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Chairman of Bear Stearns sells his shares for $61 million By Landon Thomas Jr. Published: March 28, 2008

NEW YORK: Only a year ago, James Cayne's stake in Bear Stearns was worth more than $1 billion on paper. But on Thursday, Cayne, the chairman of Bear, disclosed that he had sold all of his shares this week in the troubled investment bank for just $61 million.

While the sale leaves Cayne a wealthy man, it nonetheless underscores the deep theoretical losses suffered by Bear's shareholders following the company's forced sale to JPMorgan Chase two weeks ago.

And for Cayne, the liquidation evokes a deep sense of loss. It represents a humiliating capitulation for a brash executive who, with his ever-present cigar, suspender-snapping ways and Friday golf outings in the summer, epitomized the classic, if outdated, picture of the Wall Street chieftain.

To the end, Cayne heeded the advice he often gave his colleagues at Bear: hold on to your stock. Whether the stock was flying high, as it was early last year, at $171, or plummeting, as it did in recent months, Cayne kept the vast bulk of his 5.6 million shares.

The sale, made on Tuesday, according to a securities filing, represents a final severing of ties with the firm where Cayne, 74, has worked since he joined as a broker in 1969.

Cayne did not return a telephone message seeking comment about his share sale.

While he still comes into his office suite in Bear Stearns's headquarters on Madison Avenue, Cayne has not been an active participant in the continuing talks between JPMorgan and Bear Stearns executives on broad issues of integrating businesses and identifying which bankers stay and which go. JPMorgan this week quintupled its original offer for Bear, to $10 a share, in an effort to win over the company's shareholders. The shares closed at $11.23 on Thursday, up 2 cents.

Cayne has kept a very low profile, people inside Bear say. Last week, when James Dimon, the chief executive of JPMorgan, addressed top Bear executives in a contentious 90-minute meeting, Alan Greenberg, Cayne's predecessor as chairman and chief executive, welcomed Dimon with a handshake. Cayne, who knows Dimon well and even discussed a possible merger while Dimon was at Bank One, was not easily seen, according to people who were there.

"How could he be in the room?" asked one Bear banker, who declined to be identified because he did not wish to speak publicly about Cayne, when asked why Cayne was hard to spot at the meeting.

Within Bear, a man who was once respected has now become a whipping boy for many furious employees who blame him for not selling the firm when he had the chance and, more recently, for not seeking a cash infusion in the months after the company's hedge funds collapsed and Bear's capital position became increasingly precarious.

And while he is for the moment still chairman of the Bear Stearns board, Cayne is not expected to join the JPMorgan board when the merger is completed.

People who have spoken with Cayne say that he, like everyone at Bear, was stunned by the firm's precipitous collapse and the rock bottom price for which it sold. In the past weeks, together with his wife, Patricia Cayne, who is a student of Jewish religious traditions, Cayne, who is Jewish, has spent considerable time searching for comparable events in religious history to see what lessons can be learned from the collapse of the firm, said a person who spoke to him recently.

While he has not yet moved into his new two-apartment suite at the Plaza Hotel, a purchase that cost him about $26 million earlier this month, people who have spoken with him say he still has plans to do so, as soon as he sells his current residence on Park Avenue.

While Cayne has not given a public reason for why he sold his shares, people who know him say that it suggests a need on his part to move on and separate himself, emotionally as well as financially, from the firm that for so long had been part of every fiber of his being and that now had become a source of pain and disappointment.

Cayne, unlike many lower-level Bear executives who had large portions of their net worth tied up in stock, also had the benefit of receiving large portions of his yearly compensation in cash. He was known to be prudent with his savings and has certainly accumulated enough to live out his retirement years in comfort.