Lehman's New York employees of the failed Lehman Brothers, described by Presidential candidate John Mcain as the bank with ''casino culture'', who aided in bringing the world's biggest corporate bankruptcy, were rewarded by their new owners – Barclays of London, with a $2.5-billion bonus bonanza, eliciting a furious reaction from their colleagues in London who were left high and dry by the company headquartered in New York, calling it a ''scandal.''
London-based Lehman Europe's 4,500 UK employees were out of a job after the company had been put into administration when it sought the Chapter 11 bankruptcy protection.
This bonus comes after Barclays Capital bought the US operation of Lehman Brothers for $1.75 billion, which included Lehman headquarters building in Manhattan and two data centres in New Jersey. They also took on 10,000 staff by asking them to resume work at the Manhattan headquarters today.
In the days leading up to Lehman's collapse, the US business took back all the cash held at its overseas subsidiaries. $8.2 billion held by Lehman's offices overseas was sent through London to its headquarters in the US via electronic transfer.
Lehman's European headquarters which is based in London often remitted money from its London HQ to its parent company in New York where the money kept overnight accrued interest and sent back the following morning to London.
On Sunday when Lehman filed for bankruptcy, Lehman Europe found that it was down by $8 billion as the money failed to arrive leaving the employees and creditors high and dry.
It made the European administrators, PricewaterhouseCoopers to file an 83-page motion in the New York court demanding that $8bn which Lehman Europe sent to the US be returned to London as it required paying 4,500 employee salaries, property bills, creditors and other day-to-day expenses. (See: Lehman UK files $8-billion recovery suit against US parent )
According to Barclays, a week prior to Lehman Brothers filing for chapter 11 bankruptcy the New York office had set aside the $2.5 billion bonus. A US court had agreed to the purchase of the American operations of Lehman by Barclays last week and the London banker has said that the fund should continue to be ring-fenced now since they are the new owners.
The $2.5 billion bonus has ignited anger among Lehman's 4,500 UK employees based in London who have lost their jobs and are clueless as to how long they would receive their basic salary till the European administrators of Lehman finds a suitable buyer for its London operations.
It has also triggered widespread resentment from the UK government calling the bonus culture as "perverse" and "unacceptable."
Speaking on the second-day of Labour's annual conference, Prime Minister Gordon Brown told BBC television "There's been a great deal of irresponsibility, mistakes have been made in the city. There's an element of the bonus system that is unacceptable... everyone knows there is going to have to be changes in that."
John McFall, chairman of the Treasury select committee, said: ''This is socialism for the fat cats. Everyone in financial services recognised that the remuneration system is the cancer on the financial body politic here. Until that is tackled we can't move on.''
The Liberal Democrat shadow chancellor, Vince Cable said: ''This is outrageous and deeply cynical. Part of the problem with Lehman and the other weak investment banks was that they were driven by the bonus culture, which rewarded big deals rather than good deals. It was what destabilised the institutions in the first place. They are being rewarded for having adopted business behaviour that has wrecked their bank.''
Critics have also slammed the bonus culture saying that many banking employees are paid hefty salaries and rewarded with bonuses to a job which had no relation to the work they had done.
According to media reports Barclays and Nomura are interested in buying large portions of Lehman's European operations and are reported to have submitted their proposals to the European administrators, PricewaterhouseCoopers.
Nomura, has guaranteed to take all of Lehman's equities research, sales and trading staff, as well as its team of corporate financiers whereas Barclays had committed to retain all of Lehman's frontline banking staff and was prepared to consider taking on several hundred administrative workers.
Barclays is also understood to be in the race along with Nomura and Standard Chartered, in buying Lehman's Asian operations.