Credit Suisse hires former Lehman CFO Callan

NEW YORK Tue Jul 15, 2008 6:11pm EDT

NEW YORK (Reuters) - Erin Callan, demoted as Lehman Brothers Holdings Corp's LEH.N chief financial officer last month, was hired by Credit Suisse (CSGN.VX) to head its hedge fund business, the Swiss financial services firm said on Tuesday.

Callan, 42, lost her job as CFO after Lehman said it expected to post a $2.8 billion quarterly loss, its first since going public in 1994.

Analysts widely saw her as having lost credibility after David Einhorn, a hedge fund manager who sold Lehman's shares short in a bet they would fall, gave a speech raising questions about Lehman's accounting.

Before Callan was Lehman's CFO, she headed its hedge fund banking group.

"Her name comes up repeatedly when I talk to hedge funds about who is best at covering them," Paul Calello, chief executive of Credit Suisse's investment bank, said in an interview.

Callan, whose position is new, will be based in New York. Her appointment is effective Sept 2.

Callan worked at Lehman for 13 years. She leaves a bank whose future is increasingly unclear as its share price plummets. The investment bank has wrestled with short-sellers who say it is undercapitalized. Rumors that proved to be untrue have nonetheless pulled down the company's share price.

The Securities and Exchange Commission said on Sunday that it is boosting its efforts to stop the spread of false rumors hurting financial stocks.

The New York Post reported Tuesday that Lehman was considering going private to help stop the freefall in the company's shares.

The stock has fallen nearly 80 percent this year, and trades at less than one-half its book value -- a sign of extreme distress.

Lehman shares rose 6.6 percent to $13.22 on the New York Stock Exchange Tuesday.

Lehman Brothers declined to comment on Callan's move or the N.Y. Post report.

Lehman demoted Callan to an unspecified investment bank position on June 12, when it also demoted Joseph Gregory from his position as chief operating officer.

(Editing by Braden Reddall/Jeffrey Benkoe)