The Work

April 30, 2010 1:22 PM

Former Lehman In-House Lawyer: Fuld Fudged Compensation

Posted by Brian Baxter

UPDATE April 30, 5:15 p.m. The last paragraph of this post has been updated with a statement from Dick Fuld's lawyer, Patricia Hynes.

Oliver Budde, a former associate general counsel at Lehman Brothers, claims that the former CEO for the bankrupt financial services firm underreported his pay by at least $200 million.

Lehman's board and regulators did nothing about the issue, despite being contacted by Budde about the discrepancy in reported compensation for Dick Fuld, according to this story in the current issue of Bloomberg Businessweek.

Budde (pronounced Boo-da), a former associate at Skadden, Arps, Slate, Meagher & Flom, claims that when he approached his superiors in the general counsel's office at Lehman and expressed reservations about the disclosures of Lehman executives' pay, he was told that the bank's outside attorneys at Simpson, Thacher & Bartlett had approved the disclosure policy.

Businessweek reports that Simpson Thacher corporate finance partner Andrew Keller was the lead partner on the Lehman account. Keller did not respond to Businessweek's calls seeking comment and a spokeswoman for the firm did not immediately respond to our own request for comment. We also have reached out to Keller via e-mail but have not yet heard back.

After Budde resigned from Lehman in February 2006, later that year the SEC revised its rules governing the reporting of unvested restricted stock units (RSUs) and other stock-based awards in proxy statements, according to the Businessweek story. When Lehman changed its proxy reporting in 2008, Budde was anxious to see how his former employer would address the issue in future disclosures, the story says.

Budde was shocked, the magazine reports, when Lehman disclosed only two out of 15 RSUs awarded to Fuld. He went to the SEC seeking to become a whistle-blower, but BusinessWeek reports that in response to a letter sent to the regulator about his concerns, Budde only received a standard form thanking him and never heard back.

The story also notes that an upcoming academic paper by Harvard Law School professor Lucian Bebchuk, visiting Tel Aviv University professor Alma Cohen, and Harvard lecturer Holger Spamann titled "The Wages of Failure: Executive Compensation at Bear Stearns and Lehman, 2000-2008," calculates that Fuld earned $522.7 million between 2000 and 2007.

That figure is close to the $529.4 million that Budde estimates Fuld received during the same time period. Both figures are markedly higher than the amount Fuld claimed to have earned--$310 million--when he appeared before a congressional committee in October 2008.

In advance of that testimony, Businessweek reports that Simpson Thacher billed nearly 890 hours for work preparing Fuld for his congressional testimony and on various documents. The firm billed the bankruptcy estate $491,197 for that work, Businessweek reports.

Patricia Hynes, an Allen & Overy partner representing Fuld, declined Businessweek's request to speak to her client. "We're not giving any interviews," she said. She did give us a brief statement addressing Budde's allegations.

"Mr. Fuld did not understate his compensation from 2000 to 2007, when he testified before Congressman [Henry] Waxman's committee," Hynes said.

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