Masters of the universe

Up to 10,000 staff at the New York office of the bankrupt investment bank Lehman Brothers will share a bonus pool set aside for them that is worth $2.5bn (£1.4bn), Barclays Bank, which is buying the business, confirmed last night.

The revelation sparked fury among the workers’ former colleagues, Lehman’s 5,000 staff based in London, who currently have no idea how long they will go on receiving even their basic salaries, let alone any bonus payments...

A spokesman for Barclays said the $2.5bn bonus pool in New York had been set aside before Lehman Brothers filed for chapter 11 bankruptcy in the United States a week ago.  Barclays has agreed that the fund should continue to be ring-fenced now it has taken control of Lehman's US business, a deal agreed by American bankruptcy courts over the weekend.

Barclays is paying $1.75bn for the US operation of Lehman and is keen to retain its best staff.  It said it had made no promises to individual staff members about how much they will receive but that the bonus fund would be paid out...

Many of Lehman’s UK staff are particularly angry about the US payouts because it has emerged that in the days running up to the bankruptcy, some $8bn in cash was transferred out of the account of the bank’s European business into accounts at the New York head office.

There is no suggestion any of this cash was used to supplement the bonus fund, but partly as a result of the transfers, PricewaterhouseCoopers (PWC), the administrator to the European business, initially found it impossible to guarantee salaries would be paid [to the European employees]. - The Independent

So... Barclays paid $1.75 billion for a “bankrupt” company that, lo and behold!, was sitting on a pile of $2.5 billion in cash.  Which may be perfectly innocent: Those “bonuses” could be commissions due but not paid, and the like.

But the situation still stinks:  How much of that cash will go to the very executives whose mismanagement sent the company into bankruptcy?  If the $2.5 billion had instead been counted as an asset, would there have been any need for bankruptcy at all?  And, finally, there’s that convenient shell game syle cash transfer, just before the filing.

BTW, in case you missed the math:


Via:  Robert, writing to Chaos Manor

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