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Up to 10,000 staff at the New York office of the bankrupt investment bank Lehman Brothers will share in a bonus pool set aside for them that is worth US$2.5 billion ($3.6 billion), said Barclays Bank, which is buying the business.
The revelation sparked fury amongst the workers' former colleagues, Lehman's 5000 staff based in London, who currently have no idea how long they will go on receiving even basic salaries, let alone any bonus payments.
It also prompted a renewed backlash over the compensation culture in global finance, with critics claiming that many bankers receive pay and rewards that bear no relation to the job the do.
A spokesman for Barclays said the US$2.5 billion bonus pool in New York had been set aside before Lehman Brothers filed for chapter 11 bankruptcy in the United States a week ago.
Barclays has agreed that the fund should continue to be ring-fenced now it has taken control of Lehman's US business, a deal agreed by American bankruptcy courts over the weekend.
Barclays is paying US$1.75 billion for the US operation of Lehman and is keen to retain its best staff.
British employees of Lehman described the bonus payments as a "scandal" yesterday, as they waited anxiously to see whether a deal could be struck with buyers circling the bank's European operations.
Many of Lehman's UK staff are particularly angry about the US pay-outs because it has emerged that in the days running up to the bankruptcy, some US$8 billion in cash was transferred out of the account of the bank's European business into accounts at the New York head office.
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 £100 million ($267 million) loan to fund the payments. PWC last week wrote to Lehman Brothers' head office in New York, requesting the repayment of the US$8 billion, but a spokesman said yesterday that the administrator had received no formal response.
Prime Minister Gordon Brown said Britain would review financial services awards. "There's been a great deal of irresponsibility," he said. "There's an element of the bonus system that is unacceptable."
However, Adair Turner, who formally takes over today as chairman of the Financial Services Authority, the UK's chief City regulator, warned it would be very difficult to police individual pay deals.
- INDEPENDENT
