The Devil's Casino (12 page)

Gregory called Carlson into his office. He said, “Don’t lose your temper.” Carlson replied, “Just like Chris does with you?” He added that he was tired of watching Pettit berate Gregory each week. “It makes me sick,” he said.

At this, according to Carlson, Gregory turned around and kicked his trash can, shattering it. “He got in my face,” says Carlson. “I said, ‘ Looks like I touched a nerve, didn’t I?’ ”

A week later, Carlson was demoted.

Gregory told Carlson he had decided that Carlson had become the symbol of the “Mexico” problem. Gregory cried when he told him the news. Carlson believed that Gregory was doing this only because he thought this would help repair Gregory’s relationship with Pettit. He told Carlson that he had to move him off the floor in order to protect him to get him out of Pettit’s line of fire.

But the rift between Gregory and Pettit was by now irreparable.

Even the Pettit family noticed they no longer saw as much of Joe. Now—according to Lara Pettit—her father was tight-lipped and never discussed Gregory.

She also says she never heard her father say anything remotely derogatory about Fuld. “He was always completely respectful of him,” she says.

In a telling sign, the carpool was breaking up. Tucker and Lessing still drove in together, but Pettit and Gregory gradually found their own ways in. Pettit drove; Gregory got himself a driver.

The thing about Martha Dillman is she definitely wasn’t

a femme fatale or some sort of Mata Hari who tried to reel

Chris in; I always thought she was just very nice. I think that ‘s

important to remember.

—Peregrine Moncreiffe

B
y 1995, Chris Pettit’s temper seemed to be on a constant simmer. Even though his troops were still loyal, it was becoming clear that he could no longer manage the firm day -to-day in the intimate way he used to run things. The business was growing too fast. To make matters worse, he’d been busy contacting oncologists around the country for his brother, Rusty, who was dying of brain cancer. He was on a short fuse.

“We had to evolve more toward a model of decentralization,” says John Cecil. “As we pushed harder for the performance levels we wanted, it was more difficult for Chris or any individual to exercise the kind of control he had in mind.”

Pettit appeared to be unmoored by this change. He became unusually short with people like Ron Gallatin, who had an impish quality about him—once, according to Cecil, Pettit told Gallatin to “fuck off” when he popped his head in Pettit’s office door. This was out of character. “Usually Chris only yelled when someone deserved to be yelled at,” says one of Pettit’s colleagues.

On another occasion he got so animated in a meeting over hiring choices with Fuld and Cecil that Cecil recalls that Pettit’s voice rose to a shout. He came around to the back of his chair, and while he continued a long diatribe, his hands grasped either side of the back the leather chair. He gradually, ever so slowly, lifted it off the ground. He kept talking, apparently completely oblivious, until Fuld said to him quietly, “Chris, put the chair down.”

“Ordinarily Chris was unemotional, thoughtful, listened as much as he talked—but he became someone who had a temper, didn’t listen, was adamant and not objective,” says Tucker.

Most damaging to Pettit’s sainthood status among the traders were the stories about his office romance with a married, redheaded mother of three named Martha Dillman. Joe Gregory later wrote in the ill-f ated “Modern History” of Lehman that when Pettit was caught in this relationship, “he would turn negative on the firm. The guy went crackers and it was the beginning of a very rough period.”

Martha Dillman was hired in 1981 from JPMorgan by Tom Tucker, to run commercial paper research in Lehman Commercial Paper Inc. (
LCPI
). By 1995 she headed up research for all of fixed income and was the highest-paid woman in the company. She was soft-spoken, which sometimes masked her sharp wit. She was nicknamed “The Stiletto” for her ability to puncture holes in people’s arguments. Her husband worked in asset management for the Bank of New York. Unlike Mary Anne, who was thrifty, Martha had a driver, designer clothes, and lavish homes. She was 11 years younger than Mary Anne Pettit.

Dillman and Chris Pettit had gotten to know one another through a shared affection for Johnnie Walker Black, which they knocked back after work. At first no one had believed the rumors about them, which began to circulate in early 1993. Dillman was attractive, but everyone knew that Pettit, like Fuld, was an ardent family man.

Though no one knew it, Pettit had moved out of his Huntington home in the fall of 1993, and into an apartment Lehman kept for him and Tucker in New York City.

When he moved out he never mentioned Dillman; he told Mary Anne that he was confused and needed space. But he still came home for weekends with his children. He still spent Thanksgiving and Christmas with his family. The Pettit children had no idea he was gone.

But Tucker had noticed his friend behaving oddly since the Christmas party held at the Puck Building in New York in 1992. He, Pettit, and Dillman all got into a limo; they were planning to drop Dillman off before heading out to Huntington. They were all drunk. “We always got hammered at things like that,” says Tucker, who sat in the front seat.

Tucker was stunned when he saw Pettit lunge for Dillman in the backseat, kissing her.

Later, after Dillman got out, he said to Pettit, “Are you crazy?” He thought his friend had simply had too much to drink. (Pettit in his cups was a legend. He once gave a much -quoted speech on the various ways you could use the word
fuck—
as a noun, as a verb, as an adjective, and so on.) But over the next six months, it became obvious to Tucker that Dillman and Pettit were growing more and more intimate. Complicating things further, Dillman was pregnant that year and gave birth to a son, Tom Dillman.

Pettit let an inkling of his feelings for her slip out after the 1993 Christmas party in the Museum of Natural History. Shearson had just been spun off, and once again Pettit soaked his sorrows in Scotch.

At the end of the evening, Pettit and Dillman and others were walking to the Stork Club on the Upper West Side when one person recalls that Pettit started mumbling, over and over: “Martha, I love you.”

The rumors slowly crystallized into fact. During a Eurobond conference held in Brocket Hall, a stately home in Hertfordshire, England, one Lehman attendee, David Bullock, told people he had seen Dillman coming down the stairs near Pettit’s hotel room at 6 A.M. A few hours later, the New York headquarters was abuzz with the news.

Dillman was viewed as highly ambitious. Some people thought she was fantastic at her job and enormously likable. Craig Schiffer (who didn’t work for her) was godfather to one of her children. She was not afraid to air her views and succeeded in alienating some people—particularly Gregory, whom she told people she considered “dumb as rocks” and “untrustworthy.” Gregory in turn once told Tucker he thought she was “evil.” Others said she was a prima donna. She had risen swiftly to the head of research position, yet according to Tucker she also had a reputation for taking breaks during the day to run personal errands, which was not considered a Lehman-like work ethic. Now she began showing up to meetings with Pettit that Mary Anne felt she had no business attending. Some people wondered: Had she slept her way to the top?

For many months Pettit kept the affair from his family. Lara Pettit recalls that one evening a week her parents would go off together, supposedly to see the architect supervising the construction of their grand new house down the road. What she didn’t know was that they were seeing a marriage counselor.

But since Lara now worked for Lehman (in structured credit sales), it was inevitable that she would hear the office gossip about her father. In 1993 Lara marched into her father’s office and confronted him.

“If I find out you ‘re lying to me, I am gone,” she said. “I will not be lied to like this.”

She says he looked at her a moment, then said, “Lara, I am not having an affair.”

In February 1994, Mary Anne found two plane tickets to Washington in Chris’s coat; the passengers were listed as Martha Dillman and Christopher Pettit. She phoned Tucker late that night and asked what they were for and he had to pretend he had no idea. He liked Mary Anne very much, and the guilt ate at him. Why, he thought, won’t Chris just end the affair and go home?

Pettit still phoned Mary Anne every day from the office. He rented a house in Oyster Bay to be near his son, Chris Jr., who was in high school in the area. Dillman often stayed over.

Still, Mary Anne waited for him to come home. She continued to believe Dillman was just a drinking buddy of Chris ‘s. “We were the Cinderella couple,” she says years later. “I felt that he really loved me.”

When Chris asked Mary Anne for a divorce, she refused to cooperate. Years after Chris had moved out, Steve Lessing told people she kept Chris’s slippers under the bed and his clothes in the closet.

Chris Pettit and Martha Dillman officially “came out” when he brought her as his date to the wedding of Bob Genirs’s daughter in October 1994. Martha had divorced her husband in November 1993; Martha had told people her husband first learned about her affair when he saw a diaphragm in her briefcase.

The affair was enormously divisive in the Lehman offices, and destabilizing for Pettit. Even so, he never contemplated leaving the firm, even when John Mack of Morgan Stanley offered him the job of running fixed income there.

But he began to drink more. A colleague saw him sit at the table in the Lehman dining room and knock back a drink in one gulp before turning to greet people. “I was shocked,” says this person. “Ordinarily Chris was the most perfect host; he’d always wait for everyone else to have their glasses filled and make a toast before taking a sip; I realized what a strain he must be under. Clearly he was drinking for medicinal purposes.”

He had reason to be stressed. The lines dividing work and family had been blurred for so long that the consequences of his infidelity were manifold. The Pettits and the Lessings built homes in Hobe Sound’s Loblolly Bay neighborhood near Jupiter, Florida, and Steve Lessing’s father-in-law, Andrew J. Melton Jr., got Chris, Joe, and Tom into his country clubs. Tucker’s wife, Heather, and Lessing’s wife, Sandra, in particular, felt horrible for Mary Anne. And Tom Tucker, reeling, blamed himself, says a colleague, because he’d hired Dillman.

Colleagues say Pettit became increasingly isolated in the office. He wouldn’t listen to anyone; he became hot-tempered, apparently changing into someone that even Tucker had to admit “he couldn’t like.” He became feared.

In 1995, he and Martha moved into a $5 million house in Brooklyn Heights.

Even though she knew it wasn’t what her mother or any of her siblings wanted, Lara Pettit slowly got to know Dillman during this period. “I could see she made my father happy, and I didn’t want him out of my life,” she says.

But others in the office were less forgiving. They felt deceived by Pettit. “When we found out that this affair was going on, it was such a betrayal,” says one former Lehman employee. “Part of the reason I loved being there was because I liked working for these guys. I feel like they at least had some sort of code. And that affair was a breach of the code.”

Dillman was also divisive in the office because she was thought to be “Chris’s spy.” A former senior executive recalls that he and his peers were told by John Coghlan, a managing director in fixed income, to clam up whenever she entered the room, and as politely as possible, to leave. “We were told to tell her absolutely nothing,” says one person intimate with the situation.

Pettit’s troops resented her because she distracted him from his job—the two of them would disappear for hours.

Gregory played up all the tumult the affair created in the office. He had good reason. He knew Dillman loathed him, and he was still chafing with Pettit because of the peso fiasco.

Fuld largely kept out of all this. He did tell a few people, including Pettit, that he deeply disapproved of the affair. He expected Pettit to sort it out.

Eventually Pettit talked things over with Dillman and they agreed that she had to leave Lehman. In early 1995, Fuld sent out a firmwide memo saying Dillman was stepping down to spend more time with her family.

No one was fooled. Pettit, according to Lara, felt so bad about the whole thing that he set up a company for Dillman and put in some of his money. “He felt she’d given up her job for him,” she says.

Dillman’s resignation did little to silence Gregory, who told others that Pettit was still unhinged and that his private life was still affecting his work. Gregory also had another reason to pick a fight with Pettit. He felt his division, fixed income, which brought in the bulk of Lehman’s revenues, should be better remunerated, and he didn’t like the fact that Pettit was protecting the heads of equities and banking, which were not performing so well. (They were newer and weaker divisions.)

Gregory began holding secret meetings with people on the operating committee to explore ways to limit Pettit’s power.

Gregory said he was doing this for the good of the firm. Tucker recalls that in early 1996, Gregory told him that Tucker had been a loyal friend to Chris, but now it was okay to let it go and not worry about the friendship. Pettit was too far gone. It would be better for the business, Gregory told Tucker, to relinquish the friendship. Tucker didn’t say much in reply. He’d already decided that he was leaving Lehman. He’d seen quite enough of life on Wall Street. Unlike Pettit, he remembered the oath they took—and he wanted to keep it. Tucker still wanted to be a “good guy.”

Pettit may have been distracted, but he clearly sensed that forces were aligning against him. Around this time, he told people to stop talking to John Cecil or Dick Fuld; he told them to come to him with their queries.