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no problem. But he was president of the firm and all he appeared to be interested in was

diversity. That was the problem.

--Lehman executive committee member

Joe Gregory and Skip McGee never got along. McGee was completely unlike Gregory-he scored an "I" for introvert on the required Myers-Briggs personality-type tests,

whereas Gregory was an "F" for feeler and an "E" for extrovert. In executive committee

meetings McGee said as little as possible--a marked contrast to the loquacious Gregory.

Gregory didn't trust the taciturn McGee (or anyone else who seemed to keep to

themselves; he once complained that Mike Gelband, the head of fixed income from 2005

until 2007, looked down at the ground too often). Even though banking under McGee had

brought Lehman its second best year in firm history--2004--with revenues of $11.6

billion (34 percent ahead of 2003), Gregory grumbled that it wasn't good enough, and

pointed out that the firm's global fee share still had not cracked the top five, which was

one of Fuld 's goals.

Hope Greenfield, who worked for Gregory in human resources beginning in 2001, told

McGee that he'd "gone as far as he would at Lehman Brothers." She'd heard this from

Gregory, who was reportedly hoping to assign McGee to a commodity trading business in

Houston--where McGee lived, and commuted from every week via NetJet. According to

a source who encountered McGee right after his talk with Greenfield, he was

"crestfallen."

One of Gregory's complaints against McGee was the long hours his bankers put in.

Gregory got a time sheet each week, and he wasn't happy with what he read, according to

colleagues. The bankers worked far longer hours than employees in the other divisions.

Partly this was cultural. The banking analysts and associates would throw footballs

around the office and even hit golf balls--precisely because they wanted to still be at

work and sending e-mails from the office at 3 A.M. It looked macho. But Gregory

abhorred such practices. He viewed them as unhealthy.

Workaholics and introverts weren't the only people who annoyed Gregory. Now topping

the list of people he wanted to fire was chief financial officer David Goldfarb, who

rivaled Gregory as Fuld's top sycophant, and kept a perennially bullish outlook, which he

attributed to the market's decoupling from the fundamentals of the American economy.

He also had a habit of referring to the firm as "the Bros." One person joked, "You may

only guess at Joe Gregory's reaction to this."

But when Gregory told his boss he planned to fire Goldfarb, the CEO took the unusual

step of intervening. Instead of being sacked, Goldfarb was "promoted" to the position of

chief administrative officer (CAO).

Goldfarb, ignorant of the behind-the-scenes machinations, took the new position as a

hearty endorsement.

He went out and immediately bought snappier suits and a St. Regis condo in Fort

Lauderdale. "His shirts had a sheen," says a colleague, and he wore booties, or ankle

boots.

The condo became Goldfarb's albatross: He'd told the rest of the executive committee

how he had invested $4 million in renovating the property, only to have some mix-up on

the deeds keep him from finishing the job. He kept droning on and on until his audience

lost his thread of thought. He even called Jeb Bush, the governor of Florida, and Mark

Walsh for help. Some on the committee snickered secretly at his meandering tale of woe

and apparent ineptitude. However, someone close to Walsh felt that the people who

belittled Golfarb over this were petty and mean-spirited. "The developer died right after

David bought the property," someone close to Walsh points out. "That's a pretty unusual

thing to have happen."

Fuld's efforts might have been better utilized sparing some other underlings from feeling

Gregory's wrath--namely, Bart McDade and his deputy, Mike Gelband, a duo Gregory

disparagingly called "Fortress FID" for the fierce loyalty they commanded over the

traders in