• U.S.

Wall Street: Give Back The Loot!

2 minute read

No event on Wall Street in the ’80s was more artfully avaricious than the payout of over $250 million in employee bonuses shortly before the collapse of Drexel Burnham Lambert. The bonus bonanza — which totaled more than twice the amount of the debt on which Drexel defaulted — helped push the firm over the edge, as it struggled with mounting lawsuits over the dealings of its junk- bond division. Now the reorganized company is suing the recipients of its largesse to recover the loot.

The suits reveal who made off with the most. Topping the list is Leon Black, former head of mergers and acquisitions. His take, less than two months before the February 1990 bankruptcy filing: $16.6 million. But more than 50 others received over $1 million apiece. The firm’s rationale: it was merely honoring promises it had made earlier to employees.

Drexel won’t find it easy to recoup the money. Last October, the SEC criticized the payments as excessive but not illegal. However, under the , bankruptcy code, companies can sue for the return of so-called preference payments dating back one year before the firms collapsed. “Drexel will also argue that the bonuses were a fraudulent conveyance,” says bankruptcy lawyer Leon Marcus. “My guess is that some of the employees will settle, while the guys with the deepest pockets are going to fight it forever.”

More Must-Reads from TIME

Contact us at letters@time.com