London employees of defunct Lehman Brothers (LEH) are outraged that the 10,000 people at Lehman’s New York offices will be guaranteed to receive $2.5 billion in bonuses set aside for them in a pool before the bankruptcy.
The Independent reports that Barclays (BCS), which bought Lehman’s North American operation for $1.75 billion, has confirmed that it will keep the pool “ring fenced,” probably as a bid to hold on to Lehman’s more talented staff.
In addition to the $2.5bn cash pool, Barclays is also in negotiations with about 30 executives it considers to be Lehman’s best assets and plans to offer them contracts worth tens of millions of dollars. British employees of Lehman described the bonus payments as a “scandal” as they waited anxiously yesterday to see whether a deal could be struck with buyers circling the bank’s European operations.
More scandalous in the eyes of Lehman’s London staff is that $8 billion in cash was transferred from Lehman’s European business to North America just days before the bankruptcy, which helped secure bonuses for New York–and which is now jeopardising basic salary payments for London employees:
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. The September wages of thousands of European staff were only secured in the middle of last week, when PWC negotiated a £100m loan to fund the payments. PWC wrote to Lehman Brothers’ head office in New York last week, requesting the repayment of the $8bn, but a spokesman said yesterday that the administrator had received no formal response.
Business Insider Emails & Alerts
Site highlights each day to your inbox.