Troubled Wall Street firm Lehman Brothers, still reeling from the announcement that it expects to report a $2.8 billion loss for the second quarter, its first quarterly loss since going public 14 years ago, has relieved two senior managers of their posts in an attempt to appease disgruntled shareholders.
Chief financial officer Erin Callan, who had been in the role for less than a year after taking over from Chris O'Meara in September 2007, will take a senior management role in Lehman’s investment banking division, where she had previously headed the global hedge fund coverage group. She is replaced by Ian Lowitt, who will assume chief financial officer duties while retaining the co-chief administrative officer role he has held since October 2006.
Lehman president and chief operating officer Joseph Gregory will also step down from his current post. He assumed the company presidency in 2004, having previously served as chief administrative officer and head of global equities and will remain at the bank in an undisclosed capacity. Gregory has been replaced by Herbert "Bart" McDade, who previously took over Gregory's role as global head of equities in June 2005.
Chief executive Richard Fuld, the man responsible for taking the company public in 1994, has offered no indication as to whether he plans to stand down, although speculation is mounting that the Lehman board may shortly remove him. If so, he will join the ranks of Stan O’Neal, Chuck Prince, Ken Thompson and James Cayne as another high profile chief executive casualty of the credit crisis.
In addition to announcing its expected $2.8 billion loss, Lehman disclosed plans to raise an additional $6 billion in capital through common and convertible preferred stock to supplement the $4 billion the firm raised through a convertible preferred stock offering in April.
That news may prove just as damaging to the firm’s reputation as the anticipated quarter two losses. The bank has been plagued by persistent rumours of financing difficulties since the near-collapse and subsequent purchase of Bear Stearns in March. Those rumours culminated in the release of a statement by Lehman's treasurer on June 3, denying that the bank had to tap the Federal Reserve for emergency funding through the primary dealer lending facility.The recent speculation surrounding the bank has been reflected in Lehman’s share price. From a high of $85.80 on February 2, 2007, Lehman stock ended the day at just $22.70 on June 12. The steepness of the decline has accelerated markedly in the last four weeks, however, with the stock trading at as much as $44.62 - virtually double today’s price – just 28 days ago on May 15.
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