Lehman bonuses reward for merely doing job, U.S. says
Lehman Brothers Holdings Inc.'s plan to pay $50 million in bonuses to employees handling derivatives contracts appears to be a reward for merely doing their job, the U.S. Trustee said in a court filing.
Lehman, which is liquidating in bankruptcy, asked a judge last month for permission to pay incentives to about 230 full- time employees unwinding the contracts. Diana Adams, the U.S. Trustee who oversees Lehman's bankruptcy, said in today's filing that she was asking the company for a second time to explain why it needs to pay such bonuses, particularly to vice presidents who have "limited authority" except for signing papers.
"Without the information identified below by the United States Trustee, the inference is that the debtors propose to pay bonuses to the derivatives workforce for performing the contractual and fiduciary duties it already has," Adams said in the filing in U.S. Bankruptcy Court in New York.
The Bankruptcy Code "strictly limits the payment of retention bonuses to insiders," according to the trustee's filing.
The rule was enacted "as a result of increasing public sentiment against the practice of executives of bankrupt companies generously rewarding themselves during restructuring at the same time that rank-and-file workers were suffering tremendous economic blows," the trustee said.
Lehman told Bankruptcy Judge James Peck in a Nov. 25 filing that the derivatives team had brought in more than $8 billion in cash and settled 17 percent of the contracts.
Motivate, Reward
A bonus pool "designed to motivate and reward employees" in the group will help to maximize the value of the remaining contracts, it said.
"The reasonableness of the cost structure of the bonus plan is not clear," the trustee said.
Lehman filed the biggest U.S. bankruptcy in September 2008 with assets of $639 billion.
Kimberly Macleod, a Lehman spokeswoman, didn't immediately return a call and e-mail seeking comment after regular business hours.
The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).