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'Your company is bankrupt, you keep $480m. Is that fair?'

Discussion in 'International Forum' started by BAK, Oct 7, 2008.

  1. BAK

    BAK JF-Expert Member

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    'Your company is bankrupt, you keep $480m. Is that fair?'

    Andrew Clark in New York and Elana Schor in Washington The Guardian, Tuesday October 7 2008

    [​IMG]
    Richard Fuld, chief executive of Lehman Brothers, testifies in Washington on Monday. Photograph: Susan Walsh/AP

    It was a showdown to cherish for critics of Wall Street's culture of enrichment. The grim-faced boss of the bankrupt bank Lehman Brothers was left squirming yesterday as a veteran Democrat roasted him over his multimillion-dollar pay.

    With the startled look of a man unaccustomed to sharp examination, Lehman chief executive Richard Fuld clashed bluntly with the chairman of the House oversight committee, Henry Waxman, on Capitol Hill.

    Called on to explain why Lehman collapsed last month, Fuld began with a note of humility, saying he felt "horrible" over the demise of the 158-year-old institution. "I want to be very clear," Fuld said. "I take full responsibility for the decisions I made and for the actions I took."

    In a brief speech which was heard in silence, Fuld told legislators that if he could turn back the clock he would do many things differently. As soon as he finished speaking, sparks began to fly.

    The chairman of the committee held up a chart suggesting that Fuld's personal remuneration totalled $480m (£276m) over eight years, including payouts of $91m in 2001 and $89m in 2005.

    "Your company is now bankrupt and our country is in a state of crisis," said Waxman, a liberal from California. "You get to keep $480m. I have a very basic question: Is that fair?"

    After a long pause, Fuld said the figure was exaggerated: "The majority of my compensation, sir, came in stock. The vast majority of the stock I got I still owned at the point of our [bankruptcy] filing."

    Waxman cut him off, saying that even if the figure was slightly lower, it was "unimaginable" to much of the public. "Is that fair, for a CEO of a company that's now bankrupt, to make that kind of money? It's just unimaginable to so many people."

    "I would say to you the $500m number is not accurate," said Fuld. "I'd say to you, although it's still a large number, for the years you're talking about here, my cash compensation was close to $60m, which you've indicated here, and I took out closer to $250m [in shares]."

    Interrupting again, Waxman listed Fuld's collection of property, including a $14m ocean-front villa in Florida and a home in an exclusive ski resort.

    "You and your wife have an art collection filled with million dollar paintings," Waxman said. "Your former president, Joe Gregory, used to travel to work in a helicopter."

    A pugnacious congressman with a bald head and military moustache, Waxman warmed to his theme: "You made all this money taking risks with other people's money."


    Refusing to give ground, Fuld said his pay had been set by an independent compensation committee which spent "a tremendous amount of time" making sure executives' interests were aligned with those of shareholders.

    "When the company did well, we did well," Fuld said. "When the company did not do well, we didn't do well."

    Waxman disagreed: "Mr Fuld, there seems to be a breakdown, because you did very well when the company was doing well and you did well when the company was not doing well. And now your shareholders who owned your company have nothing. They've been wiped out."

    Fuld's evidence was his first public appearance since Lehman failed, sparking a chain of events which has sent shockwaves through the global financial system and prompted the US government to begin a $700bn bail-out of the banking sector.

    A lifelong Lehman employee who joined the firm as an intern in 1966, Fuld has been blamed for the debacle by many of the bank's 28,000 staff - including those in London who have accused senior management of filleting Lehman's British operation of money in the bank's final days.

    Deadpan and emotionless, Fuld repeatedly frustrated congressmen by answering questions with lengthy, technical financial explanations.

    Frustrated by his demeanour, a Republican congressman, John Mica, tried humour: "If you haven't discovered your role, you're the villain today. You've got to act like a villain."

    Fuld stared back wordlessly, without a shadow of a smile.
     
  2. Kang

    Kang JF-Expert Member

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    I watched this on youtube and honestly I fail to see the problem here, that total amount of compensation mostly came from years when the company made significant profits, and made his shareholders billions of dollars, nobody seems to be mentioning that.
    When the company did go bankrupt he was a major shareholder in the company and therefore also lost a ton of money. So I think the situation is fair enough.
     
  3. Ab-Titchaz

    Ab-Titchaz Content Manager Staff Member

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    [​IMG]

    That is why Capitalism is not a fair system.In all fairness this individual should
    do some time.This is a criminal act nut again lets see how the so called American Justice System plays out.
     
  4. BAK

    BAK JF-Expert Member

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    Executives at bailed-out AIG stayed at $500 a night Californian resort

    A week earlier the Federal Reserve had to extend a huge credit line to AIG to keep the troubled firm from collapsing

    Andrew Clark in New York guardian.co.uk, Tuesday October 07 2008 16:53 BST


    The world's largest insurance company, AIG, spent $440,000 (£250,000) on a lavish corporate retreat at one of California's top beachside resorts just a week after accepting an $85bn emergency loan from the US government to stave off bankruptcy.

    Details of the getaway emerged at a congressional hearing today where lawmakers expressed outrage at AIG executives "wining and dining" at the height of a financial crisis.

    An invoice from the St Regis resort in Monarch Beach, south of Los Angeles, shows that AIG spent $139,375 on rooms, $147,301 on "banquets", $23,380 on spa treatments and $6,939 on golf at an eight-day company event which began on September 22.

    A week earlier, on September 17, the Federal Reserve had to extend a huge credit line to AIG to keep the troubled firm from collapsing due to vast liabilities on risky financial insurance policies.

    "Average Americans are suffering economically," said Henry Waxman, chairman of the House oversight committee. "They are losing their jobs, their homes and their health insurance. Yet less than one week after the taxpayers rescued AIG, company executives could be found wining and dining at one of the most exclusive resorts in the nation."

    Set in 172 acres of grounds on a bluff overlooking the Pacific ocean, the St Regis resort describes itself as "Tuscan inspired". Rates for its 325 rooms are typically upwards of $500 a night and the travel guide Fodor's gives the place a rave review, saying: "Exclusivity and indulgence carry the day here; you can even have someone unpack for you."

    An AIG spokesman said the event was to entertain independent insurance salesmen of AIG American General - one of the company's main US operations which offers life, health and accident policies.

    "It was a recognition event for independent agents of AIG American General who distribute insurance policies," said the spokesman. "It was planned months ago."

    In written evidence to Congress, AIG's former chief executive, Robert Willumstad, blamed an "unexpected and unprecedented market-wide crisis of confidence" for the company's financial predicament.

    AIG wrote off more than $50bn in unrealised losses on complex mortgage-related instruments such as credit default swaps. But Willumstad, who stood down as a condition of the federal bail-out, blamed mark-to-market accounting rules for accentuating the impact of the company's exposure, prompting downgrades by credit rating agencies.

    "Looking back at my time as CEO, I don't believe AIG could have done anything differently," said Willumstad. "The market seizure was an unprecedented global catastrophe."
     
  5. Kang

    Kang JF-Expert Member

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    Which criminal act is that? There are always risks in a business, and I haven't seen any evidence that they did anything illegal.
     
  6. Ab-Titchaz

    Ab-Titchaz Content Manager Staff Member

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    The plot thickens and looks real ugly.As we speak 2 former AIG CEO's are facing the hearing committees in Congress.
     
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