The blog entry is here, and the court filing therein is simply dispatched by Sam Jones:
It is disingenuity of the highest order to suggest that banks like Lehman were passive victims of a stormy market. Their actions created the stormy market in the first place. Dick Fuld's Lehman reaped what it sowed.
In fact, the filing actively celebrates all the risks that were taken by Fuld and Lehman in the years leading up to the collapse, talking about Lehman's "four consecutive years of record-breaking financial results" between 2004 and 2007, and citing with admiration Lehman's soaring share price.
Leave aside Fuld's strategic decisions, about which there will be long debate. Here's one thing you simply cannot excuse him for: by all accounts, he didn't bother selling out because that would have meant surrendering the executive office, and this he could not bear to do. Instead, he played chicken with the markets and the Fed. The result was a bankruptcy that wiped out the shareholders to whom he owed a fiduciary duty, touched off a massive financial panic, etc.
I'm sure he had no idea that Reserve Primary would break the buck, markets would lock, massive layoffs would ensue, and half the journalists in DC would be spending their evenings debating just how low you can turn the thermostat before the pipes freeze. But he certainly knew that he was risking the future of thousands of employees and the shareholders who employed him because he liked to see the letters "CEO" after his name. To add insult to injury, as I blogged earlier, he's now playing shell games with his assets, trying to ensure that the shareholders who sue him can't cut kick him out of the mansion he bought with their money.
Exonerated? Like OJ, maybe.
I worked for an internet company back in 2000 that had a stock at $70 that fell to $25 and SAP wanted to buy it at $35 and the company said no. They thought they could turn it around - they couldn't - and it was eventually sold for less than a dollar a share. But I recall most employees, who had options with strike prices above $35 a share - were not interested in selling either.
I'm willing to bet that Fuld wasn't the only one who thought it could be turned around - I bet most of the board and most of the employees thought they could ride it out as well.
Hindsight is always 20-20.
If Lehman hadn't popped the bubble, something else would have. The financial industry needs the same kind of deadwood cleanout that the high-tech industry got back in 2001-2003, and given how much the housing and oil markets had inflated, a massive disruption was virtually inevitable.
Fuld gets credit for destroying Lehman, and that's plenty enough for him to chew on.
I'm just glad Megan that you warned about this and so many other things endlessly beforehand, as otherwise your now constant self-praise of your omniscience would seem pathetic.
I sure hope those shareholders have more of a case than Ms. McArdle makes here, because they aren't going to win a case predicated on Fuld's trying to keep the company independent.
Especially because all they would have gotten is stock in some other failing financial. How good is the BofA stock that Thain got for Merrill Lynch's shareholders? But hey, it always turns out that every financial journalist is oodles of times smarter than every Wall Street CEO.
Not every journalist y81, just Megan.
That's why she was such an amazing success on Wall Street prior to blogging.
I don't know y81...if I held Merrill common at the time of the deal with BAC I would've felt relieved. However crappy the stock is (and was) it wasn't zero.
k1
ryanculver.blogspot.com
Megan's argument for legal liability would likely end up in dismissal - he is protected by the business judgment rule.
If, however, there were material omissions or mistatements in Lehman's SEC filings or prospectus, and he had reason to know about these, then he may have civil liability for investors' losses.
Jerry Yang at Yahoo did more or less the same thing. Luckily all that cost was his own money and the shareholders'.
Sometimes the action of one individual makes a notable difference. I followed the career of a defensive end on a high school football team once. I wasn't sure he had made All District until I ran into an old announcement some years later. Thinking about why he had been chosen, I recalled a particular playoff game. The opposing team didn't have much of a kicker; so near the goal line they double teamed the end and tried to run through his position. He made the tackle. The ball went over on downs. His team went several games further to the semifinals. With Fuld, we have the reverse situation.
I don't think he's leagally responsible for anything, but Ms. McArdle is exactly right about Fuld passing up bids to sell. He had two shots with a Korean outfit, one in the mid $20's and one about $5 later on that he passed on. When you're worth like -$20+ per share with proper marks, you're quite an idiot not to sell.
In addition, Fuld had been there for a long time and had a 'yes' board, most of whose members didn't know squat about the business except that 'Fuld is always right'. AIG had the same problem, but they had it even worse since the guy that ran the place for years, Maurice Greenberg had been forced out in 2006, "yes boards" can work if the maestro is sort of in charge, and subsequently noone there had any clue as to what was going on.
Fuld could have sold out, but who wants to run every move one makes to a committee of Koreans from Seoul?
Is Steven Case the best CEO of his generation? Might he be the anti-Fuld?
Sounds like James is angling to be Fuld's houseboy.
if dick fuld was not a jew,he would be in jail.
I hope that was a joke, tony.
THE STORY OF DICK "HEAD IN THE AIR" FULD
(Johnny Head in Air, From Struwwelpeter)
WilliamBanzai7
As he trudged along like an arrogant Wall Street fool,
It was always Dickie Fuld's golden rule
To be looking at the pie in the market sky
Even as the subprime meltdown clouds floated by;
But what calamity just before him and Lehman lay,
In his way,
Dickie never thought about;
So that every one cried out
"Look at little Dickie Fuld there,
Little Dickie Head-In-Air!"
Running just in Dickie's way
Came a big market Bear one day;
Dickies's eyes were still astray
Up on high,
In the irrationally inflated subprime sky;
And he never heard them cry
"Dickie, mind, the Bear is nigh!"
Bump!
Dump!
Down they fell, with such a thump,
Bear and Dickie in a lump!
Once, with head as high as ever,
Johnny walked beside the subprime river.
Johnny watched the derivative traders trying
Which was cleverest at riskless flying.
Oh! what fun!
Dickie watched the bright round Wall Street sun
Going in and coming out;
This was all he thought about.
So he strode on, only think!
To the subprime river's very red brink,
Where the risk of bankruptcy was high and steep,
And the MTM water very deep;
And the Lehman fishes, in a row,
Stared to see him coming so.
One step more! oh! sad to tell!
Headlong in poor Dickie Fuld fell.
And the Lehman fishes, in dismay,
Wagged their tails and swam away.
There lay Dickie on his face,
With his nice red writing-case.
Illustration on WilliamBanzai7 Blog