Lehman Brothers has paid, less than a year before the September 2008 bankruptcy, huge financial compensations between 8 and 51 million dollars for 50 of its highest paid employees, totaling more than $700 million, according to the Los Angeles Times. The newspaper cites documents filed in court during the Lehman Brothers bankruptcy, lost among the millions of pages that describe in detail the most terrible bankruptcy in history, a catalyst for global financial crisis of 2008-2009.
Documents show the list of highest paid employees of the bank, which received between 8 and 51 million dollars in cash, shares and other forms of remuneration. It is not known whether employees have started to sell shares before the bank failure. Generous financial packages awarded only a few months before the collapse of Lehman caused amazement among the experts in top employee compensation, again highlighting the culture of Wall Street money, which had a decisive contribution to the financial crisis.
“Many people will be amazed at how well some people were paid. This is not a situation where only five or six people get a lot,” observes an American expert in financial compensation. Lehman Brothers went bankrupt in September 2008 after massive bets on subprime mortgages that proved worthless after the collapse of the housing market. Before the U.S. housing crisis, when housing prices were rising, debt securities composed of mortgages were the “hot” assets on Wall Street.
The huge demand for such securities and large bonuses received by bankers who sold them have encouraged underwriting more risky loans, which have become irrecoverable losses after speculative bubble of the housing market burst in the U.S. Lehman documents obtained by the Los Angeles Times offers an interesting viewpoint on Wall Street pay practices because federal law requires companies to disclose only the compensation packages granted to the five most important executives.
The entries show that huge payments were not huge made only to CEOs but were divided to a large group of bankers receiving bonuses sometimes higher than the CEO that headed the company. Highest paid employee of Lehman was Robert Millard, who received in 2008 for his work in 2007, 51.3 million dollars. Millard was the head of a Lehman subsidiary that dealt with investment of bank’s money.
CEO of Lehman, Richard “Dick” Fuld, received $40 million. In 2005, Millard was paid only $3.8 million, and his compensation was rising in 2006 by 1.084%, to 44.5 million, according to documents. Currently head of a hedge fund, Millard argues that he has not received all compensation for 2006 and 2007. He says that more than half of the financial packages were paid in company shares that became worthless after the bankruptcy. “Lehman Brothers lost a lot of money in other ways,” Millard said.
Millard’s colleague, Marvin Schwartz, was given a compensation of $31.1 million for 2007, up from $27 million in 2006 and $19.3 million in 2005. Currently, he is a portfolio manager at Neuberger Berman investment fund. Jonathan Hoffman, a trader at Lehman Brothers, received financial compensation for 2007 of $30.9 million, compared to $19.9 million in 2006.
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