Lehman Brothers: $400 million bonuses for top executives on 100 Mortgages

Top executives at Lehman Brothers along with money managers could get retention bonuses valued at $400 million when their investment-management business is sold to Hellman & Friedman LLC and Bain Capital LLC.

Bain and Hellman agreed on a deal to buy the majority of the asset management unit from the collapsed bank Lehman Brothers back on September 29 for the price of $2.15 billion, which was around fifty percent of the buyout firms initial bid. Lehman Lawyers said yesterday in a court hearing that both Bain and Hellman would deduct the employee awards from the amount they pay the Lehman for the assets.

The bonus proposals come after lawmakers in a House Oversight and Government Reform Committee hearing faulted Lehman Chief Executive Officer Richard Fulds compensation of $484.8 million since 2000. Under 2005 bankruptcy laws, creditors could try to recover Fuld’s pay and the money managers’ retention bonuses, said Lynn LoPucki, who teaches bankruptcy law at University of California at Los Angeles and Harvard University.

“Fuld took huge bonuses while running a highly risky business, and these executives are taking their money after the end came,” he said. “The estate of the bankrupt company is entitled to recover the payments.”

Hellman of San Francisco and Bail who are based in Boston teamed up to buy Lehman Brothers as the two private equity firms were the only bidders in a auction that was rushed after the Wall Street investment bank filed for bankruptcy in New York.

Source: Bloomberg

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I think that the Lehman Bros. debacle/bankruptcy was handled in a very unfair way by the government. If they had been bailed out perhaps a lot of the other bailouts might not have been needed.
The followup news about Fuld’s huge bonuses and the pending continuing payments to former execs is just criminal.
My 88 year old mother lies in a nursing home dependent on some investments to sustain her stay there among which is a $38,000 Lehman note. This represents over 10% of her meager income which has now stopped completely and she may never recover this money. Why should former CEO continue to receive huge compensation when my mother gets nothing from her investments. If she uses up all her money in the nursing home she will become a ward of the state and the taxpayers will be forced to pay for her nursing home expenses via Title 19 funds. I’m sure this can be magnified thousands of times by other holders of Lehman investments including bonds, notes and stock.
Ed

Comment by Edwin Geels — October 23, 2008 @ 6:13 pm