NEW YORK, MAY 29 -- Directors of Drexel Burnham Lambert Inc. today replaced Frederick Joseph as chief executive officer of the firm that he saw go from the pinnacle of Wall Street power to the trough of financial collapse.
John F. Sorte, who until now was co-head of Drexel's corporate finance department, was elected to replace Joseph. Sorte will oversee a reorganization that Drexel hopes will yield a viable, albeit drastically smaller firm.
The announcement came as the broker-dealer and 14 other subsidiaries of Drexel's parent company filed today for reorganization under Chapter 11 of the federal bankruptcy code.
Drexel's parent company, Drexel Burnham Lambert Group Inc., filed for bankruptcy protection on Feb. 13. Since then, the firm has wound down most of its operations and dismissed all but 500 of its 5,400 employees.
The broker-dealer and the other subsidiaries stayed out of bankruptcy court until today to make it easier for the firm to sell as many assets as it could without having to submit every transaction to court approval.
The practical effect of today's filings is that Drexel's remaining creditors, with a few exceptions, now will have to go to court to be repaid. Drexel said it could file a reorganization plan as early as mid-June.
Drexel was once the most influential firm on Wall Street because of its pioneering work under Michael R. Milken in building the market for junk bonds. But Drexel went under after pleading guilty to six felony counts of federal securities fraud.
Joseph, 53, will retain the position of president of Drexel's parent company but will hand over responsibility for day-to-day operations of the broker-dealer to Sorte, 42, the firm said.
"It made sense to a get a guy in there who's going to look at day-to-day stuff and plan for reorganization as well," a Drexel executive said. He added that there were "no plans" for Joseph to leave the firm.