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John Akers (former president of IBM), Roger Berlind (a theater producer), Thomas

Cruikshank (CEO of Halliburton), Hideichiro Kobayashi (a general manager at Nippon

Life Insurance), Henry Kaufman (the former chief economist at Salomon Brothers and

the only person on the board with a background in finance), John Macomber (a real estate

expert), Dina Merrill (an actress, daughter of the co-founder of E.F. Hutton), and

Masataka Shimasaki (another Nippon Life head). They were all friendly with Fuld--and

they'd never even met Pettit. The board endorsed his plan.

Even though he had made Fuld sign a $10 million severance deal, Pettit never saw the

coup coming. It never occurred to him that his old friends would betray him. Why?

Because he would never have done it to them.

As Mel Shaftel says: "Though he chewed Joe out, especially during the Mexican thing, it

was like you'd chew out a child. He would never have fired Joe. Joe was 'family' to him."

On February 18, 1996, Lara Pettit organized a surprise 50th birthday dinner for her father

in a private room at Gramercy Tavern, a swank American tavern in New York City's

historic Flatiron building. She invited Fuld, Gregory, Lessing, and all the other members

of the executive committee, and most of them came.

When Lara and her father opened the door of the private dining room for the big surprise,

her father blanched. "Please stay," he begged his daughter.

"No, no. Have a good time," she said gaily.

The next day she went to the restaurant to pay the check, expecting it to be huge.

It wasn't. Judging by the receipt, the party had started at seven o'clock and was over by

eight.

She asked her father what had happened.

He told her, "Oh we just had drinks--we didn't want you to pay for more than that."

The Ponderosa Boys had all carpooled together for decades, and now they couldn't even

stand to be in the same room together.

Once Dick Fuld knew he had the support of Tom Tucker and Steve Lessing--"Chris's

guys"--he knew that he had control of Lehman Brothers. He didn't want to fire Chris

Pettit, but he did want to hobble him.

"It took a remarkable amount of push from me and Steve Lessing to get Dick emboldened

enough," Gregory wrote later for the unpublished Lehman "Modern History." "He needed

to believe that we, whom he viewed as Chris loyalists, would in fact be there for him."

Lessing and Gregory were in Singapore on March 15, 1996, on business when the plan to

"force Chris into a box," as Gregory put it, was initiated. Fuld was going to tell Pettit he

had decided to fire Williams and Shaftel, and that unless Pettit agreed, he 'd have to strip

Pettit of his directorship of the operating committee.

He would also tell Pettit the firm would henceforth be led by a small group known as the

frontline committee, of which Pettit would be part--but not its head.

To the end, Fuld needed to be propped up for his confrontation with Pettit. According to

Gregory, before calling Pettit into his office, Fuld asked Gregory and Lessing on the

phone in Singapore, "How am I going to do this again?"

When Fuld summoned Pettit to his office and told him he needed to fire Williams and

Shaftel, Pettit refused. In that case, Fuld said, he needed to ask Pettit to step down from

running the operating committee. He laid out his plans for a small committee of six, and

Pettit again refused.

So Fuld demoted him to "head of client relationships."

What happened next is known only by the two men who were in that room. All that

anybody else knows is that there were raised voices and that Pettit then marched out of

Fuld 's office. Dave Steinmetz, Pettit's chief of staff, recalls seeing Fuld come out of his

office right after he'd confronted Pettit. Steinmetz told colleagues Fuld was ashen-faced.

Had he--completely unintentionally--done something irreparable with Pettit? Had he

pushed him out?

For the better part of a week, Pettit tried to fight back, but once he realized that Tucker,