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39. The Treasury Department/Fed study also revealed that, over a period beginning in early 1986, Salomon had bought more than half the bonds issued in 30 out of 230 auctions (Louis Uchitelle, Stephen Labaton, “When the Regulators Stood Still,” New York Times, September 22, 1991).

40. Warren Buffett testimony, “In the Matter of Arbitration Between John H. Gutfreund against Salomon Inc., and Salomon Brothers Inc.” Session 13 & 14, November 29, 1993.

41. Contracts differ by employee, by company, and by state, and the indemnification provisions use broad wording that is subject to interpretation, but in general, corporate officers accept the legal risk that goes with their position on the condition that their employers pay legal fees unless they are convicted of fraud or other criminal wrongdoing or have engaged in willful misconduct. Salomon’s action was highly unusual at the time and remains unusual. In 2005, KPMG’s refusal to pay its partners’ legal fees became the subject of lawsuits. In July 2007, a U.S. federal judge dismissed a case against thirteen KPMG employees for promoting aggressive tax shelters, because he determined that the government had strong-armed KPMG into denying them legal payments.

42. Transcript of Federal Open Market Committee meeting, October 1, 1991.

43. Interview with Gary Naftalis.

44. Interview with Otto Obermaier.

45. Ibid.

46. Interview with Gary Naftalis.

47. Interview with Otto Obermaier.

48. Letter to Salomon Inc., shareholders as reprinted in the Wall Street Journal, November 1, 1991.

49. Interview with Paula Orlowski Blair.

50. Ibid.

51. Salomon advertisement in the Wall Street Journal, November 1, 1991. All of Salomon’s growth in earnings for several years had been given back to employees. Salomon performed in the bottom third of stocks in its market-cap class. The third-quarter-income statement would have been drenched with red ink had not the lower bonus pool reversed it. The previous “share the wealth” approach subsidized money-losers so that everyone was richly paid. Buffett’s biggest change was to link bonuses to individual and division performance. For the five years ending December 31, 1991, Salomon Inc.’s stock ranked 437th in performance among S&P’s top 500 stocks. (1991 Salomon Inc., 10K)

52. Interview with Deryck Maughan.

53. Interview with Jim Robinson.

54. For decades, as a partnership, it had—literally—been run for the employees. It was the inherent separation of capital and labor at a publicly owned investment bank that was the problem.

55. Otto Obermaier. He later wrote “Do the Right Thing: But if a Company Doesn’t It Can Limit the Damage,” Barron’s, December 14, 1992.

56. The same was not true of the May two-year note squeeze, in which several small firms were bankrupted. Had it ever been proven that Mozer colluded with the hedge funds to corner the market or submitted false bids in that auction, Salomon’s and the individuals’ penalties doubtless would have been more severe; the whole story might have ended differently.

57. Interviews with Frank Barron and Bill McLucas. McLucas confirms the gist but can’t recall the exact words.

58. Interview with Otto Obermaier.

59. Mozer served his four months after pleading guilty to lying to the Federal Reserve Bank of New York. The SEC and prosecutors took no action against Feuerstein.

60. Gutfreund was also barred from heading a firm without SEC approval.

61. Interview with Paula Orlowski Blair.

62. In fact, Jerry Corrigan did not lift the full ban on Salomon until August 1992.

63. CNBC Inside Opinion, Ron Insana interview with Gutfreund, April 20, 1995.

64. Interview with John Gutfreund.

65. Interview with Charlie Munger.

66. The arbitrators were John J. Curran, Harry Aronsohn, and Matthew J. Tolan.

67. Interview with Frank Barron.

68. Those who have spent any significant amount of time with Munger will instantly recognize the sensation of talking to him when his head is turned off, while something occasionally