Behind Lehman’s collapse, an inner circle of greed


At first glance, Vicky Ward’s “The Devil’s Casino: Friendship, Betrayal, and the High-Stakes Games Played Inside Lehman Brothers’’ appears to be merely the latest in a seemingly endless line of books about the financial crisis.


But what’s remarkable about this narrative is that Ward, a contributing editor at Vanity Fair and frequent CNBC commentator, manages to humanize many of the central figures involved in the rise and fall of one of Wall Street’s largest firms, offering profound insight into the titans of finance whose recklessness, greed, and competitiveness brought the US economy to the brink of collapse.

The story plays out like a Shakespearean tragedy (Ward even includes a “Cast of Characters’’) in which the very principles upon which the firm was built prove to be its undoing. The number-juggling techniques Lehman staff members employed to mask the company’s vulnerabilities are mind-boggling and predictably maddening, but that’s not the heart of the book.

Instead, Ward focuses primarily on a group of four men who called themselves “The Ponderosa Boys,’’ one of whom, former Lehman president Chris Pettit, died in 1997 shortly after leaving the firm. They were friends (some from childhood) who came from modest upbringings, carpooling to Lehman’s Manhattan offices each morning from Long Island. They came to Wall Street wide-eyed, drawn by the lure of wealth, and vowed never to be corrupted by the money they would make. Ward chronicles, in dramatic fashion, their ascent through Lehman’s ranks, and the values, friendships, and marriages that dissolved as a result.

But “The Devil’s Casino’’ is by no means an absolution. Some executives, like Joe Gregory, president, chief operating officer, and original Ponderosa Boy, are pilloried, and deservedly so. Ward outlines Gregory’s extravagant lifestyle in jaw-dropping detail, noting his yearly personal spending budget ($15 million) and habit of using a seaplane or helicopter to get to work.

In fact, while chief executive Dick Fuld has become, in the public’s eye, one of the poster children of the financial meltdown and certainly the face of Lehman’s downfall, it’s actually Gregory, his number two, who emerges as the real villain behind the largest bankruptcy filing in US history: a power-hungry, snake-in-the-grass figure who used his authority to put a fence around Fuld and prevent those who might have proved useful from entering his boss’s inner circle.

In Ward’s telling, then-Treasury Secretary Hank Paulson did everything he could to save Lehman Brothers in its final weekend, making the decision to let it go only in the 11th hour, with troubled insurance giant AIG looming ahead. Ward also notes the seldom-reported fact that Paulson’s brother worked for Lehman and lost everything because of the bankruptcy filing on Sept. 15, 2008.

Impressively researched, the book includes interviews with a childhood neighbor of Fuld’s, as well as a gym trainer who worked with the Ponderosa Boys in the 1980s. Even Gregory, whose lawyer reportedly banned him from being interviewed, is represented; an anonymous source presented Ward with his and other executives’ personal diary accounts of the history of the company.

The writing becomes tedious only when Ward, out of necessity, employs financial jargon to discuss in detail the issues that brought Lehman to its knees, for which, in fairness, there are no simpler explanations.

“The Devil’s Casino’’ offers a fascinating glimpse into the culture of one of the most powerful firms on Wall Street. One hopes that the history it chronicles will also serve as a cautionary tale for the financial industry’s still-uncertain future.

Liz Raftery is a freelance writer based in New York City.