Richard Fuld ran Lehman Brothers Holdings . . . into a brick wall. He refused to sell in the crisis. He refused to admit defeat. On September 15, Lehman declared bankruptcy when a $70 billion bailout attempt failed when Barclays said no. Recently Barclays bought remnants of Lehman for pennies on the dollar. Fuld took home almost $170 million in 2005 to 2007.
Lehman's filing wiped out as much as $13.7 billion in company stock held by employees, who owned 30 percent of the shares when the stock peaked at $85.80 last year. Lehman encouraged stock ownership and has said about 20,000 of its 26,000 workers got at least some equity in 2007.
But the market got its revenge. Fuld at one point was worth $1.2 billion in stock. He recently sold 2.8 million shares for $500,000.
Then there was Bear Stearns. Same story, different numbers.
After Bear Stearns collapsed in March, its acquirer, JPMorgan Chase & Co., offered employees it kept shares in the combined bank equal to their 2007 pay. Workers owned a third of Bear Stearns, and they saw the value of the stake drop to $393 million at the sale price of $10 a share. That compared with $6.7 billion at the $171.51 peak last year. Former Bear Stearns CEO James "Jimmy" Cayne sold a holding once worth $1 billion for $61 million in March.
http://www.garynorth.com/snip/663.htm
Lesson: when the CEO says you should invest in the shares of the company that employs you, think "Enron," "Bear Stearns," and "Lehman."
"AND THE ALL-TIME WINNER IS. . . ."
These guys were all pikers. Why? Because they did not know when to sell. You've got to know when to hold 'em, know when to fold 'em, know when to walk away, know when to run.
Henry Paulson knew when to walk away.
He had been the CEO of Goldman Sachs until he accepted the call to become Secretary of the Treasury.
Maybe you did not know the following. When you become Secretary of the Treasury, you must divest yourself of stock holdings. Not to do so would be a conflict of interest. Make sense?
But how could anyone be lured into this office who is a big player? Think of the capital gains taxes! So, the government passed a law that exempts Federal appointees from taxes if they sell their holdings before they take office.
Paulson sold his shares. I would call this very good timing. Because he had a reason for selling, the sale did not depress the share price. He got out. None of the others did.
He owned half a billion dollars in Goldman Sachs shares.
