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Employee Bonuses Get Approved in Lehman Brothers Bankruptcy

A bankruptcy judge has approved the plan of Lehman Brothers Holdings Inc. to pay $50 million in bonuses to employees handling derivatives contracts. The judge said the payments provide essential incentives to employees with “unique skills.”

In November, Lehman, the investment bank liquidating in bankruptcy, asked U.S. Bankruptcy Judge James Peck in New York for permission to pay the bonuses to approximately 230 full-time employees unwinding the contracts. On December 16, the judge sanctioned the payments as bankers, under attack after two years of failures and bailouts, risk more public ire by awarding year-end bonuses, according to a Bloomberg National Poll earlier in December.

In a November 25 filing, Lehman told Peck that the derivatives team had brought in more than $8 billion in cash and settled 17 percent of the contracts while under bankruptcy protection. The filing said that a bonus pool “designed to motivate and reward employees” in the group would help maximize the value of the remaining contracts.

Also during the court hearing, the judge informed Barclays Plc it could not have documents it sought from Lehman creditors and the trustee for Lehman’s brokerage, according to a spokesman for the trustee who declined to be named.

In September 2008, Lehman filed the largest U.S. bankruptcy with assets of $639 billion. Lehman’s creditors include UBS AG, the New York Giants, Abu Dhabi Investment Authority, and individual bondholders. The creditors have filed $824 billion in claims against the company.

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