Too Big to Fail [63]
Fuld had spoken to the reporter Susanne Craig on and off the record many times over the last few months. But he’d certainly never breathed a word of this. Craig’s article was brief and to the point. She knew that Lehman had been in discussions with the Korea Development Bank, a state-owned policy bank in South Korea; she knew that it would be a huge international deal, and that it was being orchestrated by Kunho Cho, Lehman’s top executive in Seoul. The only way she could have learned those essential details was if someone in the know—someone at the table in the conference room that morning, in fact—had leaked the story.
Coming on the heels of David Einhorn’s campaign against the firm—Lehman’s stock had fallen 22.6 percent since his speech in May—it was yet another public relations disaster. Fuld knew perfectly well that bankers were occasionally prone to being loose-lipped about their clients, but this concerned the firm he had given his entire life to, and was about its very survival. The breach of loyalty stung him deeply.
Just a day earlier rumors had circulated that Lehman was so desperate for liquidity that it had tapped the Federal Reserve’s discount window. That was untrue, but Lehman’s stock was pummeled anyway, falling 15 percent.
For the past two weeks Fuld had been forced to respond to such rumors on an almost daily basis, as Einhorn’s comments had taken on enough credibility to sow seeds of doubt about Lehman’s own. To Fuld’s thinking, that was precisely Einhorn’s objective. Fuld’s co-chief administrative officer, Scott Freidheim, had been in touch with nearly half the public relations flacks in the city, desperately attempting to formulate a counterattack against Einhorn and the shorts. “How does this guy have any credibility coming after us?” Freidheim asked Joele Frank and Steve Frankel, two crisis specialists. “We can’t go tit for tat with everyone who makes a claim,” he’d said to another PR executive, Steven Lipin. In the meantime, the firm had established a clear script for all discussions with the media: There would be no more winging it; they couldn’t afford any mistakes.
Fuld thought Craig’s coverage had crossed the line, even if it was a legitimate scoop; To him, in his fit of rage, it was as if she had knowingly set out to undermine the firm, just like Einhorn. The article made Lehman seem like a collection of petty high school cliques, a gossip mill. He had always considered her one of only a handful of trustworthy reporters. The week before she’d even asked to sit in on one of Lehman’s management meetings, a request he thought was ludicrous, but he’d declined the request politely. “I’d like to be helpful,” he explained. “But I can’t allow that.”
When Craig phoned Fuld that afternoon to follow up on her story, he lit into her mercilessly. “You pose as a responsible journalist but you’re just like the rest of them!” he said. “Your seat at the table has been removed,” he shouted, then slammed down the receiver. There would be a new rule in effect at Lehman, he subsequently decreed: Nobody, not even the PR department, was allowed to speak to the Wall Street Journal ever again.
When he learned of Fuld’s diktat, Andrew Gowers, Lehman’s head of communications, was beside himself. “I don’t understand how on earth this policy is supposed to help us communicate in the middle of all this if we’re going to shut out the biggest financial paper in the country,” he complained to Freidheim.
“I don’t know,” Freidheim replied with a shrug. “It’s between Dick and the paper.”
Scott Freidheim knew who the leaker was, or so he believed.
At forty-two years old, Freidheim was the youngest member of Fuld’s inner circle. The son of the former CEO of Chiquita, he was the ideal Fuld operative: a get-it-done loyalist with a killer instinct. As the firm’s co-chief administrative officer, he wasn’t so much a banker as he was a highly paid strategist. To Fuld’s detractors, he was one of the chairman’s pets, a know-nothing protector of the throne who shielded