Thursday, October 28, 2010
Lehman Brothers Asks Bankruptcy Judge to Approve $30M in Bonuses
Lehman Brothers Holdings Inc, which filed for Chapter 11 bankruptcy in September of 2008, has asked for a bankruptcy judge's approval to pay as much as $30 million in bonuses to employees in its derivatives department. Lehman's derivatives department is widely held responsible for the company's collapse, amassing billions of dollars' worth of risky derivatives like mortgage-backed securities.
Now, Lehman says, it needs to pay these bonuses to keep compensation competitive and retain highly skilled employees involved in unwinding the derivatives transactions that brought the company down two years ago. Lehman's request asks for authorization of a $15 million bonus pool for 2011 along with another $15 million that a judge has already authorized but has not been earned yet.
Under the incentive plan for 2010, Lehman was already authorized to pay $50 million in bonuses to its derivatives department.
The federal government declined to bail out Lehman Brothers in 2008 when the mortgage-related derivatives market collapsed, leading to the largest bankruptcy in United States history—twice as big as the next-largest, the bankruptcy of Washington Mutual, which was filed eleven days later. Lehman had approximately $646 billion in assets before filing for bankruptcy.