when you can make more from liquidations. Fees paid to lawyers and accountants for unwinding Lehman Brothers in the US and Europe are likely to be more than $2 billion. The fees charged to Lehman’s US estate stood at $917m in July and should top $1 billion this month. In London, expenses for unwinding the European arm, with legal costs, are estimated at almost $900m.
The US estate is paying more than 1,000 people while in London, PwC, the administrators to Lehman’s main European operations, still has more than 300 of its people on the project. Now that is quite extraordinary when you bear in mind that this company is no longer trading, the book such as it is is supposed to be being wound down, the assets were supposed to be liquid and tradable and yet two years after the Lehman bankruptcy, there are still 1,300 people being charged to the estate at several hundred dollars an hour, enough to run a medium sized trading operation.
"Oh, but.." say "bankruptcy experts" (read other liquidation professionals with a vested interest) "these costs are small relative to the size of its balance sheet compared with Worldcom and Enron".
Phooey, we say. Those were 'real' companies with physical assets (OK, maybe not worth the values ascribed to them in their accounts) and it takes longer to sell those assets. Lehman had nothing more than paper (OK and a few phones and desks). Sorting out the mess and getting it all squared away should have been a relatively simple affair. Perhaps it couldn't all be made to close out and disappear overnight, but 1,300 people coming to work every day for 2 years. Do they all have a role? Gimme a break.
But what ever comes of this, do me a favour, please. Don't think that just because somebody ran a bank in liquidation for a few years, pocketing millions for their firm in the process, that they are somehow able to run a proper banking business. The last time this happened was BCCI which launched the banking career of Sir Fred Goodwin.