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around inside 3 World Financial Center. If a new trader joined a desk, the entire desk had

to be rewired and altered. This created a domino effect, which required paying union

workers massive overtime since the reconfiguring had to be done at night. The bankers

demanded the same perk.

Cecil immediately prohibited anyone from moving their desk without getting his

permission. He told a new hire, "Why don't you just ride the elevator or walk from one

side of the building to the other?"

None of this made him popular, but he did cut costs. In 1995, he got Lehman's total

expenses down to about $950 million from $1.3 billion, and he held it there for four

years. Meanwhile, net profits went up to $71 million, compared to the disappointing $22

million a year earlier.

While all this was happening, Fuld and Pettit still had neighboring offices on the trading

floor, as well as offices on the executive floor--but their relationship started, very

gradually, to sour.

"I think [initially] they had a relationship of convenience," says one trader who was

closer to Pettit. "They knew they needed each other and both brought something to the

table, but as they became more senior, I feel they became less tolerant of each other and

gave less credit to the other. I think what friction they had was below the surface and I

feel Chris resented Dick."

"Chris knew that Dick might want to fire him and have all the glory for himself," said

Perry Moncreiffe. "He said to him, 'That's fine, but you 'll have to pay me out.'" Pettit

drew up an agreement that stipulated that if Fuld fired him, Pettit would be paid $10

million.

Moncreiffe says Fuld signed without thinking twice about it.

One of the reasons Fuld was aloof to the foot soldiers was his devotion to family, a

quality he tried to instill throughout the company--although on occasion he got mocked

for it. Fuld had two priorities: Lehman and his family.

"With Fuld, it didn't matter who was in the room; it didn't matter if it was clients in the

room. It just didn't matter," says Bob Genirs. "If his secretary came to the door and said, '

Your wife's on the phone,' Dick always took the call! I'd never met anybody in business

who'd do that."

The Fulds lived first in Bayshore, Long Island, and then New York's Upper East Side

before moving to Greenwich, Connecticut, with their three children. (They also bought

homes over the years in Florida and Sun Valley.)

On trips to Asia, while his colleagues and clients would visit geisha houses after dinner,

Dick always went back to his hotel. When he was still fairly new to the firm, Glucksman

once told him: "Take our most important client out to dinner. Don't fuck this up." Fuld

took the man to dinner. As soon as Fuld had paid the check, he wanted to leave (he was

taking night courses at New York University's Stern School of Business at the time), but

the client was adamant that their evening was not over.

"Let me be plain," Mr. Very Important Client said. "You are going to take me downtown

and get me laid. And you are going to pay for it."

Fuld said, "Fuck you," and left.

The next morning, Glucksman was livid when he heard that his client had not had a good

time. He summoned Fuld to his office and screamed at him. In an echo of Fuld's ROTC

fallout in Colorado, Fuld said to his boss, "Do you want to hear my side?"

"No!" roared Glucksman.

Later that day, though, Gucksman came into Fuld's office and said, "So what is your

side?"

When he told Glucksman what had happened, Glucksman cut off business with that

client.

And now, Fuld was the one sending young brokers out to butter up important clients. And

he expected to them to behave the way he had. He expected them "to do the right thing."

In early January 1995 Joe Gregory, then the head of fixed income, walked down the

corridor of the glass doughnut-shaped space that comprised the trading floor into Chris

Pettit's office with some bad news. He had just discovered the firm had $5 billion