Drexel Burnham Lambert Inc. is paying two traders more than $1 million a year and other top executives hundreds of thousands of dollars during the firm’s costly bankruptcy proceedings.
Drexel confirmed Monday that 29 senior executives and traders are receiving more than $250,000 a year each. But the firm said the salaries were set early in the case, are necessary to manage its business and are on a par with compensation elsewhere on Wall Street.
A Drexel spokesman, Steven Anreder, said the firm was trying to control expenses for its own benefit and that of creditors, who stand to gain more money in a reorganization if Drexel can hold down costs.
The report comes as salaries and compensation fall at major Wall Street firms during an industrywide recession.
Drexel documents show that the firm is paying $35 million to its sharply reduced staff of about 290 employees, or an average of $121,000 a year. Of that, $21.1 million is for 73 officers and $14.05 million for the rest of the staff.
Two traders, Robert Beyer and Mark Attanasio, who are managing directors in capital markets, are receiving $1.45 million each, according to the documents, which first were reported in the New York Times and confirmed by the firm.
The confidential documents, which were given to several creditor committees, detail Drexel’s finances through October. The firm said the compensation figures are annualized.
David Boies, an attorney representing government thrift agencies suing Drexel for alleged fraud in the sale of junk bonds, said the salaries and other expenses such as legal costs were depleting Drexel’s estate.
Boies said that although some salaries obviously were needed to run Drexel during its Chapter 11 proceedings, “We don’t believe the amount is being kept to a reasonable, necessary minimum.”
“Every dollar that is paid out unnecessarily is potentially a dollar less for the taxpayers to recover,” he said. Boies represents the Federal Deposit Insurance Corp. and Resolution Trust Corp. in claims against Drexel.
Drexel’s parent filed for bankruptcy reorganization in February, and the brokerage subsidiary followed in May. The firm has said it plans to emerge as a reorganized entity that would, among other things, be involved in restructuring distressed companies.
Boies said Drexel’s listed assets--about $2 billion--fall far short of covering the firm’s liabilities, including lawsuits seeking tens of billions of dollars in alleged damages. Drexel last year admitted to six criminal counts related to illegal trading.
FDIC and RTC lawyers have called for liquidating the firm, saying there was no chance that Drexel could reorganize as a viable business. Two judges in the case have balked at supporting a liquidation.
The Drexel spokesman said the firm independently had asked U.S. Bankruptcy Judge Francis Conrad for permission to hire a firm to review its compensation structure and help set payouts for 1991. The report is due in January.
“These compensation levels have been under careful and continuous oversight by the board of directors, by the creditors and by the equity committee,” Anreder said. “Drexel has been living in a fishbowl as far as its expenses and compensation is concerned.
“This notion that we’re excessively paying people is inaccurate,” he said.
Anreder said Drexel needed to pay competitive salaries to executives and top traders to keep them at the firm to help devise a reorganization plan and manage its large but tough-to-sell portfolio of junk bonds.
He also said some executives are crucial to the firm retaining an “institutional memory” so it can respond to about 13,000 civil claims filed in the bankruptcy.