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minutes,” was the verdict of one ex-employee. The fact that they wouldn’t have a job without Buffett was forgotten in the grim shadow of the Bad Bonus Day. “Warren didn’t understand how to run a people business” became the refrain among ex-employees. Salomon wasn’t the kind of place where you could just raise prices, cut overhead, and pull cash out of the business up to the parent company (although Buffett did as much of that as he could). You had to keep very smart people motivated when they had other options instead, during a time when “you were dying by a thousand cuts a day,” as Olson put it. Buffett viewed the new pay deal as a cultural litmus test: Those who left were mercenaries whom the firm could do without, and those who stayed had signed on to the kind of firm he wanted.

Wall Street being a mercenary kind of place, little by little many of the top employees continued to drift away, carrying books of business to competitors as they departed. Buffett couldn’t sleep. “I couldn’t turn off my mind,” he says. He had spent his whole life avoiding commitments to anything where there was no escape hatch and he didn’t have total control. “I’ve always been leery of getting sucked into things. At Salomon I found myself defending things I didn’t want to defend; and then I found myself being critical of my own organization.”

Months had passed and Obermaier was still pondering whether Salomon’s conduct was bad enough to indict. He knew “it would have been the death knell of the company.”55 In considering the phony bids, he thought it important that Mozer’s actions were motivated more by rebellion against the Treasury rules than simply to enrich Salomon. Likewise, no serious financial losses had occurred from the phony bids.56 He also weighed Buffett’s promises and the new culture.

Together with Breeden at the SEC, he began to work on settlement talks with Salomon that would allow the firm to escape indictment. Frank Barron, the lawyer from Cravath, went down to the SEC to negotiate its share of the settlement in a meeting with Bill McLucas, Breeden’s deputy, who informed Barron the fine from the Department of Justice and the Treasury Department would be $190 million plus a $100 million restitution fund. Barron was shocked—the fine was huge for the transgressions of a single trader who had violated Treasury rules without causing serious harm to customers or the market. Why? he asked. “Well, Frank,” said McLucas, “you have to understand that it’s going to be $190 million because that’s what Richard Breeden says it’s going to be.”57

The moment when John Meriwether had rushed into the conference room that Sunday morning, white and shaken, quoting Dick Breeden, who had called Salomon “rotten to the core, rotten to the core,” came to mind. There would be no appealing this decision. Salomon agreed to pay the extraordinary fine.

Buffett was trying to undo the “rotten to the core” image as fast as he could. Dubbed “Jimmy Stewart” by the staff, he nixed deal after deal that he thought was too close to the line, despite the resulting internal backlash. Then another crisis erupted that almost derailed the settlement.

Mozer made a proffer to the government to plea-bargain his case. He revealed some tax-motivated trades done by him with other traders that involved making secret side deals with other firms to guarantee the other firms against losses. The tax trades would give the prosecutors an even stronger reason to press criminal charges against the firm.

Besides the obvious motivation of trying to save his own neck, Mozer had ample reason to harbor bitter feelings toward Salomon. Had the firm’s former leaders handled the situation properly, he still would have been fired, and he might have still been charged with fraud and be going to prison—but his name would not be splashed all over the newspapers as the man who had nearly caused the largest financial failure in history.

During an emergency board meeting, Obermaier called Olson about the tax trades to settle things down. He said that he had decided not to scuttle the settlement