I'd recommend taking a slight variant on this in order to handle the middle name problem:

while(<FILE>)
{
my @line = split '|'; # split line
#so far as above apart from my declaration
#now split on whitespace
my @names = split ' ',$line[1];
#same idiom for getting the first letter
my $firstletter = substr ($names[0],0,1);
#then get the last item in the name array
my $lastname = $names[-1];
#now do whatever you want to do with the letter and lastname
}
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Of course this assumes that all the names are in a givenname middlenames familyname format.