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When enough is never quite enough.
It is widely known that some of the highest paid employees worldwide are to be found among the trading desks of large international banks.
For one particular former Goldman Sachs employee who claims that his efforts assisted the bank to profit by $7 billion, the payment of an $8.25 million annual bonus for 2010 was enough of an insult that it resulted in the trader suing Goldman Sachs.
Deeb Salem insists that the bank should pay the difference between the 2010 bonus and what he had expected. During an arbitration hearing, Mr. Salem explained that he was led to believe that his bonus for 2010 would be $13 million, a reduction from the $15 million award he received in 2009, a year during which he was paid more than Goldman Sachs CEO Lloyd C. Blankfein. Mr. Salem maintains that his 2010 bonus was unfairly cut because of a written warning he received about his self-appraisal in 2007.
According to Bloomberg, 35 year-old Mr. Salem stated that the $8.25 million bonus that he was awarded for 2010 did not reflect his contribution to the company, whilst Goldman Sachs counter-argued that he was aware that the firm could pay him whatever it saw fit, as this is a bonus rather than salary, and that the company had considered his previous conduct when determining compensation. Mr. Salem said promises from executives kept him from leaving the firm for one more year, before a $3 million bonus was the final straw and caused him to leave the bank for a hedge fund.
“Let’s be very clear: I was one of the most sought-after investment professionals in the industry,” Mr. Salem said during the Feb. 25 hearing. “I had the opportunity throughout the course of my career and throughout, from that day, from almost every month that I was at Goldman, to leave for other opportunities.”
A transcript of Salem’s arbitration hearing before the Financial Industry Regulatory Authority was included as an exhibit to his petition filed last week in New York State Supreme Court. The document was no longer available on the court’s website today after Goldman Sachs filed a motion to seal the petition and parts of related exhibits.
The company considers Mr. Salem’s claims to be absurd, with Goldman Sachs spokeswoman Tiffany Galvin having stated ““These claims are utterly ridiculous, which is why they were rejected by a FINRA panel, and unworthy of any further response.”
Subsequently, Mr. Salem asked the court to dismiss the arbitrators’ ruling against him because he considers bias to have been shown, with one particular panel member having used foul language to describe Mr. Salem’s case.
Aside from Mr. Salem’s attempts to justify his expected $13 million bonus from a corporate perspective, there was also a personal side to his relative plight.
In January 2011, Mr. Salem told his mother, who was staying with him because her house had burned down, that he expected at least $13 million for 2010, according to the transcript. That was based on the fact that his mortgage-trading desk generated about the same amount of revenue in 2010 as it did the previous year and that Justin Gmelich, a credit trading executive, told him at a cocktail hour that he was a “steal” at $15 million, Salem said.
Mr. Salem sought a total of more than $16 million in additional pay in arbitration. This included approximately $7 million in deferred stock that Mr. Salem explained that he would be entitled to as long as his exit from the company without creating a furore, as previously perpetrated by former Goldman Sachs employee Greg Smith who approached the media and created a high profile smear campaign against the bank, accusing it of mistreating clients.
Attorney Andrew Frackman of law firm O’Melveny & Myers LLP, representing Goldman Sachs, explained at the hearing that no promises of an actual amount were made to Mr. Salem, and that the company’s policy clearly states that all bonuses are discretionary, with Mr. Salem acknowledging as much when he signed the firm’s employment offer.
Mr. Salem asserted that his group entered a large short bet against the housing market, generating billions of dollars for Goldman Sachs, and helping it withstand the financial crisis of 2008/2009 better than its compatriots, many of whom were saddled with toxic debt from home foreclosures. Mr. Salem further alleged that CEO Mr. Blankfein told the desk to cover its bet in early 2007, forcing the group to sell $5 billion of positions to Harbinger Capital Partners LLC, a hedge fnd which gained huge success betting against sub prime mortgages.
Mr. Salem’s lawyer, Jonathan Sack of Sack & Sack, counteracts Mr. Frackman’s defence by explaining in an interview with Bloomberg that his client was scapegoated as other executives who were criticized by the Senate were not penalized.
While Mr. Salem’s claim originally sought more than $20 million of unpaid compensation, Mr. Sack said in the hearing his client was now seeking $9.5 million plus 41,000 shares of deferred compensation, worth approximately $7 million.
Mr. Salem left for hedge-fund firm GoldenTree Asset Management LP in 2012 after his 2011 bonus fell to $3 million. His group made $260 million in a difficult market that year, he said.
“Everyone at Goldman took a beating in 2011 because it was a terrible year for the firm,” Mr. Frackman said. The contraction of business continued since then, with FX business at the bank having reached notable lows in late 2013.
Whilst the outcome has not been finalized, Mr. Salem remains under the impression that he will gain what he considers to be his dues.