Drexel Sues Former Top-Paid Executives : Securities: The investment firm is trying to get back big bonuses it paid out just before filing for bankruptcy.

Drexel Burnham Lambert, once one of Wall Street’s most powerful investment banking firms, sued about 280 of its former top-paid executives Tuesday in an effort to recoup $260 million in bonuses.

Drexel was driven out of business after it was engulfed by the Wall Street insider trading scandal involving its junk-bond wizard, Michael Milken. It is trying to reorganize as a smaller firm.

Drexel is seeking the most money--$16.6 million--from Leon Black, the former managing director in charge of mergers and acquisitions. Black was also one of three chiefs of its corporate finance department.

Rory Millson, one of Drexel’s lawyers, said the suits target employees who worked between June, 1989, and the time the parent company filed for bankruptcy in February, 1990. Each employee was sued individually in Manhattan bankruptcy court.

“These were payments that should be returned to Drexel under the provisions of bankruptcy law,” he said.

In October, the Securities and Exchange Commission released a report finding that Drexel raised its top officers’ pay even as it headed toward bankruptcy. While the SEC criticized the payments, it concluded that Drexel had done nothing illegal.

The SEC said that in 1989 Drexel’s 50 highest-paid employees received about $3.5 million each--6% more than in 1988.

Drexel said it paid the large bonuses to ensure that top money makers would not leave the company after it decided in 1988 to plead guilty to six felonies.

The SEC report said Black was originally given a $10-million bonus for 1989, but a few weeks before Drexel filed for bankruptcy he complained that the sum was insufficient.

Black’s compensation was raised to $20 million--$16 million in cash and $4 million in Drexel stock, the SEC said.

Black, who now heads New York-based Apollo Advisors, could not be reached for comment.

In other suits, Drexel is seeking $7 million from Warren Trepp, formerly a trader in the junk bond department in Beverly Hills, and $6.99 million from John Kissick, who replaced Milken as head of that department.

Joshua Friedman and Marc Rapaport, who jointly headed Drexel’s Beverly Hills capital markets department, are being sued for $4.95 million each.

“It’s a disgrace. They ought to be ashamed,” said a former executive who did not want to be identified. “When I left, they begged me to stay.”

The ex-employee said the action was particularly disgraceful because former Drexel Chief Executive Frederick H. Joseph is being allowed to stay on as a consultant to the reorganized company at $350,000 a year.

The consulting agreement, approved by a federal bankruptcy judge, was reached so that Joseph would help Drexel and government regulators pursue claims against Milken and other former employees.

Joseph is earning $375,000 as vice chairman of Drexel’s parent, Drexel Burnham Lambert Group.

Milken, who is serving a 10-year prison term, was not named in the suits filed Tuesday. He left Drexel before the specified time period.

Drexel sued Milken last year for repayment of more than $1 billion in compensation. Parties in that case have been holding serious negotiations. A settlement is expected soon.