Daily Management Review

Lehman Trader Still fighting for his $83 Million Bonus 7 years after the Bank Failed


Lehman Trader Still fighting for his $83 Million Bonus 7 years after the Bank Failed
A little-known bond trader was on a hot streak before Lehman Brothers collapsed, pulling the trigger on the global financial crisis. More than $700 million in profits was given to the bank in a period of two years by Jonathan Hoffman.
He was then looking at a bonus of $83 million. Even by Wall Street standards, it was an eye-popping payday.
In what has become the ultimate Wall Street grudge match Hoffman is still fighting to collect that bonus from Lehman after more than seven years. Hoffman’s $83 million bonus was paid by Barclays, the giant British bank he joined shortly after Lehman collapsed, say lawyers representing Lehman’s estate in a Manhattan bankruptcy court. In other words, they say, he is trying to be paid twice for the same work.
This legal battle is the last thing that has kept Lehman from closing the books on the largest bankruptcy in U.S. history. The failure of federal regulators to implement rules meant to curb excessive Wall Street pay after the 2008 financial crisis has been highlighted by this incident.
“This was one of the most important parts of Wall Street reform, and it is one of the last to get any attention. The lure of Wall Street money hasn’t changed,” said Bart Naylor, financial policy advocate for Public Citizen.
Large bonuses drew new scrutiny in the wake of the financial crisis after American International Group, the massive insurance company, took a taxpayer-funded lifeline of more than $100 billion even though the bonuses have long been a key motivator on Wall Street.
Despite a bailout, the company was alleged to have set aside millions of dollars for employee bonuses and retention pay. AIG AIG eventually agreed to revise some executive payments.
Lawmakers called for regulators to curb compensation considered excessive or that exposed a company to significant financial losses in the 2010’s financial reform package, known as the Dodd-Frank Act.
Wall Street bonuses are back as the progress on the rules has been slow.
According to the New York Comptroller’s office, $172,900 was the average bonus in the New York financial sector in 2014 which was 50 percent more than the past three years. Hedge funds and private-equity firms are still doling out multimillion-dollar awards to their most successful risk takers even as the bonus pool at investment banks such as Goldman Sachs is expected to shrink this year, compensation experts say.

Deutsche Bank co-chief executive John Cryan recently lamented at a Frankfurt conference that its bankers are promised bonuses too quickly.

“Many people in the sector still believe they should be paid entrepreneurial wages for turning up to work with a regular salary, a pension and probably a health-care scheme and playing with other people’s money. There doesn’t seem to be anything entrepreneurial about that except the compensation structures,” Cryan said said according to news reports.
There might be little incentive to change, according to experts, as the Dodd-Frank regulations formulated to curb excessive Wall Street pay is stuck in bureaucratic limbo.

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