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World Economic Forum at Davos, Switzerland, and found that his hotel room fell well

below his standards. He berated the Lehman corporate staff for their shoddy organization.

Behind Bhattal and Isaacs came an influx of new Lehmanites. The firm started an

aggressive hiring campaign for the brightest and best as the stock price got higher. The

firm recruited primarily from 11 well - known business schools: Chicago, Columbia,

Wharton, Tuck, Fuqua, Stern, UCLA, Kellogg, Harvard, MIT's Sloan, and Stanford.

MBA candidates who joined the firm called the atmosphere one of "scrappy, friendly

survivors."

Another commented: "People have been through a lot together, and they are very loyal to

each other."

Another: "This place is as close to a meritocracy as it gets--I've been given more

responsibility than I'd ever imagined."

"It's an aggressive firm that will let you take risk, if you can justify it," wrote yet another.

In April 2000, the executive committee was arguing about emerging markets, especially

about whether the firm should open an office in South Africa.

"I thought it was a very bad idea, because we were never going to make money in these

[emerging markets] businesses," Cecil recalls. "And banking's argument was that to be a

global player you've got to do it, and banking is very revenue -oriented, not profit oriented. And so we'd been having this debate forever."

The debate centered on the fact that trading in emerging markets necessarily meant taking

on a lot of risk--four or five years of success could be followed by four or five years of

loss. But that was the game. The problem was that every now and again a crisis (such as

the Mexican peso fiasco, or the Russian default) would pop up and that risk might be

enough to sink the entire firm. The debate, Cecil says, "came to a head in early 2000."

First, Fuld decided they were going to get Lehman out of emerging markets. As head of

equities, this task fell to Gregory. He brought all his traders and salespeople in emerging

markets together, told them what the new protocol was, and fired them.

Then, just hours later, Fuld changed his mind. He called a meeting of the executive

committee and said, "We 're going to stay in." According to Cecil, an exasperated

Gregory stood up and said, "I quit."

He couldn't believe Fuld would do this right after he 'd executed a mass firing.

Fuld hustled Gregory out of the room and the two men huddled in Fuld's office.

A few days later Fuld swung by Cecil's office and told him what had transpired. He then

said that he wanted to "bring Joe upstairs with us. He will think differently. He will think

about the business differently. I am going to make him chief administrative officer and

you will be chief financial officer."

Cecil was surprised. At that time, he was both CAO and CFO. Cecil says Fuld told him,

"You will still be the CFO--basically the two of you will be able to get things done and

have your way with the rest of the executive committee, because you' re the two most

powerful personalities on the committee."

Cecil believed that Gregory was tired of running a business and had asked for the job and

that Fuld, who hated infighting at the top, thought he could defer "senior staff

management" onto Gregory. Cecil also realized he was being demoted, though Fuld-perhaps shrewdly--pretended not to notice.

"It' ll be great; you'll be the CFO," he kept saying to a baffled Cecil.

"But I am already the CFO," retorted Cecil.

"I told him that Joe and I don't often see eye to eye," Cecil recalls, "and he said, 'When

we bring Joe up here, he 'll kind of adopt our point of view.'"

"He thought that bringing somebody up to corporate was kind of a cure-all--all of a

sudden you think differently; you think about what's right for the firm, all the time," says

Cecil. "It was hard on me, obviously, because I was giving up a big part of my

responsibilities, which Dick just couldn't get. He kept saying to me, 'But you' re going to

be the