Fury at $2.5bn bonus for Lehman's New York staff By David Prosser Monday, 22 September 2008 Up to 10,000 staff at the New York office of the bankrupt investment bank Lehman Brothers will share a bonus pool set aside for them that is worth $2.5bn (£1.4bn), Barclays Bank, which is buying the business, confirmed last night. The revelation sparked fury among the workers' former colleagues, Lehman's 5,000 staff based in London, who currently have no idea how long they will go on receiving even their 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 bore no relation to the job they had done. A spokesman for Barclays said the $2.5bn 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 $1.75bn for the US operation of Lehman and is keen to retain its best staff. It said it had made no promises to individual staff members about how much they will receive but that the bonus fund would be paid out. In addition to the $2.5bn cash pool, Barclays is also in negotiations with about 30 executives it considers to be Lehman's best assets and plans to offer them contracts worth tens of millions of dollars. British employees of Lehman described the bonus payments as a "scandal" as they waited anxiously yesterday 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 payouts because it has emerged that in the days running up to the bankruptcy, some $8bn 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 £100m loan to fund the payments. PWC wrote to Lehman Brothers' head office in New York last week, requesting the repayment of the $8bn, but a spokesman said yesterday that the administrator had received no formal response. The row will increase pressure on the Government to tackle perceptions that City pay is out of control. Speaking on The Andrew Marr Show on BBC1 yesterday, Gordon Brown said Britain would review financial services awards following the credit crisis. "There's been a great deal of irresponsibility," the Prime Minister 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. "I think it would be really exceptional in any industry to have direct regulation on what different people are paid, I don't think that's appropriate and I don't think that would be workable," he said. "What is appropriate for regulators to do, is the need to ask searching questions about the nature of people's remuneration and to ask questions of institutions as to whether they are paying out bonuses before they are really sure whether the profits are really there."A spokesman for the TUC said the US payouts were unfair. "It looks like those that will suffer the most from the Lehman Brothers' collapse are those at the bottom of the corporate chain while many of those at the top will be looked after," he said. Critics of the UK's attitude towards City pay also pointed out that the US has much stronger litigation laws. For example, advocates acting for Lehman creditors in the US said over the weekend that they might sue Richard Fuld, the investment bank's chief executive, who was paid $34.4m last year, in an attempt to force him to return some of the money.