CEO Richard Fuld to leave Lehman by year-end

[November 06, 2008]  NEW YORK (AP) -- Richard Fuld will step down as chief executive of failed investment bank Lehman Brothers Holdings Inc. by the end of the year and won't receive severance or a bonus, a spokesman said Wednesday.

He will stay on as chairman of the board.

Fuld faced growing pressure to give up the job, as critics accused him of contributing to the demise of the nation's fourth-largest investment bank. He has been a prominent target of public outrage over risky practices on Wall Street which helped send the economy spiraling into turmoil.

The announcement comes one day after New York State Comptroller Thomas DiNapoli accused Fuld of leading Lehman to its chaotic, pre-dawn Chapter 11 filing on Sept. 15.

"Mr. Fuld's decisions drove the company toward ruin, as his board stood idly by," DiNapoli argues in court papers filed late Tuesday asking a bankruptcy judge to appoint an independent investigator in the case.

A spokesman for the comptroller, Jim Fuchs, said, "His resignation would be a good first step."

Fuld had offered to resign after Lehman sold its broker-dealer business to Barclays Capital on Sept. 20, but Chief Restructuring Officer Bryan Marsal asked him to stay until the end of the year to help with the transition, a spokesman said.

"Lehman Brothers is such a mess at the moment, it's difficult to know what he'd be contributing in a transition process," said Paul Hodgson, a senior research associate at The Corporate Library. "There are few CEOs, I think, who would think their employment was guaranteed after overseeing such a major collapse."

The bankruptcy filing of Lehman Brothers Holdings Inc. was the biggest in U.S. history. It entered court protection with assets of $639 billion and debt of $613 billion.

Since the filing, Fuld -- along with 11 former or current Lehman managers or officers -- have been subpoenaed by federal prosecutors in three grand jury investigations. Those are being led by investigators in the Southern and Eastern Districts of New York and the District of New Jersey.

DiNapoli is not the first to ask for an independent investigation into Lehman. Hedge funds using the Harbinger name, as well as The Walt Disney Co., Freddie Mac and several others have made similar motions in the case. U.S. Bankruptcy Judge James Peck is scheduled to consider many of those requests at a Nov. 18 hearing.

When Fuld appeared on Oct. 6 in front of the House Oversight and Government Reform Committee, he faced outrage and sarcasm. During the hearing, Rep. John Mica, a Florida Republican, told Fuld, "If you haven't discovered your role today, you're the villain, so you have to act like the villain."

Lehman rushed into court protection on Sept. 15 after buyout negotiations failed with Bank of America Corp. and Barclays Capital and the government failed to offer a rescue deal. Barclays ended up buying key Lehman units for about $1.5 billion after the filing.

Lehman also has agreed to sell its money management arm, Neuberger Berman, to two private equity firms and its Asian, European and Middle Eastern businesses to Japan's largest brokerage, Nomura Holdings Inc.

Fuld received compensation valued at $22.1 million in 2007, according to an Associated Press calculation of his pay package.

[Associated Press; By VINNEE TONG]

AP Business Writer Joe Bel Bruno contributed to this report.

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