has proposed himself as the next ceo of Grace. And he still harbors a grudge against Bolduc, who attempted to bring the semi-independent medical services under his control. In recent weeks Hampers hired Kroll Associates, a New York- based corporate security firm to look into rumors against Hampers and to examine further reports of sexual improprieties at Grace. The corporate melodrama that already has everything may soon have much more. --Reported by JohnMoody/New York, with other bureaus

With reporting by JOHN MOODY/NEW YORK, WITH OTHER BUREAUS