Less than a year before the 2008 collapse of Lehman Bros. plunged the global economy into a terrifying free fall, the Wall Street firm awarded nearly $700 million to 50 of its highest-paid employees, according to internal documents reviewed by The Times.
The documents, which were among the millions of pages submitted in Lehman's bankruptcy, show the list of top earners each were pledged $8 million to $51 million in cash, stock and other compensation. How much, if any, of the stock was cashed in before the bankruptcy wiped out its value couldn't be determined.
Still, the rich pay packages for so many people raised eyebrows even among compensation experts and provided fresh evidence of the money-driven Wall Street culture that was blamed for triggering the financial crisis.
"Many people are going to be stunned at how well some people were being paid," said Brian Foley, an executive compensation expert in White Plains, N.Y. "This wasn't a matter of five or six people being paid a lot."
The documents were obtained by the government-appointed court receiver overseeing the firm's bankruptcy and were reviewed by The Times.
Lehman filed for Chapter 11 protection in September 2008 in what would become the largest bankruptcy in U.S. history, sparking the biggest financial meltdown since the Great Depression. The investment bank buckled after betting heavily on subprime mortgages to people with shaky credit, which became worthless as housing prices tumbled and the borrowers stopped paying their loans.
Before the fall, when housing prices were booming, mortgage-backed securities were one of the hottest investments on Wall Street. The ravenous appetite for these securities, and the rich commissions reaped by those selling them, encouraged the underwriting of ever-riskier loans that failed when the housing bubble popped, according to the federal Financial Crisis Inquiry Commission.
The Lehman documents provide a rare peek into Wall Street compensation practices, because federal regulations require salary disclosure of only the five highest-paid officers of a corporation. The documents reveal, to the dollar, the pay packages promised to individual traders and investment bankers at Lehman - a well-kept secret up to now.