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

Taken from the Guardian, UK, Tuesday October 7 2008

By Andrew Clark in New York and Elana Schor in Washington

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.