Lehman Cleans House: CFO and COO Out

As Lehman Brothers attempts to put its house in order following the disclosure yesterday of a $3-billion quarterly loss, the investment bank's high profile CFO Erin Callan and COO Joseph Gregory were replaced, according to various news reports.

The management restructuring occurred after shares sank more than 25 percent this past week. Callan will remain with Lehman in its investment banking division. Gregory is expected to remain with the firm in an undetermined position. Callan steps down after seven months in the position.

Analysts told the Financial Times that it was unclear whether these changes are enough to secure Dick Fuld's position as chief executive at a time when rivals (Merrill Lynch, Morgan Stanleyz) have ousted the captains of their listing ships. 

Herbert McDade will succeed Gregory. Ian Lowitt, the current co-chief administrative officer, becomes Lehman’s new CFO. Both changes are effective immediately.

Led by Callan, Lehman Brothers had previously claimed to be a victim of a vicious “short-and-distort scheme,” according to a Directorship report in April.

Such a scheme may have led to the near collapse of Bear Steans and warranted the Securities and Exchange Commission to take notice. Short sellers are causing alarm along Wall Street, as reported in the June/July issue of Directorship. SEC Chairman Christopher Cox said, “The SEC very aggressively pursues insider trading, market manipulation, and the kinds of illegal naked short-selling that has been very publicly alleged in [the Bear Stearns] case.”