Lehman Sends Top Brass Packing

Updated from 3:43 p.m. EDT

Lehman Brothers(LEH Quote) ousted CFO Erin Callan on Thursday as part of a top-level management shake-up three days after it warned of a big second-quarter loss.

Lehman replaced Callan, who spent just five months on the job, with Ian Lowitt, who oversaw Callan's day-to-day responsibilities in his most recent role as co-chief administrative officer. It also replaced President and Chief Operating Officer Joseph Gregory with Herbert "Bart" McDade III. McDade was in charge of Lehman's equities division and also has a background in fixed-income and corporate bonds.

Lehman Chairman and CEO Richard Fuld did not explicitly give a reason for the changes in a statement. But he noted the "challenging times" the firm faced and expressed remorse for the fate of his long-time lieutenant Gregory.

"Joe has been my partner for over 30 years and has been a driving force behind who we are today and what we have achieved as a firm," Fuld said. "This has been one of the most difficult decisions either of us has ever had to make."

Cramer: Lehman Not Out of the Woods

Lehman shares are down about 70% over the past year and closed 2.6% lower to $23.13 in furious trading. Volume was more than four times its three-month average daily volume.

The move comes at a chaotic time for Lehman, which earlier this week said it expects to report a massive second-quarter loss of $2.8 billion -- the first in its history -- and raise $6 billion worth of capital. The firm closed that sale of common and preferred shares on Thursday, effectively diluting the stock by 30%.