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Merrill Lynch chief forced out

NEW YORK – Stan O’Neal was known as one of the most ruthless men on Wall Street – clawing his way up from an impoverished upbringing in Alabama to run the world’s largest brokerage.

His tough, take-no-prisoners drive at Merrill Lynch & Co. was celebrated when he delivered record profits during his five-year tenure as chief executive. But O’Neal, who was purportedly fond of saying “ruthless isn’t always that bad,” found out Tuesday that even he wasn’t immune to the cutthroat ways of Wall Street.

After delivering investors a $2.24 billion quarterly loss – Merrill’s biggest since being founded 93 years ago – O’Neal was forced to retire by a board of directors that he mostly picked. The unfolding credit crisis claimed its biggest corporate casualty so far, though O’Neal walks away with an exit package worth $161.5 million.

O’Neal’s downfall took just six days from the time Merrill reported that record loss – though some were surprised it took even that long.

“What did him in so quickly is that O’Neal failed to develop supporters who would defend him and fight hard at the board or executive level,” said Richard X. Bove, an analyst with Punk, Ziegel & Co. “One of the reasons is that he fired 26,000 people, some of which were his supporters, and that made him vulnerable.”

Whoever replaces O’Neal faces a daunting task – so much so that the most widely tipped candidate, BlackRock CEO Laurence Fink, turned down an initial offer but has since engaged the board in active discussions, according to a person with direct knowledge of the offer who was not authorized to speak publicly.

Any successor will step into a Merrill Lynch that O’Neal aggressively transformed into a more diversified investment house from one that relied heavily on just stock trading.

The brokerage racked up record profits as he emphasized riskier bets than past Merrill CEOs. That strategy – which handed Merrill Lynch record results during the market’s peak – came with a heavy cost during the tumultuous third quarter.


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