Millions in Bonuses at Drexel Reported

Drexel Burnham Lambert Inc. paid out hundreds of millions of dollars in year-end bonuses to many employees only weeks before its parent company defaulted on loans and filed for bankruptcy, reports said today.

“Payments are said to have totaled as much as $350 million since December,” the New York Times said, quoting Wall Street executives.

The Wall Street Journal quoted a former Drexel employee as saying bonus payments were in the $300-million to $350-million range.

The employee also told the newspaper that two investment bankers at Drexel received bonuses of $11 million and $17 million respectively.

Year-end bonuses are a standard practice on Wall Street, and Drexel employees told the New York Times that several senior executives received as much as $10 million only two or three weeks before the collapse.

The payments could be questioned by creditors attempting to regain, under the bankruptcy proceedings, some of the money owed to them by Drexel Lambert Burnham Group Inc., the parent company.

The Federal Bankruptcy Code mentions that if a court finds that a transfer of property before a bankruptcy filing defrauded creditors, it can order the return of these assets to the creditors.

Drexel’s debt, as reported in the bankruptcy filings, totaled $2.89 billion while the firm’s assets were valued at $3.7 billion.