When Lehman Brothers filed Chapter 11 bankruptcy it September, 2008, it was the single largest bankruptcy in corporate American history. Now, the company has petitioned to use their funds to pay their employees $50 million in bonuses.
According to Bloomberg, U.S. Bankruptcy Judge James Peck granted Lehman's petition in the New York bankruptcy court last month.
Lehman Corporation in London requested the extra funds to pay current employees to stop them from leaving the company during the liquidation process.
They have also hired new employees to help administrators from PricewaterhouseCoopers work through millions of contracts that need to be reconciled with the company’s clients and trading partners.
In Lehman's bankruptcy petition, the company requested the funds in order to pay bonuses for 230 employees working through the bankruptcy.
Lehman claims that their employees who are handling derivative contracts have brought in more than $8 billion in cash and have settled more than 17 percent of their contracts during the bankruptcy.
They further claim that the bonuses will help motivate their employees to maximize the value of the remaining contracts.
Steve Pearson, a PwC partner claimed that the demand for the bonuses reflects the need for skilled people to work in Lehman's unique bankruptcy situation.
"We've made our strategy and reasoning clear to our creditors," Pearson said. "We need to keep up with the market and we have to bear in mind that staff here have much narrower career development options than other banks."
Pearson also claims that any bonuses given to employees would be to maximize the money returned to the creditors. They want to retain staff that has extensive knowledge of Lehman to work through the bankruptcy liquidation.
When Lehman filed for bankruptcy in 2008, the European division had 5300 employees. 2800 of them were transferred to the Japanese Bank while 1000 were laid off and 1000 quit.
The remaining employees are working on the Lehman bankruptcy to handle the clients' assets. So far the European district has returned over $13.3 billion to its clients and creditors.
The bank faces serious heat and accusations for requesting the $50 million in bonuses for employees, but the company maintains it is needed to complete the bankruptcy.
Diana Adams, the U.S. Trustee overseeing the bankruptcy, said she originally agreed to the bonus plan because she thought it was meant to help the employees, but she now questions why they will need bonuses for merely doing their jobs.