Lehman's Fuld in the spotlight after shakeup

NEW YORK — Richard Fuld has guided Lehman Brothers Inc. through economic downturns, a currency crisis, and terrorist attacks. Now, the longest-tenured chief executive on Wall Street is up against his toughest challenge — and it could cost him his job.

Three days after shocking Wall Street with news of a nearly $3 billion quarterly loss, Lehman ousted its heads of finance and operations Thursday.

The move seeks to restore market confidence in the troubled investment bank — whose shares have lost more than a quarter of their value since Monday. It also raises questions about the tenability of Fuld's continued leadership.

"This is right from the sports pages: The team's struggling so you fire the batting coach. It sends the message that the manager may be next," said Anthony Sabino, a law professor at St. John's University who specializes in business.

Fuld, known as the "Gorilla" for his outsized personality, has been considered by many nearly untouchable at Lehman, where he is also chairman of the board. He's held the top management post since 1994, and his direct, aggressive style has permeated the firm's culture pervasively.

"This guy has a fantastic reputation," Sabino said. "He's considered hard-charging, highly intelligent and has rarely made a misstep."

Fuld started at what would become Lehman in 1969 and took over the top management post at Shearson Lehman Brothers in 1984, when the firm was part of American Express.

The credit-card lender sold Lehman in 1994, leaving Fuld as head of a public company for the first time. Fuld changed the direction of the firm, from a bond-trading shop to a full-fledged investment bank, with a competitive mergers and acquisitions department.

He guided Lehman through the market turmoil in 1998 set off by the collapse of Long-Term Capital Management. Lehman stumbled during that crisis, but Fuld helped the New York Federal Reserve orchestrate a bailout of the hedge fund, cementing his reputation as a manager capable of handling rough patches.

"Fuld showed he could manage market expectations," said Axel Merk, head of the Merk Hard Currency Fund. "And so far he's done a better job than others this time around in that area."

Lehman's previous results had been better than expected on Wall Street and the firm seemed to have avoided many of the wrong-way mortgage investments that forced financial institutions to write down nearly $300 billion in the last year.

But the firm's reputation was shaken Monday. To mitigate the loss and shore up its books, Lehman said it would raise $6 billion. That sent its shares tumbling as investors, who had thought the bank had weathered the worst of the current crisis, braced for more bad news.

A similar crisis of confidence led to a run on Bear Stearns Cos. in March. It avoided collapse only with the help of a government-backed bailout.

Merk said Lehman is likely not as in the same trouble Bear faced and will probably survive.

"They are doing the right thing by raising capital, but confidence is shaken, and that goes on the CEO," he said.

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