Toomre Capital Markets LLC

Real-Time Capital Markets -- Analytics, Visualization, Event Processing, and Intelligence

Lehman Brothers

Joe Gregory and His Helicopter

Around 5 PM on Monday May 10th 2010, visitor traffic to the Toomre Capital Markets LLC ("TCM") website noticeably spiked. Many of the visitors first came to the post Possible Bankruptcy for Joe Gregory of Lehman Brothers before often continuing to other postings. The source of much of this increased traffic was tied to the micro blogging service twitter.

Joe Gregory At Least Sells Something

Joe Gregory, the former President of Lehman Brothers and long-time confidant to former CEO Dick Fuld, apparently had more difficult financial times since he was forced to resign from the failed investment bank in June 2008. As noted in this previous TCM post Possible Bankruptcy for Joe Gregory of Lehman Brothers, "one might surmise that Joe Gregory was as good at managing his own personal finances as he was at managing the leveraged risks of Lehman Brothers."

From the November 13th 2009 edition of The Wall Street Journal comes news that Joe Gregory has had some success in liquidating at least some of his various property holdings. The 2.5-acre oceanfront estate in Bridgehampton, N.Y., remains on the market with an asking price of $27.9 million. However, at least the property in Vermont is now sold. One wonders when and at what price the Bridgehampton house will eventually be sold.

Former Lehman Brothers Holdings Inc. president Joseph M. Gregory has gone into contract on his seven-acre Manchester, Vt., estate, which he listed for $2.48 million.

Mr. Gregory has also sold his guest house, across the street from the main house. After more than 30 years at Lehman, Mr. Gregory resigned from his post in June 2008; Lehman filed for bankruptcy-court protection from creditors in mid-September.

Mr. Gregory bought the seven-acre Vermont property for $675,000 in 1993, according to public records. A six-bedroom farm-style house sits on the property, which also has a barn with a three-bedroom guest apartment above. The guest house went for $715,000, 10% less than his asking price. He bought that two-acre property for $180,000 in 2000. Sunny Breen of Main Street Realty represented Mr. Gregory in both deals.

2009 TCM Transition

As Toomre Capital Markets LLC ("TCM") starts the fourth quarter of 2009, we are cognizant that our consulting business is once again in transition. As it is sometimes said, as one door closes, another door opens. We are just not quite sure which door (professionally at least) might be opening.

For much of the past two years during the on-going credit crunch, the TCM staff has been working extensively with a major participant in the Life Settlements sector. We have used various pieces of the MATLAB mathematical modeling language together with Microsoft SQL Server relational data bases and ActiveX technology to create the calculation code for their customized portfolio management application. The resulting code is rather advanced.

This MATLAB-compiled code enables TCM's client to quickly price various individual life insurance policies and to help identify the risk/rewards in simultaneously managing several portfolios of such investments. It has moved the client away from the risks and confusion of large complicated Excel spreadsheets and onto a modern web-based platform. Alas, though, the heavy development work for that particular project is drawing to an end and we are now in the acceptance testing phase. There is unlikely to be any further enhancement work necessary until at least the code has been used in production for some time period.

Partly as a result, TCM has wondered where we should turn our attention to next. Should we turn to focusing our efforts on developing similar types of MATLAB-based code for other financial clients? Certainly there are many financial firms that enjoy the convenience and ease of data input into Excel spreadsheets. With time, though, many of these same spreadsheets become large, many times unwieldy and often contain inaccurate cell references in some of their formulae.

Depending upon the complexity of what information the spreadsheet is attempting to model, MATLAB often is an effective tool for tying together: the ease of that spreadsheet bring to data input and manipulation; easy access to data stored elsewhere in relational data bases; mathematical calculation of arrays (including good routines for various types of optimization); integration with tried and time tested C/C++ calculation libraries; and excellent visualization opportunities for understanding the results.

TCM is quite skilled in doing this advanced MATLAB development and integration work. (The reader might note the many posting on the TCM website about the term MATLAB and then appreciate why we receive so many visitors each day looking for information on such terms as ActiveX, Excel and MATLAB together.)

As we contemplated during the last few weeks which way to turn, Mathworks (the maker of the MATLAB product) contacted TCM about possibly working with a hedge of hedge funds that needed help with integrating some of their existing MATLAB models with their client-facing website. Could we help? It now appears that very shortly we will be starting an initial project focused on foreign-exchange investments.

Vanity Fair: Profiles In Panic

In the January 2009 issue of Vanity Fair, reporter Michael Shnayerson has penned another excellent article, this time entitled Profiles in Panic. This article goes into some detail about how the downturn that intensified in September is affecting the Wall Street types who were living high on the hog in a gilded era. That era is very definitely changing as many are just happy to still have a job and not be one of the more 100,000 world-wide in financial services that have been laid off. It is a well written article definitely worth reading in its entirety.

In the middle of the article, the narrative turned to the sudden bankruptcy of Lehman Brothers. Perhaps no man better represented the excesses and hubris of this gilded era than the former number two at Lehman Brothers, President and COO Joe Gregory. From the article,

If the gilded age has come to an end this fall, surely Lehman’s demise—with its bankruptcy filing on that Monday morning of September l5, 2008—was the tipping point. It panicked the money markets, froze global credit, and sent stock prices spiraling down.

Lehman’s 31st floor—where Fuld and his top executives worked—was by all accounts a quiet place, especially by midafternoon, one managing director recalls dryly. Among Fuld’s loyalists, no one was more loyal than his number two, chief operating officer Joe Gregory, whose story, even more than Fuld’s, seems emblematic of the age now past. If Tom Wolfe were writing a sequel to The Bonfire of the Vanities, Gregory would be his man.

Gregory, 56, was a legend at Lehman—less for his business exploits than for his lifestyle. He had several homes: a principal residence in Lloyd Harbor, on Long Island’s North Shore; an oceanfront McMansion in Bridgehampton; a ski home in Manchester, Vermont; an apartment at 610 Park Avenue; and reportedly a house in Pennsylvania. “He had a kid who went to a small school in Pennsylvania,” a former senior colleague recalls. “Joe didn’t like the hotel, so he bought [a] house in town. It was probably only $500,000, but he paid for it so that, on the maybe two trips a year he took there, he’d have a nice place to stay. And then he had it redecorated!” The colleague says he heard it on good authority that Gregory’s after-tax expenses approached $15 million per year. That, he heard, was exclusive of mortgages. (Gregory’s lawyer declined to comment on e-mails from Vanity Fair.)

Lehman Brothers and Dick Fuld: Burning Down His House

In the event that the reader has not seen the excellent New York magazine article Burning Down The House written by Steve Fishman about the last months of Lehman Brothers, go read it now. The sub-title is "Is Lehman CEO Dick Fuld the true villain in the collapse of Wall Street, or is he being sacrificed for the sins of his peers?"

Toomre Capital Markets LLC ("TCM") believes that this is one of the better articles that explains some of what went on behind the scenes that led to the collapse of the fourth largest investment bank in September 2008. Lars Toomre at one point worked with or reported to some of the principal characters of this story. Several reporters have contacted Lars for information and background information on these characters. However, other than sharing some recollections about Bart McDade with the Wall Street Journal, Lars has declined. Rather TCM has written a number of articles about Lehman Brothers (including the very popular post Possible Bankruptcy for Joe Gregory of Lehman Brothers). An index of the various Lehman Brothers articles can be found here.

This article starts out with a description of a luncheon meeting that Dick Fuld had in June 2008 with a number of investment bankers that was arranged by the head of investment banking head Hugh Skip McGee. Two days earlier the investment bank had announced its first quarterly loss in fourteen years. The loss of $2.8 billion caused the stock to plummet again, 21 percent in a couple of days. The message to Dick Fuld was simple: "The board of directors is going to be under pressure. … It has to deliver a head to the street." Supposedly Dick Fuld shot back (as his veins on his neck popped), "I've given you fourteen years of earnings. I have one bad quarter. This is how you respond?" Yet the next day he canned both the then CFO Erin Callan and his long-time crony and then COO and President Joe Gregory.

Three months after that luncheon, Lehman Brothers on September 15 "filed for bankruptcy, the largest in history and a devastating blow to an already fragile financial system. Fuld became a symbol of failure, the face of arrogant, blindered, massively overleveraged Wall Street. Fuld is blamed for betting the farm on the way up, then stubbornly refusing to recognize the company’s dire straits on the way down. A few weeks after the bankruptcy, Congress summoned him to Washington for a deeply humiliating inquisition." Subsequently, "three sets of prosecutors launched investigations of Fuld and Lehman, probing whether shareholders had been duped."

The article goes on to make the point that in some sense Dick Fuld also is a victim. Apparently Fuld has been having trouble sleeping as he repeatedly goes over and tries to decipher the "mystery", his description of the firm's sudden collapse. "Why didn’t the government save Lehman the way it saved so many others, Bear Stearns and AIG and, just last week, Citigroup? Fuld and his allies can’t help but blame Paulson, whom he’d trusted and, until the end, viewed as an ally and even a friend. Yet Paulson, for reasons Fuld doesn’t yet understand, participated in making him the scapegoat." However, apparently "Mostly, he sits and replays Lehman’s calamitous end. 'What could I have done differently?' he thinks. 'In certain conversations, what should I have said, what could I have done?' How, he wonders, did it all go so disastrously wrong?"

Toomre Capital Markets LLC might suggest that Dick Fuld made the critical mistake of trusting too much his protégé and the firm's Mr. Inside Joe Gregory. TCM has previously written about Joe Gregory's decision to remove Michael Gelband in the spring of 2007 as the global head of the fixed-income division in the post Initial Reflections on Demise of Lehman Brothers. Apparently, Gregory did not want to cut back on the fixed-income's risk profile and may in fact have wanted to expand the risk to use the resulting profits to further fund the firm's aggressive overseas expansion.

After the Crash: How Software Models Doomed the Markets

The above also is the title of a November 21st 2008 editorial by The Editors of Scientific American. The editorial's sub-title is "Overreliance on financial software crafted by physics and math PhDs helped to precipitate the Wall Street collapse". This editorial is well worth reading both today and in the months and years to come, as all parties consider the form and regulation of global financial markets after we get through the current credit crisis.

The editorial begins:

If Hollywood makes a movie about the worst financial crisis since the Great Depression, a basement room in a government building in Washington will serve as the setting for a key scene. There investment bankers from the largest institutions pleaded successfully with Securities and Exchange Commission (SEC) officials during a short meeting in 2004 to lift a rule specifying debt limits and capital reserves needed for a rainy day. This decision, a real event described in the New York Times, freed billions to invest in complex mortgage-backed securities and derivatives that helped to bring about the financial meltdown in September.

In the script, the next scene will be the one in which number-savvy specialists that Wall Street has come to know as quants consult with their superiors about implementing the regulatory change. These lapsed physicists and mathematical virtuosos were the ones who both invented these oblique securities and created software models that supposedly measured the risk a firm would incur by holding them in its portfolio. Without the formal requirement to maintain debt ceilings and capital reserves, the commission had freed these firms to police themselves using risk tools crafted by cadres of quants.

The staff at Toomre Capital Markets LLC has long admired this publication, partly since both Lars and Aldon started in technical fields before moving to Wall Street in the 1980s. Immediately before starting at Lehman Brothers, Lars Toomre was at M.I.T. and Aldon Hynes was at what then was one of the Mecca's of industry research, Bell Labs.

Where did we work in Lehman Brothers? We each started work in the mortgage department focusing on the very software that let Lehman Brothers and other investment banks slice and dice pools of assets into various classes (or tranches) of debt securities then known as Collateralized Mortgage Obligations ("CMOs") and now as Collateralized Debt Obligations ("CDOs"). We were two of the first quants hired by Lehman Brothers' fixed-income division working on some of the early software that this editorial targets!

Possible Gossip About Joe Gregory of Lehman Brothers??

The New York Post is published by Rupert Murdoch and is well-known in the New York City area for its Page Six section which reports on various gossip items that might be appealing to the greater community. In the November 10th 2008 edition of Page Six, the following tidbit appeared under the section Just Asking:

WHICH wife of a top Lehman executive went on a $132,000 shopping spree at the Americana Manhasset Mall the day after her hubby filed for bankruptcy?

Toomre Capital Markets LLC ("TCM") has written previously about the Possible Bankruptcy for Joe Gregory of Lehman Brothers. Mr. Gregory was the former President and Chief Operating Officer of Lehman Brothers who Dick Fuld relieved of his position back in June 2008 simultaneous with the replacement of then Chief Financial Officer, Erin Callan.

FT: Winding up Lehman Brothers

On Friday afternoon November 7th 2008, The Financial Times published an excellent article entitled Winding up Lehman Brothers written by Jennifer Hughes. This article is a great summary of what Tony Lomas and his team at PriceWaterhouseCoopers have gone through in starting to wind up the European affairs of Lehman Brothers. This bankruptcy case is likely to continue for many years to come and no doubt there will be further stories about the bankruptcy administrator's conduct.

What emerges from this story is how virtually no one connected with the large investment bank Lehman Brothers (management, employees and clients) expected what then was the fourth largest investment bank to file for bankruptcy on Monday September 15th. Tony Lomas and team were the bankruptcy administrator for Enron's European operations (and still are working on that case some seven plus years later). In that case, they had two weeks to review the operations and prepare for the bankruptcy filing. In the case of Lehman Brothers, the PriceWaterhouseCoopers team had slightly more than twenty-four hours. No wonder from afar the European bankruptcy seemed so chaotic in its first days.

Toomre Capital Markets LLC ("TCM") suggests that any reader in the subject of Lehman Brothers and/or bankruptcy read this article.

Barack Obama In; Dick Fuld Out

On the day after the election of Barack Obama as the next President of the United States, The Washington Post examined why he won in an article entitled Measured Response To Financial Crisis Sealed the Election. The conclusion of the article is that Barack Obama won because of the sudden collapse of Lehman Brothers on September 15th. That bankruptcy filing triggered "the biggest corporate collapse in U.S. history and an international financial meltdown", ultimately transforming the presidential race.

Is it any surprise then on the day after Obama's election, Bloomberg News reports that Lehman Brothers' much vilified Chairman and CEO Dick Fuld will be "terminated" by the bankrupt company by year-end without any bonus or severance pay?

Dick Fuld has been rightly criticized for driving the fourth largest investment bank into the ground and for the seemingly "large" amount of compensation he received over the years. For instance, Dick Fuld was openly criticized at an Oct. 6 hearing by Henry Waxman, chairman of the House Committee on Oversight and Government Reform, for taking excessive pay, which was estimated at $484.8 million since 2000. He is also being investigated long with 12 other individuals by three federal criminal probes focusing on Lehman Brothers.

Surely, Dick Fuld has become a regular punching bag on Wall Street. Both there and on Main Street, Fuld's various failures and excesses have been ridiculed by politicians, the media, and fellow bankers and executives to illustrate what is wrong with the way Wall Street operates. Equally well, Main Street citizens are quite angry about the Wall Street types who made many times the annual compensation of professionals in other lines of work like academics or engineering.

However, does not this vilification of Dick Fuld seem like a bit much? Many on Main Street have little appreciation of how the mortgage securitization process lowered homeowner mortgage rates for many years. That process saved hundreds and sometimes thousands of dollars each month on both residential and commercial real estate. Spread across the many mortgages in the United States this "benefit" to Main Street offsets some of the amazing "profits" that Wall Street rang up in an environment of particularly low volatility and risk premiums.

Laid Off By Lehman Brothers: One Broker's Story

In the event that the reader has not yet seen this tale of gallows humor, Toomre Capital Markets LLC ("TCM") hopes that the reader of this website might enjoy this recent posting on Youtube about the supposed tale of one Lehman Brothers broker's journey through the bankruptcy experience. Part of why the humor works so well is that there is quite a bit of truth in the experiences referenced.

The Lucky Lehman Brothers Dozen: Subpoenas

At the Thursday October 16th 2008 hearing before the judge overseeing the bankruptcy of Lehman Brothers, the lead bankruptcy lawyer representing Lehman Brothers, Attorney Harvey Miller from Weil Gotschal, indicated that the firm is presently the focus of three grand jury investigations. According to Attorney Miller, the Southern and Eastern Districts of New York as well as the New Jersey U.S. Attorney offices are looking into various undisclosed aspects of Lehman Brothers' collapse.

In conjunction with these investigations, apparently a dozen subpoenas have been issued to a dozen current and former senior executives. New reports have subsequently suggested that CEO Dick Fuld and former-CFO Erin Callan are included on that list. Others have speculated whether former-COO Joe Gregory, the former head of Lehman Mortgage Capital Ted Janulis and Mark Walsh, the former head of the Lehman CMBS real estate business, might or might have received such subpoenas. CNBC reported that Joe Gregory's successor, Bart McDade had not received such a summons from Federal investigators.

Like many other observers of the demise of Lehman Brothers, Toomre Capital Markets LLC ("TCM") wonders who else was on the list of the lucky dozen to receive such Lehman Brothers subpoenas.

Lehman Brothers Bankruptcy Costs Non-Americans More than $300 Billion

On Monday October 13th 2008 comes news (via Reuters) that the bankruptcy of Lehman Brothers caused losses outside of the United States of more than $300 billion. The relevant part of the article reads:

The financial fallout outside the United States from Lehman Brothers Holdings' bankruptcy has been about $300 billion, the head of Germany's financial regulator said on Monday.

"We're still licking the wounds of Lehman," said Jochen Sanio, president of the German Federal Financial Supervisory Authority, at an international banking conference. "It caused international damage of $300 billion outside the U.S."

The U.S. government allowed investment bank Lehman Brothers to file for bankruptcy protection on September 15 instead of trying to intervene as it had done with investment bank Bear Stearns and later did with giant insurer American International Group.

Toomre Capital Markets LLC ("TCM") agrees with many commentators that the bankruptcy of Lehman Brothers in retrospect had many unintended consequences and was a primary contributing factor to the current economic crisis. Whether or not Treasury Secretary Hank Paulson made the right decision in letting Lehman fail will be debated for many months to come.

However, with such large losses among America's trading partners, it is certain that future decisions about rescuing financial institutions with potentially systemic risk implications will be made much more carefully. Hopefully, future such decisions will be made in consultation with America's global trading partners because in a highly interconnected, global world, such decisions affect far more than just the American "Main Street" economy.

Outlook After TARP Rejection

The news in the financial markets continues to be quite grim. Over the past few business days, Washington Mutual was seized by its regulators and quickly sold to JPMorgan Chase bank. Today the regulators assisted in the forced sale of Wachovia to Citigroup. Then this afternoon the United States House of Representatives rejected the Troubled Asset Relief Program ("TARP") program that would have enabled the Federal government to purchase up to $700 billion in "toxic" mortgage assets. Once the news of the no vote spread, the equity markets quickly turned even further south, ending up with the largest ever loss in the Dow Jones Industrial Average. Ahead of Tuesday's end of the month and the third quarter, the market for commercial paper is virtually frozen and what trading there is for very short terms, often overnight and generally a week or less.

In light of all of the above, several clients and professional contacts have reached out to Lars Toomre for his perspective on where things might go from here. In short, I am quite pessimistic. There is an old saying that the markets have a tendency to extract maximum pain for many parties before a correction can start. I fear that the sell-off witnessed this afternoon in the equity markets will continue and get worse as investors wonder which institution might be next. Also, I sense that equity investors are beginning to adjust downward their expectations for future earnings as consensus begins to build that the United States and perhaps the world is entering a major recession.

As bad as the equity markets might be, I am even more worried about the debt markets. The bankruptcy filing of Lehman Brothers has had far more repercussions than the Federal regulators originally projected. If you have not read the front-page story from the September 29th 2008 Wall Street Journal entitled Lehman's Demise Triggered Cash Crunch Around Globe, go read it now!

Lehman Brothers was one of the two largest dealers in commercial paper plus it had quite a bit of its own commercial paper outstanding. Its absence as a market maker has hurt the commercial paper market. The breaking of the proverbial buck by Reserve Primary Fund (due to the amount of Lehman Brothers commercial paper it held) caused many larger investors, primarily corporations and institutions, to question whether money market funds were money good. Hence, more than $150 billion of the $1.7 trillion money market funds were redeemed and much of the cash apparently has been parked in Treasury bills driving such holdings down to yield just a few basis points.

All markets are driven by the marginal buyer and seller. With few buyers in the commercial paper market, the rates required to roll over outstanding commercial paper have risen quite a bit and could well go even higher if the financial panic stays constant or worsens even further. The coming year-end is going to be truly horrendous as almost all financial institutions want to hold as much cash as possible and make their all-important year-end balance sheets look as pristine as possible. Hence, I suspect that there will be limited funds available for commercial paper issuers who want to take out bank loans instead of rolling their paper. Also, with such uncertainty about financial credits, it is also will be likely that issuing longer term debt in the corporate bond market will be very difficult, if not impossible for all but the safest credits.

Finally, market participants do not seem to be focusing on what is going on in the hedge fund sector. Many hedge funds are suffering net losses for the year and as a result, many hedge fund investors are submitting redemption notices. Even though most hedge funds have substantially reduced their leverage, many still employ leverage in the range of 3:1 to 5:1. The redemptions and margin calls from the decline in the equity markets will cause yet more selling from hedge funds. Hence, I would expect that many markets will be under pressure from further hedge fund deleveraging.

Toomre Capital Markets LLC ("TCM") consults with clients who are involved with structured finance securities, derivatives and other "hairy" investment opportunities like weather derivative contracts and life settlement portfolios. Many of these investment alternatives are illiquid, even in the best of times. As a result, we have a keen appreciation of what is termed "liquidity risk". Two of the clients today independently asked that I highlight a past post entitled Can Wall Street be Trusted to Value Risky CDOs?. Both found it extremely helpful and useful in thinking about the value of liquidity and what may lay ahead for the rejected TARP program.

Reader comments and thoughts are welcome.

FBI Investigates AIG and Lehman Brothers Failures

On Wednesday September 24th 2008, The TimesOnline website is reporting that FBI Investigates Fannie Mae and Lehman Brothers. Apparently the Federal Bureau of Investigation ("FBI") has launched an inquiry into Fannie Mae and Freddie Mac, the mortgage companies; Lehman Brothers, the bust investment bank; and AIG, the nationalized insurance company.

"It is understood that investigators are trying to ascertain whether fraud helped caused some of the troubles at the four groups. The investigation includes whether executives deliberately misled the stock market about the health of their businesses." At AIG, news reports in the past ten days or so have suggested that the former senior management did not appreciate until just recently the full extent of the problems in their derivatives subsidiary AIG Financial Products. That led to the effective take-over of AIG.

Lehman Brothers apparently failed because market participants had little confidence in where its mortgage assets were marked-to-market. News reports about the meetings at the New York Federal Reserve Bank during the weekend of September 14th suggested that a number of market participants from other investment banks were surprised to see the relatively "rich" (or high) prices to which many of Lehman Brother's mortgage assets were marked. It has been suggested that from CEO Dick Fuld, President Bart McDade, (and former-COO Joe Gregory before him), former-CFO Erin Callan, and others down to the recently-retired global head of the Mortgage Capital division, Ted Janulis, all saw gold in what many others viewed as lumps of coal.

No doubt one or more of these executives will be answering questions for the FBI about possible allegations that there were mis-statements of asset values, particularly in the mortgage area. David Einhorn of the hedge fund Greenlight Capital raised numerous questions about the valuation of mortgage assets at Lehman Brothers after its first-quarter 2008 earnings report. At the time, various Lehman Brothers executives strongly rejected his allegations.

Possible Bankruptcy for Joe Gregory of Lehman Brothers

During the past few days, there have been a large number of readers of the Toomre Capital Markets LLC ("TCM") website looking for more information on the bankruptcy filing of Lehman Brothers. Some of those inquiries have been looking for details on both "Joe Gregory" and "bankruptcy".

This was a bit surprising because there were few other searches for the names of other Lehman Brothers executives in combination with the term bankruptcy. Perhaps the readers were looking for more information about Joe Gregory's extravagance of using a helicopter to commute back and forth to work in mid-town Manhattan from his (plural) homes on Long Island. TCM has previously written about Joe Gregory and his extreme example of hubris and excess in the posts Employee Losses in Lehman Brothers Stock Holdings and Initial Reflections on Demise of Lehman Brothers.

On Sunday, September 21st 2008, New York Magazine published an article about the pain of sudden down-sizing that many are feeling with the demise of Lehman Brothers in an article entitled The Rage of the Previously Rich. Buried in the middle of that article was the text:

On Friday, September 12, the Wall Street Journal reported that Lehman’s former president, Joe Gregory, who was demoted along with former CFO Erin Callan in a management shake-up in June, was listing his Bridgehampton house on Surfside Drive for $32.5 million. The collapse of Lehman’s stock is a blow to Gregory’s lifestyle. He reportedly used to travel by helicopter to midtown from his $3.5 million mansion in Huntington, which was recently renovated, according to a Sotheby’s broker. According to one source, Gregory’s financial adviser was in negotiations with Lehman’s attorneys at Simpson Thacher & Bartlett, working to avert his filing for bankruptcy, after he borrowed money against his Lehman stock to pay for the renovation. “He owes a lot of money for it. They called the margin loan” late last week, the source said.