Fuld rejected Koreans’ offer to rescue Lehman

News of the blunder came as Fuld told the employees of the firm that he feels "horrible" for what they have gone through this week.

"This has been very painful on all of you, both personally and financially," he said in a memo.

Korea Development Bank (KDB) chief Officer Min Euoo Sung said his offer of $6.40 a share for a controlling stake was snubbed in the weeks preceding its bankruptcy.

The price included a 30% premium for management control, he said, without saying how large a stake was sought. Fuld wanted $17.50 a share, causing the talks to collapse, Min said.

Barclays is considering buying parts of Lehman in Europe after agreeing to acquire its North American business for $1.75 billion following the Wall Street firm's bankruptcy.

"It would have been a favourable deal for us," said Min.

Under the proposed deal, KDB would have taken over Lehman's "good assets" after spinning off poor assets into a "bad company", he said.

By turning his back on the offer, Fuld sealed Lehman's fate as other potential suitors Bank of America and Barclays baulked at taking on the firm without government guarantees over future exposure to mortgage losses.

Lehman lost 96% of its value between February 2007 and last week. In the past two days Fuld sold shares that were worth $247 million 18 months ago for less than $500,000. That stock would have been worth $18.4 million under the Korean offer.

Fuld still holds 503,744 shares in the firm, worth 13 cents each for a total of $65,486.72.
Not that he is expected to be joining the dole queue any time soon. Over his 14-year reign at the firm, Fuld has netted some $500 million in sales of options of Lehman stock.

He will have a chance to put his side of the story next Thursday when he has been invited to testify before a House of Representatives committee about "regulatory mistakes" and "financial excesses" that led to Lehman's bankruptcy filing.

Congressional attention comes as questions are being raised about the suitability of the Lehman board to rein-in Fuld's enthusiasm for mortgage assets. Critics say only two of the 10 directors had direct experience in the financial-services industry.

The board's members include John Macomber, an 80-year-old former McKinsey consultant, John Akers, 74, a former IBM chief, Thomas Cruikshank, 77, chief of Halliburton before Vice President Dick Cheney, and Henry Kaufman, 81, the chief economist at Salomon Brothers during the 1970s.

Former US Bancorp chief Jerry Grundhofer only joined this year.