Published: Friday, 11 Sep 2009 | 10:15 AM ET

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On the day Lehman Brothers filed for bankruptcy, Lynn Gray got into the office before 6 a.m., earlier than her usual 7:30 a.m. arrival.

CNBC.com Lynn Gray launched Campus Scout, a firm that provides on-campus recruiting services for a fixed fee.

It was still dark outside when she bought a coffee from the man with the cart.

"How you doing?" he asked.

That's when tears rolled down her cheeks. She handed him a $20 bill.

"Don't give me any change," she said.

As she walked inside the building, people were already leaving. Others wandered the halls, not knowing what to do.

"Why us and not AIG

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[AIG  Loading...      ()   ]? Why us and not Merrill?" she remembers saying and continues to ask herself. Gray, then chief administrative officer of Lehman’s global real estate group, had worked at the company for 11 years.

Gray, along with some 10,000 colleagues in the New York metropolitan area transitioned into jobs at Barclays Capital, after the firm acquired Lehman's US investment banking and capital markets businesses last year.

While some ex-Lehmanites started independent firms, others turned to academia, the arts and philanthropy. Still, Lehman's fall continues to haunt former employees one year after the largest corporate bankruptcy in American history. Many are still confounded about how this could have happened to their company, once the fourth-largest investment bank in the United States.

"I couldn't believe that people could be that irrational," said one former senior executive about the government's decision to let the firm fail. "It was an ad hoc decision to make a point, which in a sense boomeranged."

Lehman had asked for bank-holding status, a move that would have helped prop up the firm with additional capital, but the request was denied, said this former senior executive who was in the emergency boardroom meeting the day prior to bankruptcy.

"They [the government] miscalculated the impact of Lehman," he said. "I expected to be woken up for months after and someone telling me it was just a bad dream."

While some fault the Feds, others point to Lehman's leadership.

Lehman had hired Lawrence Lindsey, a former Fed governor and CEA chairman, and his  economic consulting firm to supply macroeconomic advice. Lehman paid Lindsey six-figures a year for two years, yet CEO Dick Fuld and Joe Gregory, then president, never attended meetings, said Larry McCarthy, former managing director and head of distressed trading. If they had, they would have heard Lindsey's opinion that the housing market was a bubble.

"These guys didn't listen and not only they didn't listen, they double downed and triple downed," said McCarthy. "If your best people tell you to do X and you do Y, you've got some problems."

Fuld reiterated in a recent interview with Reuters that circumstances involving abusive short selling, false rumors, credit agency downgrades and loss of confidence by clients and counterparties, not his leadership, were to blame for Lehman's fall.

The former Lehman CEO originally made these points last year, when he told the Congressional panel that he would wonder "until they put me in the ground" why the U.S. government did not rescue his firm, as it helped others.

Nevertheless, Fuld has detractors.

"It was like working for two different companies," said McCarthy. "We knew what we were doing. But we didn't know what they were doing."

As early as 2007, Larry McDonald, a former vice president of distressed debt and convertible securities trading and author of "A Colossal Failure of Common Sense," an account of Lehman's fall, started to see warning signs.

Courtesy Amy Radar Of McDonald's decision to write on Lehman's fall: “I wanted everyone on Wall Street to know this didn’t have to happen," he said.

"At the top of the market we had $770 billion in stocks, bonds, commercial real estate and residential real estate, oil, gold, treasuries, but we only had net tangible equity of $20 billion," he said. "Nobody knows exactly, because Lehman's a black box."

But employees who spoke out were pushed out or silenced, he said.

"The place went from being Camelot and every day it became more poisonous," he said. "Lehman didn't have any real bread. They had to borrow to keep playing this game. In some ways, it was like a Ponzi scheme."         

Since Lehman's collapse last year, Gray, 60, lost her job and hundreds of thousands of dollars in deferred compensation. But she has taken it as an opportunity and launched her own business, Campus Scout, a firm that provides on-campus recruiting services.

"I'm very proud that I worked at Lehman," she said. "That's part of my history and not a part of my future."

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