You need to specify three lieutenants of the same rarity and stars, plus the appropriate recombinator. The first lieutenant is the one that gains a star. The second and third lieutenants, and the recombinator, are all used up and disappear.
You cannot get rid of your last of any of the following lieutenants in Fusion - AK, Fang, John, Mia, Charmaine, Penelope, Blade, Cesar, Hector, Michael, Lucas, Blink, Caine, Fox, Kate, Tagg. This is because they are needed to undertake Jobs and they can be bought for cash.
If you have a leveled up version of an LT and a spare of the same star that you wish to fuse away it will fuse away the leveled up version leaving you with the unleveled one, unless you put the levelled one in your inner circle before fusing.