Lehman Brothers Removes Finance, Operating Chiefs

June 12, 2008 7:06:06 AM PDT
Lehman Brothers said Thursday Chief Financial Officer Erin Callan and Chief Operating Officer Joseph Gregory have been removed from their positions, days after the investment bank announced a $3 billion quarterly loss. Its shares sank almost 7 percent in morning trading.

The shake-up in Lehman Brothers' top ranks comes after shares of the investment bank slumped more than 25 percent this past week. Investors have been shaken after the company disclosed Monday it needed $6 billion of fresh capital to offset its first loss since going public in 1994. That offering of common and preferred stock is set to close Thursday.

Callan will remain with Lehman in its investment banking division, where she previously ran a group that catered to hedge funds before taking the CFO spot last September. Gregory, who has been with Lehman for more than two decades, will also remain with the firm in an undetermined position.

Herbert McDade, 48, will succeed Gregory. He was previously the global head of the company's equities division, a position he has held since 2005. Ian Lowitt, 44, the current co-chief administrative officer, will become Lehman's new CFO.

The changes take place immediately.

A spokesman for Lehman would not comment on the changes to Lehman's top ranks.

However, Chief Executive Richard Fuld said in a statement that removing Gregory from the COO job was "one of the most difficult decisions either of us has ever had to make." Fuld was unavailable for comment.

Lehman shares fell $1.62, or 6.8 percent, to $22.13 in morning trading.

The company has been under intense pressure of light, particularly from short seller David Einhorn of Greenlight Capital, who has been an outspoken critic of the firm's financial health and its public disclosures.