In his 112th winter, Aghairon had a sharp disagreement with Raultor, who was then Warlord of Waterdeep. Raultor wanted to use Waterdeep's acquired wealth and strenght-of-arms to create a Northern empire, with Waterdeep its capital (and Raultor its ruler) and gathered armies for the purpose. Aghairon defied him before all the people, and Raultor ordered the mage to be chained. Aghairon magically struck aside all who sought to lay hands on him. In a fury Raultor struck at the mage with his own blade. Aghairon rose into the air, just out of reach, and, as the infuriated warlord slashed repeatedly at his rising feet, gestured. Raultor's blade transmuted in his hand, from steel into a hissing serpent, which promtly bit him. The Warlord died of the venom before the shocked people assembled there. Aghairon then gathered all the captains of Waterdeep's army, and all the senior member of the families of Waterdeep. While runners sought to bring them to the Castle, flames roared and crackled in the empty Warlord's chair-of-state at Aghairon's bidding, so that none sat there.
Then at a gesture from the mage, the flames were gone as thought they had never been, leaving the chair unmarked. Aghairon seated himself; then, and proclaimed himself the first lord of Waterdeep, saying that henceforth wisdom and not armed might would rule in the city. He would gather some few - in secret - to rule as Lords with him, masked and disguised when they appeared to the people, but equal to him authority and free of coercion by any, himself included. These Lords were drawn from all walks of life in the city, and could serve as long as they wished.
The people heard and agreed, and for the next two hundred years, Aghairon ruled with his unknown fellow Lords. Over the years, the masked Lords were a group of five, sometimes six or seven, who appeared seldom and said little. Some whispered that they were Aghairon's servants, or even magical automotons controlled by the Old Mage. Still, Aghairon's justice was swift and fair, his laws good, his guardsmen polite and just as ready to help and apprehend, and the people approved. The years passed in peace and prosperity. The North was opened to humans. Roads built under Aghairon's direction linked it together, from the ruins of "the Fallen Kingdom," which had been shattered by the goblin races' attacks before men were numerous in the North, to the cities that would later become Amn. Waterdeep grew fivefold in size and wealth. From all over the Realms, folk began to come to the "Crown of the North," - drawn by money, and among them came those who rob, cheat, and steal. When words of doings extented beyond the simple theft to depection-in-workmanship and the appearance of many fly-by-night imposter craftsmen reached Aghairon's ear, he called together the senior merchants, "the Noble Ones," and suggested that they form guilds as was done in the far South to police the unscrupulous of their own professions. Some resisted, or were furious, but most saw the advantages of such an arrangement, particulary if they were free to set matters up themselves, and not have less favorable arrangements forced upon them. The Guilds were created forthwith. Twice more the city walls were expanded, as Waterdeep continued to grow in size and prosperity. Its merchants traveled the world over, bringing back exotic goods from afar, and spreading word of the city's wealth to remote lands. In the South, some listened with an eye of conquest or at least plunder, but swords were already out in those southern lands in a time of widespread strife, and no invaders came.
Aghairon's health eventually failed and he died. He was buried with ceremony in his tower, which was secured against thieves and fools. Those who learned the arts arcane from the Old Mage cast the most protective magic known upon his home and resting-place (which many believe, remains inviolate today).