The Devil's Casino (18 page)

But, as the dramas played out in the Lehman offices, they also played out among the wives. Many of them were as competitive as their husbands, and they ruthlessly criticized or exploited any perceived weaknesses of their rivals.

The wives of executive committee members had to attend numerous Lehman functions, such as the annual induction of managing directors. They were expected to contribute to the numerous philanthropic causes Lehman supported (this number grew greatly once those endeavors fell under the purview of Gregory). Each couple was expected to make annual donations to the American Red Cross, Harlem’s Children Zone, the American Friends of London Business School, and various hospitals—all of which often totaled more than $32 million each year in Lehman donations.

Over the years there were more and more corporate and social events that the wives were expected to attend—even ones that weren’t directly related to Lehman.

Kathy Fuld collected modern art. She particularly liked Cy Twombly, Brice Marden, and Jasper Johns. In 2002, she was put on the board of the Museum of Modern Art (MoMA), and by 2007 was a vice chairman. Not only were the wives of Lehman’s senior management expected to attend MoMA evenings (along with their husbands), but they also “were told exactly how much they had to donate,” says one. There is now a wing of MoMA dedicated to Kathy and Richard S. Fuld Jr.

Whatever his influence and his success at marriage, not even Dick Fuld was powerful enough to abolish divorce. In April 1999, Teresa Gregory filed for divorce. No one was surprised. Joe ‘d often asked colleagues about their wives and exclaimed how beautiful they were. Teresa Gregory was athletic and fun, but according to one of Gregory’s colleagues, “she didn’t fit in at the Lehman dinners.”

Karin Jack recalls one evening at the Fulds ‘ apartment in the city when Teresa Gregory was left standing on her own. “She needed help, guidance, and Joe didn’t give her any,” Karin recalls.

By 2000, Joe Gregory had remarried, to a dark-haired Greek-born beauty named Niki Golod, who was recently divorced. Gregory and Golod had met through their sons, who were best friends at school.

“Isn’t it great that now they’ ll be stepbrothers?” he used to say to colleagues.

Niki Gregory loved the clothes and the jewels that her husband lavished on her. She was known to take trips to Los Angeles just to shop. She gave the Lehman wives tours of her vast shoe closets in their Huntington home. One person taken on the tour described the closet as being “twice the size of the Jimmy Choo store in New York.” It was filled with Christian Louboutin, Manolo Blahnik, and Chanel. It included every style imaginable: pumps, stilletos, boots of every height, ballet flats, strappy evening heels. “Many of them had never been worn,” remarked one awed visitor.

Like her husband, Niki outsourced all her needs to a personal staff of about 30. “I don’t think she ever set a table in her life for a dinner party,” said one wife. “It wouldn’t occur to her to do that.”

After Niki was diagnosed with breast cancer and had a mastectomy, Lehman executives (at Gregory’s request) were told to give like crazy to breast cancer awareness. “For the senior-level guys it was approximately 50 grand each; for the executive committee, approximately 100.” Fran Kittredge, who was responsible for planning all Lehman’s corporate events (even overseeing the details of the flower arrangements, which she had photographed and e-mailed to her before green-lighting them), told people what “their number was” each year.

The firm gave to political candidates as well. Fuld, say colleagues, was not loyal to either party; he went with whichever candidate he liked. The firm made sure it donated equally to both parties. However, since most of the executive committee, including Fuld, were Democrats, if a Republican looked like he might vault into the White House, Steve Lessing (a Republican) was designated to “handle” him. In 2007, after he’d retired as governor of Florida, Jeb Bush was made a private equity adviser and given an office on the 31st floor.

The executive committee members and their wives were all expected to attend the annual summer get-together at Dick and Kathy’s ranch near Bald Mountain in Sun Valley, Idaho. One wife remembers, “It was this weird combination of business and then competition between wives and their husbands. Hiking was mandatory for all.”

Karin Jack says that trip was always “an absolute nightmare for the wives to pack for.” The evenings required pretty dresses, jewelry, and Manolo Blahnik shoes, while they needed hiking gear during the day.

The couples got there on the two planes owned by Lehman, known as “Lehman Air.” The biggest—a G4 luxury jet—was known as LB1. That was the plane Fuld always used. Kittredge arranged for every person or couple to be met at the airport by a driver with an
SUV
. The waiting line of dark-glassed SUVs was almost comical to behold, according to one attendee. It was like a scene from a movie depicting the motorcade waiting for a landing president. Except this was not the president. This was just the Lehman Brothers executive committee and their wives.

Kittredge also flew in personal chefs to cook the meals. “Breakfast was sublime,” says one diner. “It was the breakfast of your dreams.”

The first meal of the day began promptly at 7:30 A.M. and ended an hour later. Then Fuld would sit in a hard-backed armchair beside the fireplace in his drawing room with the men in chairs and on sofas around him. Most of them would be wearing khakis and golf shirts. (The group would break at 12:30 for lunch and golf.) The women meanwhile shopped, biked, or went antiquing.

Everyone was supposed to be dressed appropriately.

This meant that men should wear khaki pants and either a golf shirt or a button-down. Steve Lessing almost always wore a shirt with the logo from one of the dozen country clubs he belonged to. Skip McGee usually wore a button-down shirt and khakis. Jesse Bhattal stuck with his silk ascots.

But as the years went by, there were some nongolfers in the group who had no clue what the dress code was and didn’t much care. This was a grave mistake—Fuld cared what people looked like, both in and out of the office. He always looked immaculate; he wore a navy suit to work, purchased from Richards department store in Greenwich, Connecticut, along with a white shirt, Hermes tie, and shiny black lace-ups in the British shoemaker Church’s style. He had a tailor put matching stitching in each of his suit pants and jackets so he could easily see which tops went with which bottoms. “Sloppy dress, sloppy thinking” went his motto.

Lehman was the last of all the Wall Street firms to go casual on Fridays. In the late 1990s Fuld reluctantly called the operating committee to have a vote on whether they wanted it, and to his dismay they all did. He sighed, “I don’t know what this means.” He reinforced the point: “You know what? This democratic bullshit has gone on for long enough.”

Gregory chimed in: “Oh, I don’t want this either, Dick. We are a different generation. We don’t believe in it, but we have to do this for the younger people.” Fuld compromised by letting the entire firm go casual on Fridays except for the 10th (executive) floor. As he agreed to it he said, “It is a dark day for the firm.”

In the summer of 2006, Roger Nagioff—a London-based co-head of equities, who owns a fleet of cars, including a Ferrari Daytona—arrived in Sun Valley and won the unofficial “worst-dressed prize” when he showed up in army cargo pants and a black turtleneck sweater. “I don’t play golf and I do not apologize for that,” Nagioff humorously explained. “My clothes were far too cool but Dick made me change because he was worried I would not be allowed on the course so I had to borrow some of those dreadful golf clothes.”

“Dick didn’t lay off, teasing him mercilessly all weekend,” recalls one witness. Matters were not helped by Nagioff’s atrocious beginner’s golf. He was forced to play as part of the team spirit for the Lehman Brothers Cup (a silver trophy).

A member of his foursome recalls the agony of the 18th hole. Nagioff’s group, despite the handicap of Nagioff, was in the lead. “All he had to do was to drive the ball. Now, if he’d just stood down and taken a bye [in other words, not hit], we’d have been okay. Unfortunately, he had a go, and touched the ball. . . . It went backwards way off the golf course, straight into the junk.” Nagioff disputes that he had a choice. “As the worst golfer they had to count my best shot. I had to try.” He does not dispute the outcome. It was a disaster. The team had to take another stroke penalty. They lost. (Nagioff might have done well to have followed the example of the inimitable Jesse Bhattal. Bhattal, too, had been a beginner at golf until very recently; but he believed that if one were to rise at Lehman, one took golf as seriously as work. Within a handful of years Bhattal managed to acquire a handicap of eight strokes.)

Nagioff’s New York counterpart, the co-head of global equities, Rob Shafir, was similarly deaf to the importance Fuld attached to attire. In 2004 Shafir arrived at the Mark Hotel on Madison Avenue in New York for an off-site meeting. Shafir was five minutes late (Fuld was a stickler for punctuality) and as he looked around the room Shafir realized he was also the only person dressed business casual (no tie, Oxford shirt, and chinos).

“What?” Shafir asked as he caught everyone ‘s horrified stares. “It’s an off-site.”

Fuld looked at him. “Rob: off-site, yes. Out of mind, no.”

Karin Jack recalls hating the rigorous hike up Bald Mountain, so one year she arrived with a fake cast in order to pretend she had broken her leg. She was flummoxed when Niki Gregory arrived with a real broken leg and said she planned to climb regardless. “So I brought that stupid cast out there, thinking I could get out of the hike, and then Nikki shows up in one. I wanted to just die,” Jack says.

“The competition between the men basically spread over to us,” Jack continues. (She says she made sure she always arrived with a ready supply of jokes to keep Fuld amused. “I felt like a performing flea.”)

When the women went shopping, there was always a pecking order. Usually, the spouses of the men holding the most senior positions in the company got to ride in Kathy Fuld’s car. Karin Jack was the closest of all the wives to Kathy. Like Kathy, she had once worked at Lehman. Like Kathy, she was also blonde, pretty, and stylish. They used to go antiquing together. Dick liked Karin. Sometimes he would humorously push her from behind up the final stretch of the hike. Like Kathy, she understood the unwritten rules: If you were married to a Lehman god, you belonged to Lehman. Dick Fuld used to acknowledge as much when executives became managing directors. In a welcoming ceremony where spouses were present, he thanked them for all the “canceled dinners, weekends, and vacations” they were about to go through and no doubt already had.

“Lehman was his life,” Karin Jack says of her husband. “I mean, Brad didn’t do one single thing for 20 years that wasn’t Lehman Brothers—not a postcard, nor a Christmas present, nor a phone call to his family. I did everything, unless it had a Lehman stamp on it. As a Lehman wife, you raise your kids by yourself. You have your babies by yourself in the hospital. And then you’ re supposed to be happy and pretty and smiling when there’s an event, and you really would like to strangle somebody.” Brad Jack agreed with Karin’s sentiments.

One time, she had to manage the move to a new house on her own. She later received a card and flowers from Teddy Roosevelt (a managing director at Lehman and the great-grandson of President Theodore Roosevelt). The card said: “I know that all we do is steal your husband, and I ‘m sorry you had to move by yourself.”

But that was just what was expected of all the wives. “I knew the culture,” she says, “so I knew he couldn’t come home if there was an important meeting. I was in labor with our daughter and had to lie there without him. . . . But I wouldn’t get mad at him—he had called the entire Hong Kong office in for a meeting. We knew that it would have been used against him. If you made a personal choice that hurt Lehman, it was over for you.” Brad recalls: “It’s true. Karin went into labor. I got into the car but only made it three miles because the traffic was snarled up. I had to turn around and deal with the Hong Kong office who
had
flown in to see me. She was right. And she was very understanding. I had to be in that meeting.”

Karin remembers the time one of her children had a seizure brought on by a high fever the day she and her husband were scheduled to look at the new McMansion Joe and Niki Gregory were building on Long Island. “It was just the six of us—Dick and Kathy, Joe and Niki, Brad and I. We were using Joe’s helicopter. But I said, ‘I have to take my son to the pediatrician.’ So they landed the Sikorsky near our home and waited for me, and they were not leaving without me. Can you imagine the pressure? I have this really sick child, but I know that if I don’t get on that helicopter, it’s going to hurt Brad. (Her husband agreed.)

“[The Fulds] paid a lot of lip service to the importance of children and your family, but no one really cared.”

Another executive who found this to be true was Shafir, who by 2000 had replaced Gregory as co-head of global equities, along with Roger Nagioff. By 2004, he was sole head. In 2005, according to Andrew Ross Sorkin’s
Too Big to Fail
, Shafir discovered that he had a child with cystic fibrosis and he asked for time off. When he returned, he was demoted from the executive committee to run hedge funds. Several months later, Gregory asked him to move to Asia.

Shafir reportedly replied: “Asia? You have to be kidding, Joe. You know about my kid. . . .” Gregory didn’t care, and didn’t budge. In 2007 Shafir quit, moving to Credit Suisse.

Niki Gregory was as skillful a political operator as her husband—and just as ambitious. Some of the wives were a little intimidated by her, while others were just cautious.

One time in Sun Valley, both Brad and Karin Jack noticed that Niki Gregory was ignoring Martha McDade, the wife of Bart McDade, who was then running fixed income.

Martha was a civil engineer who had founded her own environmentally focused engineering company as well as a charity to help improve the lives of amputees. “She was a smart woman who was always herself, just a fabulous person,” said one wife. On that Sun Valley trip, Martha asked some of the other wives: “Why will Niki Gregory not look at or talk to me?” Jack immediately interpreted the snub as a sign that Bart McDade was likely to be demoted or fired.