Lehman Approved Huge Payoffs for Execs Days Before Going Bust

THE Lehman Brothers board signed off on more than $100m (£59m) in payouts to five top executives just three days before the bank went bankrupt leaving thousands of employees out of work in London.

The payoffs, approved on September 12 by the Wall Street giant’s compensation committee, included over $24m in severance packages to the collapsed firm’s top three London executives.

The committee agreed a $16.2m pay-off for Benoit Savoret, chief operating officer for Europe. This payment had been guaranteed by the firm after Savoret had turned down an approach to join a rival firm. Andy Morton, the fixed-income business head, was set for a $2m golden goodbye.

Both were forced out in a shake-up orchestrated from New York in the waning days at the troubled bank. A $5m package for Jeremy Isaacs, the European chief executive who also left, was approved as well.

The executives never received the payments – detailed in internal Lehman documents seen by The Sunday Times - because the company filed for bankruptcy protection the next working day, September 15.

According to Tony Lomas, the lead administrator, they will now be treated as unsecured creditors.

The committee also signed a $41m retention package for Eric Felder, the head of global fixed income in New York, and a $40m two-year deal for Jerry Donini, the US-based head of equities. These are understood to have been voided, replaced by new contracts under Barclays which bought the US business.

The pay deals will further inflame the debate raging about executive pay as the global financial crisis accelerates.

In the two years prior to Lehman’s collapse, the executives were generously remunerated while overseeing forays into risky commercial real-estate investments that helped to bring the company down.
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