Photo: Ryan Collerd for The Wall Street Journal
Jonathan Hoffman, at home last year, made nearly $ 550 million in profits for Lehman during 2008
Judge Lorna G Schofield of the US District Court in New York on July 6 said former top trader Jonathan Hoffman’s argument that Lehman owed him more than $ 83 million “strains credulity” even though he received a similar amount from Barclays when he went to work for the UK bank following Lehman’s collapse.
“It strains credulity to argue, as Hoffman does here, that the $ 83 million that Barclays agreed to pay in extra compensation was a mere signing bonus or motivational tool, and that the amount only coincidentally matched the amount that Hoffman was owed by LBI,” Judge Schofield in a 13-page opinion.
Judge Schofield also reversed a bankruptcy court ruling that Hoffman was entitled to $ 7.7 million stemming from an unpaid portion of the bonus he was awarded in 2007.
Still, the decision supports US Bankruptcy Judge Shelley Chapman’s 2015 ruling that Lehman’s obligation to pay Hoffman’s bonus was transferred to Barclays when it bought Lehman’s brokerage unit shortly after the failed investment bank filed for bankruptcy. Barclays agreed to pay the $ 83 million and to copy other key terms of his employment agreement with Lehman.
The ruling is a win for Lehman bankruptcy trustee James Giddens, who had said Hoffman was essentially trying to “double dip” by collecting from both Barclays and Lehman.
Jake Sargent, a spokesman for the trustee, said the ruling “reiterates that there will be no double recoveries in the Lehman Brothers liquidation, which is consistent with the law and fair to all customers and creditors of the LBI estate.”
A lawyer for Hoffman wasn’t immediately available for comment.
Hoffman, who lives outside of Philadelphia with his wife and three children, majored in economics at the University of Pennsylvania and took a job at Lehman in 1994 after deferring a bid to get his MBA at Penn’s Wharton School.
At Lehman, Hoffman became a star, specialising in government bonds in the bank’s Miami office. Hoffman made nearly $ 550 million in profits for Lehman during 2008, and his trading represented 10% of the bank’s total profit during 2007. He received $ 100 million in compensation for his trading at Barclays during 2008 to 2010, in addition to the $ 83 million he received on account of the Lehman bonus.
The Lehman brokerage is being unwound separately from the investment bank. Giddens is leading the effort, which doesn’t fall under bankruptcy law but which is instead conducted under the Securities Investor Protection Act. Individual customers of the US brokerage received about $ 92.3 billion almost immediately after Lehman collapsed. In all, Giddens has returned more than $ 114 billion to Lehman’s customers and creditors.
This story was first published by The Wall Street Journal
—Joseph Checkler contributed to this article