• Choose a category
• All
• Classic-Fiction

Soon after Gelband left, an exasperated Alex Kirk reportedly went to Fuld and

complained that he, Fuld, hadn't been listening to Gelband properly--largely on account

of the "guy down the hall" (Gregory) whom "nobody believes," and "who just tells you

what he thinks you want to hear, not what is actually going on."

Fuld told Gregory what Kirk had said. Kirk promptly became Gregory's next target.

In a classic Lehman maneuver, instead of replacing Gelband with Kirk, who knew the

business inside out, Gregory promoted Roger Nagioff, the former head of European

equity derivatives, who lived in London and who had zero expertise in fixed income, to

run it. Isaacs says he saw Nagioff's promotion as a sign that Fuld was raising the profile

at the European business. In fact, many people thought Nagioff had been chosen only

because Gregory liked him and didn't think he posed a threat. Gregory did not even mind

that Nagioff said he wanted to stay in London, but he told Nagioff he would have to

spend two weeks per month in New York and presumed him to buy an apartment in the

city.

"That was the trouble with the whole philosophy of the place," says a former managing

director and head of global recruiting, who worked at Lehman for 20 years before leaving

in the late 1990s. "Instead of going out and finding the best, they'd find someone loyal."

After the Lehman holiday party in 2007, word got around the firm that Alex Kirk had

taken a company-chartered bus home and asked the driver to drop him off first, ahead of

the first scheduled stop.

The man he jumped ahead of was far junior to him, but he was a member of the Gay,

Lesbian, Bisexual, and Transgender (GLBT) Network headed by Gregory.

"Do you know who I am?" Kirk had reportedly asked the driver when he had at first

demurred. When Gregory heard what had happened, he was furious, according to

colleagues. He docked $1 million off Kirk's bonus.

In early 2008, Nagioff told Gregory he was exhausted from the transatlantic commute

and he was quitting. Instead of appointing the obvious successor--Kirk--Gregory chose

Andrew Morton, a Canadian who had met Fuld just twice, to run the fixed income

division. There are reports that Kirk either quit and was fired. Either way, he was gone.

Plenty of Lehman employees, including Tom Russo and Freidheim, gave speeches

warning that a bubble was coming and how imperative it was to manage risk. At Davos

in January 2008, Freidheim was quoted in the Financial Times saying, "We don't have to

wait to find out whether there is a recession or not. . . . We 're in a credit recession and we

have to deal with it."

Russo gave a speech to the G30 in November 2007, later updated for the 2008 World

Economic Forum in Davos, called "Credit Crunch: Where Do We Stand?" the highlights

of which were bullet points such as: "Household net worth will likely start to decline on a

[year-on-year] basis in the first half of 2008"; "Signs of a softer job market are starting to

emerge . . . contributing to a decline in consumer confidence"; "Meanwhile the consumer

is very levered"; and "Mortgage market problems and the contagion into credit markets

and banks pose an additional challenge to consumers."

So why wasn't Lehman taking its own advice?

By 2007, Lehman's real estate commitments had sprung in just one month from $20

billion to $40 billion. Gregory was annoyed, executives say, that Lehman had lost out to

Wachovia and Merrill Lynch for a deal financing Tishman -Speyer' s $5.4 billion

acquisition of Stuyvesant Town, a huge apartment complex in Manhattan. Fuld, too, was

irked; he was close friends with Jerry Speyer, the chairman of the real estate developer,

and those relationships were supposed to lead to contracts. Speyer and Kathy Fuld were

board members of the Museum of Modern Art. Gregory and others urged Walsh to get

the next major deal.

And so to the surprise of many on Wall Street, Walsh spearheaded a deal with Barclays

and Bank of America to finance Tishman-Speyer's