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result of 2,500 different line items (deals). Cecil watched this from afar and shook his

head. "It needs to be $5 to $10 billion at most," he believed. No matter how lucrative

Walsh 's deals were, they were illiquid--if trouble hit, he wouldn't be able to get out of

them and shrink the balance sheet. It was an appalling risk.

But if anyone said to Gregory, "Shouldn't we be careful?" they were given this answer:

Got to beat Goldman Sachs.

Gregory continually talked about "building a better brand than Goldman." He gave

speeches saying Lehman needed to surpass Goldman Sachs in the next five years.

Meanwhile he continued to build his diversity program. He hired Anne Erni as chief

diversity officer in the United States, and Fleur Bothwick as head of diversity for Europe.

Mentoring and inclusion programs started to attract positive press--and, as mentioned,

even a Harvard Business School report--which was a useful counterweight to the press

reports on star Internet analyst Holly Becker, whom, it emerged, the Securities and

Exchange Commission (SEC) had been investigating since 2003. The agency thought

Becker might be giving her husband, Michael Zimmerman, a stock trader at the hedge

fund SAC Capital, inside information on Lehman research reports. (Becker left Lehman

that year, and the SEC eventually dropped the investigation without charging her.)

Several senior executives told Fuld they were concerned that the firm's focus on diversity

was taking up too much of Gregory's attention--and too many resources. Fuld talked to

Gregory about the concerns but nothing changed. It was clear that Gregory was no longer

interested in running a business. In executive committee meetings he talked about his

tremendous wealth. He was also obsessed with cleanliness and personal hygiene. He kept

a ready supply of Tic Tacs on his desk that he offered around, and he swilled Listerine at

least twice daily. Like Fuld, he did not like slovenliness in others.

It was commonly known among the senior executives on the 31st floor of 745 Seventh

Avenue that Gregory's personal annual spending budget was $15 million a year. "I never

did understand why he bought a vast house in the Hamptons for just two weeks each

year," one colleague noted dryly. He also had both a seaplane and a helicopter ready for

his daily commute.

Another employee says: "Joe always stayed in Huntington rather than moving somewhere

more affluent because he wanted to be a big fish in a small pond. He wanted to be the

richest man in town."

In 2004 Gregory pulled off his best political move yet. He persuaded Fuld to get rid of

Brad Jack on the grounds that he had not been sufficiently focused on work since his

illness. Jack says this is nonsense.

On May 24, 2004, Jack was demoted to office of the chairman, with responsibility for

overseeing all of the firm's investment banking relationships. Soon he was out--with an

$80 million severance package. In 2008, Brad and Karin Jack divorced but remained

great friends. They speak daily. Jack says, "The truth is that if it had not been for the

years of long hours and pressures, Karin and I would still be married. But we had drifted

apart."

In 2004 Vanderbeek had left, too. He knew his career was over when he was demoted; an

avid hockey player, he had seized the chance to buy the New Jersey Devils for $175

million.

Fuld so trusted Gregory now that he did something that would have been unthinkable a

year before: He anointed him president. It was official: The ghost of Chris Pettit had been

vanquished.

This move was not universally hailed in the office. The problem with Gregory, many

said, was not so much what he was, but what he was not: He was not on top of the

numbers and the businesses. A few months later Peter Cohen idly asked Fuld, "Why did

you make Joe president?"

Fuld replied cavalierly, "I don't know. He will probably be my undoing."

Chapter 15

No Ordinary Joe

I think if Joe had been in some other