A bankruptcy judge largely rejected a "double-dip" bid by a former Lehman Brothers bond trader for an $83 million bonus he claimed he was owed following the investment bank's 2008 collapse, with the judge calling his request "pure nonsense."

Judge Shelley Chapman of the U.S. Bankruptcy Court in New York said former top trader Jonathan Hoffman is entitled to only about $7.7 million stemming from an unpaid portion of the bonus he was awarded in 2007. Furthermore, Mr. Hoffman will receive only 35 cents on the dollar for the bonus.

"Mr. Hoffman was a gifted trader who generated billions of dollars in profits for Lehman over the course of his employment," Judge Chapman said in an 87-page decision Thursday. But she characterized as "pure nonsense" the Wall Street veteran's argument that Lehman owed him more than $83 million, even though he had received a similar amount from Barclays PLC.

The judge said Lehman's obligation to pay Mr. Hoffman's bonus was transferred to Barclays PLC when it bought Lehman 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 Mr. Hoffman was essentially trying to "double dip" by collecting from both Barclays and Lehman.

"We are very pleased that there will be no double recoveries in the LBI liquidation, which is consistent with the law and fair to all customers and creditors of the LBI estate," a spokesman for Mr. Giddens said Friday.

A lawyer for Mr. Hoffman declined to comment Friday. A spokeswoman for Barclays also declined to comment. Mr. Hoffman couldn't be reached.

Mr. Hoffman, who lives outside 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 M.B.A. at Penn's Wharton School.

At Lehman, Mr. Hoffman became a star, specializing in government bonds. According to traders who worked with him at Lehman, "Johnny H" was an astute, successful and somewhat secretive trader, a self-described lone wolf in the bank's Miami office

He earned $14.8 million in bonuses for 2005 and $20 million in 2006 before taking in $31 million in 2007 and about $77 million in 2008, according to records released after the Lehman bankruptcy. His contract at both Lehman and Barclays allowed him to collect as much as 14% of the profits he generated. Since the financial crisis, new regulations have cut down on the type of trading that allowed traders like Mr. Hoffman to generate such massive profits and related bonuses.

Judge Chapman also handed down rulings on several other former employees seeking bonuses from Lehman.

Energy trader J. Robert Chambers won the judge's blessing for a $40.7 million bonus, Mr. Chambers received only $1 million from Barclays after he was transferred from the floundering Lehman.

Lawyers for Mr. Chambers couldn't immediately be reached for comment Friday. A spokesman for Mr. Giddens said he was still reviewing parts of the ruling involving Mr. Chambers.

The judge also ruled on two other claims by former Lehman employees, ruling one was due about $1 million and the other nothing.

Those with unsecured claims, like the former Lehman employees, will be paid at less than the full amount of their claims, since only customers of Lehman's brokerage recovered all they were owed. Mr. Hoffman and the others will receive 35 cents on the dollar on most of their claims.

The brokerage is being unwound separately from the investment bank. Mr. 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 U.S. brokerage received about $92.3 billion almost immediately after Lehman collapsed. In all, Mr. Giddens will return $114 billion to Lehman's customers and creditors.

Lehman, once the nation's fourth-largest investment bank by assets under management, collapsed into the largest bankruptcy ever in September 2008. The filing sent markets into turmoil and helped trigger a global financial crisis. Lehman's brokerage business was quickly sold to Barclays, and the company's New York-based holding company officially exited bankruptcy in 2012.

The Lehman estate, which itself has paid back around $100 billion to creditors, is still winding down and selling off its remaining holdings, a process that is expected to continue for several years.

James Sterngold and Joseph Checkler contributed to this article.

 

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(END) Dow Jones Newswires

October 09, 2015 17:35 ET (21:35 GMT)

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