Ward the devils casino; friendship, betrayal, and the high stakes games played inside lehman brothers (2010)

Table of Contents Title Page Copyright Page Dedication Epigraph Cast of Characters Key Players Lehman 1984 -1994, the Slamex Years Lehman 1994-2008: From Independence to Meltdown Key Lehman Spouses The Original Lehman Brothers Industry Players Barclays The Law Bankruptcy Administrators Government Players Prologue Part One - THE PONDEROSA BOYS Chapter - A Long, Hot Summer Chapter - The Beginning Chapter - The Captain Chapter - The "Take-Under" Chapter - Slamex Chapter - The Phoenix Rises Chapter - Independence Day Chapter - The Stiletto Chapter - The Ides of March Chapter 10 - Eulogies Part Two - THE ECHO CHAMBER Chapter 11 - Russian Winter Chapter 12 - Lehman's Desperate Housewives Chapter 13 - The Young Lions Chapter 14 - 9/11 Chapter 15 - No Ordinary Joe Chapter 16 - The Talking Head Chapter 17 - The Sacrificial Ram Chapter 18 - Korea's Rising Sum Chapter 19 - The Wart on the End of Lehman's Nose Chapter 20 - Damned Flood? Chapter 21 - Closing the Books Epilogue A Note About the Sources Notes References Acknowledgements Index Copyright (c) 2010 by Vicky Ward All rights reserved Published by John Wiley & Sons, Inc., Hoboken, New Jersey Published simultaneously in Canada No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose No warranty may be created or extended by sales representatives or written sales materials The advice and strategies contained herein may not be suitable for your situation You should consult with a professional where appropriate Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 7622974, outside the United States at (317) 572-3993 or fax (317) 572-4002 Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books For more information about Wiley products, visit our web site at www.wiley.com Library of Congress Cataloging-in-Publication Data: Ward, Vicky The devil's casino : friendship, betrayal, and the high-stakes games played inside Lehman Brothers / Vicky Ward p cm Includes bibliographical references and index eISBN : 978-0-470-63823-1 Lehman Brothers Investment banking New York (State) New York History Investment advisors New York (State) New York History Finance New York (State) New York History I Title HG5129.N5W37 2010 332.660973 dc22 2010000762 For my sons, Orlando and Lorcan Doull Without your laughter, your hugs and your very good-natured patience, "Mummy's annoying book" would not exist The mind is its own place, and in itself Can make a heav'n of hell, a hell of heav'n Paradise Lost by John Milton, 1:254-255 Cast of Characters Key Players Richard S "Dick" Fuld Jr., Lehman's chief executive officer An underachiever in youth, Fuld got a job trading commercial paper at Lehman in 1969 Joseph M "Joe" Gregory, president and chief operating officer Gregory started at Lehman in 1968 as a summer intern when he was 16 years old He used to cut the lawn of Lehman's top trader, Lew Glucksman T Christopher "Chris" Pettit, Lehman president and chief operating officer A West Point graduate, decorated Vietnam veteran He joined the firm in 1977 and rose through its ranks until, that is, 1997 Lehman 1984 -1994, the Slamex Years Board Members of Either Amex or Shearson Noted in the Book David Culver John Byrne President Gerald Ford Richard Furlaud Henry Kissinger Dina Merrill (actress) CEOs Howard L "H" Clark Peter A Cohen Lewis L "Lew" Glucksman Harvey S Golub J Tomlinson "Tom" Hill James D Robinson Sanford I "Sandy" Weill Managing Directors James S Boshart III Herbert Freiman Ronald A Gallatin Jeffrey Lane Robert "Bob" Millard The Hon Peregrine Moncreiffe Theodore "Teddy" Roosevelt V Peter J Solomon Executives Jim Carbone, senior deputy to Chris Pettit Steve Carlson, head of emerging markets John F Cecil, chief financial officer (later also chief administrative officer) Steven "Steve" Carlson, global emerging markets John Coghlan, managing director of fixed income Leo Corbett, deputy head of equities Martha Dillman, sales Robert A "Bob" Genirs, Shapiro's successor as CAO Nancy Hament, human resources Allan Kaplan, banking Bruce Lakefield Stephen "Stevie" Lessing, senior deputy to Tom Tucker Robert Matza, Stewart's successor as CFO Paul Newmark, senior vice president and treasurer, Lehman Commercial Paper Inc (LCPI) Michael Odrich, chief of staff to Dick Fuld Marianne Rasmussen, head of human resources Thomas Russo, chief legal officer until 2008 Mel Shaftel, chief of investment banking Robert A "Bob" Shapiro, chief administrative officer Richard B Stewart, chief financial officer Kim Sullivan, sales Thomas H "Tom" Tucker, sales Jeff Vanderbeek, rose to run all of fixed income, then capital markets James "Jim" Vinci, Pettit's chief of staff Paul Williams, equities chief Lehman 1994-2008: From Independence to Meltdown Executives Madeleine Antoncic, head of risk Steve Berger, briefly co-head of banking Steven Berkenfeld, global head of legal, compliance, audit Jasjit "Jesse" Bhattal, replaced Tyree as head of Asia in 2000 Tracy Binkley, head of human resources Erin Callan, chief financial officer Steve Carlson, head of emerging markets Jerry Donnini, head of equities Eric Felder, replaced Reider Scott J Freidheim, office of chairman, later chief administrative officer Mike Gelband, McDade's successor at fixed income David Goldfarb, chief financial officer turned chief administrative officer turned global head of strategic partnerships Hope Greenfield, chief talent officer Jeremy Isaacs, head CEO of Lehman Europe from 2000 onward Bradley Jack, banking, then co-COO Ted Janulis, head of mortgages Todd Jorn, hedge funds Alex Kirk, high-yield business Fran Kittredge, philanthropy Bruce Lakefield, Europe until 1999 Ian Lowitt, treasurer, later co-chief administrative officer, then chief financial officer Herbert "Bart" McDade, fixed income and later equities Hugh "Skip" McGee, investment banking Michael McKeever, briefly co-head of banking Christian Meissner, Europe Maureen Miskovic, risk Andrew Morton, Nagioff's successor in fixed income Roger Nagioff, European equity derivatives, then Gelband's successor in fixed income Chris O'Meara, CFO, then head of risk Rick Rieder, head of credit Thomas A Russo, chief legal counsel Benoit Savoret, Europe Robert "Rob" Shafir, global equities David Steinmetz, Chris Pettit's chief of staff Paolo Tonucci, treasurer C Daniel Tyree, Asia until 2000 Jeffrey Vanderbeek, head of fixed income turned vice president George Herbert Walker IV, investment management Mark Walsh, real estate Ming Xu, analyst Lehman Staff of Note Holly Becker, equities Marianne Burke, Dick Fuld's secretary Barbara Byrne, investment banking Kerrie Cohen, press officer Andrew Gowers, press officer Ros L'Esperance, investment banking Lara Pettit, sales Marna Ringel, Scott Friedheim's assistant Craig Schiffer, bond salesman Peter Sherratt, Europe Key Lehman Spouses Celia Felcher Cecil Isabelle Freidheim Kathleen Fuld Teresa Gregory Niki Golod Gregory Karin Jack Sandra Lessing Martha McDade Mary Anne Pettit Michael Thompson, ex-husband of Erin Callan Heather Tucker Nancy Dorn Walker The Original Lehman Brothers Henry, Emmanuel, and Mayer Lehman, founders Philip Lehman, managing partner, 1901-1925 Robert "Bobbie" Lehman, took over as head of Lehman from father Philip in 1925 Industry Players Gary Barancik, partner, Perella Weinberg Partners James L "Jamie" Dimon, chairman and CEO, JPMorgan Chase David Einhorn, chairman, Greenlight Capital Kenneth D "Ken" Lewis, president, chairman, and CEO, Bank of America John Mack, chairman of the board and CEO, Morgan Stanley Joseph R "Joe" Perella, chairman, Perella Weinberg Partners Daniel Pollack, lawyer for Chris Pettit Robert K "Bob" Steel, president and chief executive, Wachovia, also domestic undersecretary at the U.S Treasury Min Euoo Sung, CEO, Korea Development Bank Mark Shafir, partner and senior investment banker, Thomas Weisel Partners Bruce Wasserstein, the late chairman and chief executive, Lazard Andrew Zimmerman, analyst, SAC Capital Barclays Archibald Cox Jr., chairman, Barclays Americas Jerry del Missier, president, Barclays Capital Robert E "Bob" Diamond Jr., president and CEO, Barclays Capital Michael Klein, independent adviser, Barclays Rich Ricci, chief operating officer, Barclays Zimmerman, Michael Lehman's management team in 1989 (clockwise from top): Richard S Fuld Jr., Robert A Genirs, Paul Williams, Robert A Shapiro, Steven Gott, Bruce Lakefield, Thomas H Tucker, Theodore Roosevelt IV, Jeffrey Vanderbeek, Joseph Gregory, John Coghlan, T Christopher Pettit CREDIT: Sherry Lane Caricatures, www.sherrylane.com Tom Tucker (left) and Chris Pettit ( right) on holiday in Little Dix Bay, Virgin Gorda, 1984 Happy times: Chris and Mary Anne Pettit, Virgin Gorda, 1984 (Left to right) Mary Anne Pettit, Chris Pettit, Tom Tucker, Heather Tucker, Virgin Gorda, 1984 Chris and Mary Anne Pettit play tennis on Virgin Gorda, 1984 Chris Pettit (right) and Tom Tucker ( left) shoot the breeze, Virgin Gorda, 1984 Chris and Mary Anne Pettit, Virgin Gorda, 1984 Joseph and Niki Gregory at the GLSEN (Gay, Lesbian and Straight Education Network) 2005 Respect Awards' New York Gala PHOTO CREDIT: Desiree Navarro/Getty Images Lehman CFO Erin Callan poses for Portfolio magazine while the company faces rocky markets (March 17, 2008) PHOTO CREDIT: (c) Jeff Riedel/Contour by Getty Images Scott Freidheim speaking at the opening plenary session of the World Economic Forum annual meeting in Davos, Switzerland (2006) PHOTO CREDIT: Photo World Economic Forum/swiss-image ch The Museum of Modern Art honors Richard Fuld Jr (shown with wife Kathy) with the David Rockefeller Award in February 2006 PHOTO CREDIT: Matt Carasella (c) Patrick McMullan (Middle left ) Steve Lessing, Jeffrey Vanderbeek, and Joe Gregory; ( bottom right ) a young Dick Fuld John F Cecil, the chief financial officer (later chief administrative officer) who should never have been allowed to leave PHOTO CREDIT: Julie Beers Former CEO J Tomlinson "Tom" Hill: The Lehman co-head who should not have been fired PHOTO CREDIT: Courtesy of J Tomlinson Hill Robert E "Bob" Diamond Jr., president and CEO of Barclays Capital, orchestrated the deal of the century PHOTO CREDIT: Barclays Nancy Dorn and George Walker at the Whitney fall party (September 2005) PHOTO CREDIT: Matt Carasella (c) Patrick McMullan Peregrine Moncreiffe in Scotland (1993) PHOTO CREDIT: Mungo Meehan U.S Treasury Secretary Henry "Hank" M Paulson Jr briefs the press on September 15, 2008 He later said, "I didn't want to stand up and say, 'Guess what? We're sitting here naked The United States of America is powerless.' " PHOTO CREDIT: Brendan Hoffman/Getty Images ... Cataloging-in-Publication Data: Ward, Vicky The devil's casino : friendship, betrayal, and the high- stakes games played inside Lehman Brothers / Vicky Ward p cm Includes bibliographical references and index eISBN... at Lehman Brothers The five men who would forge the culture of the new Lehman Brothers, the postShearson Lehman, could not have been more -A- different from the polished Lehman partners of the. .. into the ruling elite of the new Lehman Brothers The firm was founded in 1850 by three cotton trader brothers Henry, Emmanuel, and Mayer Lehman The cotton business had evolved from trading and