Lehman chief grilled on pay, leadership of company

Accepts blame but says other factors at play

Richard Fuld was heckled by protesters as he left Capitol Hill yesterday after testifying before the House committee. (Susan Walsh/Associated Press)

WASHINGTON - The chief executive of Lehman Brothers Holding Inc., whose bankruptcy filing last month dramatically escalated the financial crisis on Wall Street, faced angry lawmakers yesterday and defended his leadership and the millions of dollars he and other executives made as the company's troubles mounted.

Although taking what he called "full responsibility" for the actions that led to the nation's largest bankruptcy, Richard Fuld told the House Oversight and Government Reform Committee that his firm was overwhelmed by a "financial tsunami" caused by a series of "destabilizing factors," including lack of investor confidence, short-selling, credit downgrades, and rumors.

"Based on the information that we had at the time, I believed that these decisions and actions were both prudent and appropriate," Fuld said of his leadership of Lehman. "None of us ever gets the opportunity to turn back the clock. But with the benefit of hindsight, would I have done things differently? Yes, I would have."

Lehman filed for bankruptcy after Treasury Secretary Henry Paulson and other Bush administration officials decided not to try to save it.

But while Fuld said he and company executives did everything they could to protect the company, Representative Henry Waxman, a California Democrat and the chairman of the committee, slammed Fuld for earning $484 million in salary, bonuses, and stock sales since 2000.

"Your company is now bankrupt, our economy is now in a state of crisis, but you get to keep $480 million," Waxman said, displaying yearly compensation figures on large TV screens in the hearing room. "I have a very basic question for you. Is this fair?"

Fuld said that the figures were not accurate, and that he probably received "a little bit less than $250 million."

Yesterday's hearing was the first of at least five Waxman plans to hold on the causes of the financial crisis, which led to the Wall Street bailout plan passed by Congress last week. Republicans criticized Waxman for not focusing first on the problems that led to the government takeover of Fannie Mae and Freddie Mac.

House minority leader John Boehner, an Ohio Republican, derided yesterday's hearing as "political theater" designed to divert attention from the role of Fannie Mae and Freddie Mac, the government-sponsored mortgage lenders that he said Democrats protected for years from Republican reform attempts.

Waxman said his committee is looking into the problems of the two lenders and might hold hearings on them as well. He noted that Republicans controlled the Congress from 1995 to 2007.

Waxman focused first on Lehman Brothers, releasing 24 pages of internal company e-mails and other documents that he said undermined Fuld's contention "that Lehman was overwhelmed by forces outside its control."

The documents showed the company's executives "continued to squander millions on executive compensation," Waxman said, even as Fuld was seeking a bailout. Between 2004 and 2007, Lehman paid $16 billion in bonuses, with Fuld receiving $30 million in cash bonuses and more than $260 million in total compensation during that time.

In one e-mail exchange in June, Fuld criticized a suggestion from Neuberger Berman, its money management subsidiary, that Lehman management should forgo bonuses this year for a "significant expense reduction" as well as to "send a strong message to both employees and investors that management is not shirking accountability for recent performance."

Waxman cited another document showing Lehman recommending four days before the bankruptcy filing that three departing executives received more than $20 million in "special payments."