NEW YORK -- Drexel Burnham Lambert Inc. sued hundreds of its former employees yesterday in an attempt to recover more than $250 million in bonuses paid shortly before the company filed for bankruptcy in early 1990.
The bonuses have been at the heart of some of the biggest controversies resulting from the collapse of the Wall Street powerhouse.
The size of Drexel's bonuses was long a legend on Wall Street, but yesterday's lawsuit for the first time provides details of how rich those payments were.
The largest bonus, $16.6 million, went to Leon Black, former head of mergers and acquisitions, less than a month before the bankruptcy filing. But the largess was widespread, with more than 50 executives receiving more than $1 million even as the firm's finances deteriorated.
Since the collapse, some Drexel executives have said the bonus payments seemed to lose all connection with reality in the final years as billions of dollars in revenues flowed through the firm. Still, the huge payouts appeared almost minuscule in comparison with the more than $1 billion paid over five years to Michael Milken, former head of the "junk" bond division.
Last year, Milken pleaded guilty to six felonies involving securities laws violations and is now serving a 10-year prison sentence.
Although the payments have come back to haunt the Drexel executives who received them, no bonus money is being sought from the former head of the firm, Frederick H. Joseph. In the months before the bankruptcy, Mr. Joseph scrambled to strengthen the firm's finances and took his bonus in stock, the value of which was wiped out.