The Devil's Casino_ Friendship, Betrayal - Vicky Ward [73]
three corner offices on the 31st (executive) floor of 745 Seventh Avenue. (Dick had one,
and Fran Kittredge gave herself the other.)
"Dick never quite got over how Lessing turned this bad situation to his advantage," said
Cecil, who had remained close to Lessing. "It really impressed him that he hadn't quit.
He'd stuck and made the job work."
Lessing had one huge advantage: As had been proved with the Russian crisis, thanks to
both his popularity and his vast Rolodex, there were not many clients--or potential
clients--Lessing could not get on the phone.
As Doug Ireland, a former Lehman managing director, recalls, "He's a natural sales guy.
He knew the guys at Met Life, and he knew the guys at Federated, and he knew the guys
at Black Rock. And when we needed favors, during [the Russian crisis], Steve was
Johnny-on-the-spot, calling every single one of them, saying, 'What do you need? How
can we help? We' re going to be okay; stay with us.' And he was absolutely, in my mind,
the MVP."
Lessing was also the liaison between Greg Maffei, then the CFO at Microsoft, and Fuld-which was a precious relationship for Lehman. Unlike his contemporaries, Lessing was
also able to "eat crow," as one peer put it, and get back into Gregory's good graces. This
was a feat no one else in the history of the firm managed to pull off.
Jeff Vanderbeek was not as lucky. He was demoted from the position of head of all
capital markets to office of the chairman, "responsible for risk, strategy, and private
equity."
Vanderbeek was not respected by many of the people who worked under him in fixed
income, including Bart McDade and Mike Gelband. Vanderbeek was expected to find a
graceful exit strategy.
The following year--2003--was a big one for Lehman. Its price-to-earnings ratio was now
finally up to 14, which meant it was in a position to buy a valuable investment without
diluting shareholder value. On July 22, 2003, it bought the investment management
business NeubergerBerman for approximately $2.625 billion--which brought Lehman's
assets under management to $116 billion. Neuberger became known as "the crown jewel"
at Lehman.
Fuld was enjoying mountains of good press, and he was named the top CEO in fixed
income sales and trading by Institutional Investor. Lehman's brand of fixed income sales
and trading, equity research, and fixed income research were all ranked first on the
Institutional Investor list. There were no such accolades for banking. As usual, this was
Lehman's weakest spot.
So Fuld again decided to shake up personnel. He promoted a former Texas high school
football player turned formidable Houston energy lawyer, Hugh "Skip" McGee, to global
head of investment banking; Mark Shafir, from Thomas Weisel Partners, was hired as
head of mergers and acquisitions (M &A). Other strong hires included a young German,
Christian Meissner, who was recruited to run banking under Isaacs in Europe, where the
firm still had not broken into the top 10. In private equity, Charlie Ayres was hired from
MidOcean Partners to head up global merchant banking.
Fuld and the executive committee prodded Walsh to work harder than ever. Walsh now
had several funds under management, aping Goldman Sachs's model, the so-called
Whitehall Funds--but Fuld and Gregory wanted to keep using the firm's balance sheet for
his lucrative deals. Walsh was happy to oblige. "When Mark was keen to do a deal he
didn't want to know about obstacles or risk; there wasn't much stopping him," says John
Cecil. One major New York City realtor recalls that at this time, "Lehman's aggression
was just startling in [real estate]. They were determined to beat out absolutely anyone to
every deal."
Goldman Sachs was envious, but wary. "We stuck to ensuring that the maximum we had
exposed of our own money was only 20 percent--the rest was put out to a fund," says a
source at the company. "You just couldn't assume the real estate market would continue
to go up."
But Walsh, Fuld, and Gregory did.
By 2008, the firm had at