Time at CU pivotal for CEO of Lehman

'Stumble' sent Richard Fuld into business world

By Roger Fillion, Rocky Mountain News (Contact)

Published September 16, 2008 at 12:05 a.m.

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Photo by George Kochaniec Jr. / The Rocky

The Merrill Lynch office at Second Avenue and University Boulevard in Cherry Creek.

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Lehman Brothers CEO Richard Fuld liked to say he "stumbled" into the world of business.

The 1969 University of Colorado graduate told a CU graduating class two years ago that he initially wanted to become a test pilot.

Entering CU in 1964, Fuld enrolled in aeronautical engineering but quickly discovered there was a problem.

"I couldn't do graphics," Fuld told the thousands of graduates gathered at CU's Folsom Field on May 12, 2006. "I was one of those kids with no spatial relationship capabilities."

Fuld also tried his luck with the Air Force ROTC program. But that didn't pan out, either, after he "went against" one of his commanding officers.

"I stuck up for another underclassman," Fuld said. "Let's just say I was politely asked to leave the program."

So he rolled the dice once more. "I stumbled into international business," Fuld told the graduates.

He graduated from CU's school of business with a bachelor's degree in international business. The young Fuld made a beeline for Wall Street and joined Lehman Brothers that same year. He had worked as an intern at the investment bank in 1966.

Fuld ultimately become the longest-serving chief executive officer on Wall Street, guiding Lehman through tumultuous times until the collapse of the 158-year-old firm on Monday.

Fuld became Lehman's CEO in 1994 when the storied investment firm was spun off from American Express. Skeptics on Wall Street at the time questioned whether Lehman would have the financial muscle to survive.

Over 14 years, Fuld, 62, turned a money-losing bond trading shop into a full-service investment bank.

But there were plenty of bumps along the way.

The firm weathered bogus rumors in 1998 that the collapse of the Long Term Capital Management hedge fund threatened Lehman's solvency.

Under Fuld's tenure, Lehman also survived the stormy aftermath of the Sept. 11 terrorist attacks, which forced the firm to relocate its offices from lower Manhattan to midtown.

Fuld won acclaim from Wall Street leaders such as Lazard Ltd. chief Bruce Wasserstein. And he joined the circle of CEOs sought after by boards such as the New York Federal Reserve's.

Forbes magazine in 2008 ranked Fuld No. 11 in CEO pay, taking home total compensation of $71.9 million. His five-year total was tallied at $354 million.

But Fuld's winning streak ultimately came to an end. He gambled almost four times Lehman's shareholder equity last year on mortgage securities that he insisted were hedged by other bets.

"It makes me rather sad to see this organization brought to its knees as the result of what I'll call a lack of control, poor management of internal risk and ultimate self-interest," said Walter Gerasimowicz, who worked at Lehman as an investment strategist and now heads Meditron Asset Management in New York.

Dennis Ahlburg, dean of CU's Leeds School of Business, said that, under Fuld, Lehman has been supportive of CU, sponsoring student scholarships as well as underwriting an upper-level course in investment banking and a public forum.

Ahlburg recalled that Fuld's 2006 commencement address was an "incredible speech."

"He has a pretty spellbinding presence," said Ahlburg, who knows Fuld and has dined with him.

Ahlburg noted that the graduates often toss beach balls into the air during a commencement address but the students held off during Fuld's address.

"It didn't happen with Dick," said Ahlburg. "You've got to be a pretty compelling speaker to get that many students focused."

Bloomberg News contributed to this report.

Lehman in Colorado

Hundreds of Coloradans employed by Wall Street firms have been glued to their computer screens, anxious to find out how the crisis will affect them.

Lehman, the 158-year-old investment bank that filed for Chapter 11 bankruptcy, has operated a mortgage lending unit in Colorado called Aurora Loan Services.

That subsidiary significantly scaled back its business earlier this year, cutting roughly 1,300 jobs, or half of its work force. Lehman said it would consolidate Aurora's Colorado operations in Littleton and close centers in California, Florida and New Jersey.

It is unclear what Lehman has left in the state. A woman answering the phones at the Colorado office referred media inquiries to Lehman in New York. The company's public relations representatives did not respond to an e-mail on Monday seeking information.

Aurora Loan Services has filed several lawsuits in U.S. District Court in Denver over the past year and a half. In the latest complaint, the unit said it purchased mortgage loans from American Sterling Bank but that the bank breached terms of its contract. Other defendants included SCME Mortgage Bankers, Fieldstone Mortgage Co., A.K.T. American Capital, Mega Capital Funding, and Fremont Investment & Loan Corp.

The Lehman unit focuses on "Alt-A" loans to borrowers who have good credit but cannot document income.

Merrill Lynch, which sold itself to Bank of America in a $50 billion deal, has about 500 wealth management employees scattered across Colorado.

After luring Merrill Lynch to Colorado in the early 1990s, officials said the company could end up employing 5,000 people.

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