Underpaid by $83 million? Senior Barclays trader Jonathan Hoffman thinks so

The financial crisis which blighted the economies of the European and American continents during 2008 and 2009 created an extremely difficult financial markets landscape in its wake, which has lasted until this day, requiring some top level talent to recover the fortunes of banks affected.

British multinational banking giant Barclays PLC (LON:BARC) is not only one of the world’s largest banks, but also one of the world’s largest FX dealers. The bank’s corporate performance has suffered tremendously of late, with flagging profits, and most recently an unprecedented $1.53 billion in settlement of class action law suits and regulatory censuring for its part in the FX rate manipulation scandal.

Last year, LeapRate reported that traders employed by Barclays would rather remain in their positions than seek employment with competitors HSBC or RBS due to high remuneration by Barclays, however for one particular senior trader, it appears that enough is not quite enough.

New York-based Jonathan Hoffman was paid $170 million over a five year period which spanned the financial crisis and its aftermath, a payout which was greater than that awarded to Bob Diamond, the firm’s former CEO.

Mr. Hoffman, however, is not satisfied with this and has turned to the courts in order to secure what he considers to be $83 million in unpaid bonuses from his days at Lehman Brothers, the North American multinational financial institution which collapsed in 2008.

Mr. Hoffman had joined Barclays from Lehman Brothers, and upon his appointment by Barclays had negotiated an $83 million payment by Barclays as part of his remuneration in order for him to move on from his lost bonuses.

According to a report by The Guardian, Trustee James W Giddens has accused Mr. Hoffman of “double-dipping”, saying the payment from Barclays had already compensated him for the lost Lehmans bonuses.

In a deposition, Michael Keegan, a Barclays managing director, recalled thinking Mr. Hoffman was a “sneaky bastard” for seeking payment from the Lehman estate because he had assumed Barclays’ payout had been intended as compensation for the lost Lehman payouts. “I thought he was paid for it,” Mr Keegan said. However, he conceded that Barclays chose to pay Hoffman and was under no obligation to do so.

Barclays wanted to secure the services of high-rolling Lehman traders including Mr. Hoffman after buying out the bank’s investment arm and was clearly prepared to ensure they were motivated by settling this matter voluntarily on behalf of Mr. Hoffman at the time.

Mr. Hoffman has argued that his payment was related to Barclays’ desire to secure his services against competing job offers from elsewhere. He said he was incredibly loyal to Lehman Brothers and did a good job for them. “If I am owed money by the estate, it’s not clear to me why I would not collect it,” he told the Wall Street Journal.

His lawyer Douglas Baumstein told The Guardian: “Mr. Hoffman was not paid for his Lehman bonus by Barclays. Rather, as the contemporaneous evidence shows, the payments made to Mr. Hoffman were retention payments, made to induce Mr. Hoffman to accept employment and to remain at Barclays for a period of years.” He said his client had earned Barclays more than $1.25bn.

The son of a sweet manufacturer, Mr. Hoffman began working for Lehman Brothers in 1994 and became an expert in trading US government debt. By the time the bank collapsed he was working from a small Lehman Brothers office in Miami and living on the exclusive Palm Island, just off Miami Beach.

“I never had a losing quarter, never had a losing year,” he told the court. He said he was typically allocated between $200 million and $400 million of the Lehmans capital to trade with. Hoffman has said his style had “quite a bit of gut in it” and related to watching the way trades were flowing. “I have no view on interest rates, no view on the curve,” he told the Wall Street Journal. “I never speak to clients. I don’t know who is on the other side of the trade. I guess I am a lone wolf.”

It has emerged that Mr. Hoffman, who left Barclays in 2013 and now trades with his own money from his home in Philadelphia, received a base salary of $200,000 a year, but his contract with Barclays also entitled him to 12% of the first $25 million of profits he made from trading and 14% on anything above. That meant that he earned $183m (£118m) from 2009 to 2013, according to his lawyer Mr. Baumstein.

Enough, it seems, is clearly never enough.

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