Why Would a Banker Sell his $14m House to his Wife for $100?
Former Lehman boss accused of trying to hide assets from creditors
NEW YORK - Dick Fuld took home so much money in the years before his firm spiralled into bankruptcy that he couldn't even calculate how much. But now, the former Lehman Brothers boss is counting every penny and, as he prepares for an onslaught of lawsuits against him, he finds himself at the centre of a financial mystery.
In the weeks after Lehman collapsed around him, triggering the worst financial panic since the Great Depression and causing him a personal $1bn (£718m) loss on his stake in the firm, Mr Fuld transferred ownership of a $14m mansion in Florida to his wife, Kathleen. She paid just $100, the minimum allowed by Florida law.
The five-bedroom property, nestled on 3.3 acres of beachfront at beautiful Jupiter Island, north of the well-to-do playground of Palm Beach, is their "seasonal getaway" and one of five homes the couple own.
As details of the transfer emerged yesterday, Wall Streeters and lawyers speculated that the couple could be trying to shield as many of their assets as possible from lawsuits, including bankruptcy proceedings. Mr Fuld stayed on at Lehman Brothers to assist with bankruptcy proceedings there, until the end of December. Lehman Brothers, which is being run by an administrator, had no comment.
In the congested race to be named the official face of Wall Street greed, Mr Fuld has been a nose ahead since his often belligerent performance in front of Congress in October, as lawmakers picked over the years of risky bets that enriched Lehman executives and had ultimately capsized the 158-year-old firm the previous month.
At the hearing, lawmakers lambasted Mr Fuld as a "villain" for amassing a sprawling property empire and a modern art collection that was the envy of Wall Street, while taxpayers were now on the hook for hundreds of billions of dollars to prop up the banking system.
When one lawmaker said he believed Mr Fuld had taken home half a billion dollars in pay and bonuses during the previous decade, as the finance industry feasted on a booming sub-prime mortgage market and a buoyant economy, Mr Fuld said the figure was not right but could not provide another, and eventually agreed to something close to $300m. The collapse of Lehman began a chain reaction in the derivatives markets that came close to a full-scale financial panic and prompted the US government to propose an unprecedented $700bn bailout for Wall Street - against the wishes of an American public that wanted to see super-remunerated bankers punished for their excesses. Mr Fuld has been named in numerous investors lawsuits against Lehman, its executives and advisers, accusing them of hiding its dire financial condition.
Mr Fuld and his wife recently raised $13.5m from the sale of a collection of abstract impressionist drawings and Kathleen Fuld attracted attention when she went shopping at upmarket Hermès over the holidays and requested white bags, instead of the designer brand's signature orange ones.
The transfer of the Florida mansion has raised further interest in the couple's financial circumstances.
"One thing to look for when someone is under pressure from creditors is whether they are transferring assets to other people," said Eric Ruff, a Florida attorney. "That technique is one of the oldest tricks in the book and the laws against it are named after Queen Elizabeth I."
Florida has generous laws that protect residents from losing their homes in bankruptcy and other legal proceedings. Mr Ruff said the Jupiter Island mansion might well have been shielded from anyone seeking compensation from Mr Fuld alone because it was already in joint ownership.