So Much for the Pay Czar? Wall Street Paydays Keep Coming

Big paydays persist even as banks prepare for pay czar scrutiny.

ByALICE GOMSTYN <br/> ABC NEWS Business Unit
August 10, 2009, 1:52 PM

Aug. 11, 2009&#151; -- Who will get to keep his or her multimillion-dollar pay package and who will have to settle for less? It's a question that will face Obama administration pay czar Kenneth Feinberg this week as he starts reviewing compensation plans for the 100 highest paid executives at AIG, Citigroup, Bank of America, General Motors, GMAC, Chrysler and Chrysler Financial.

The seven firms, which have received the most in bailout funds from the government, must submit the plans to Feinberg by Thursday.

Feinberg, who will focus on the companies' 25 highest paid executives first, will have the power to scale back pay packages except for those set in contracts dated before Feb. 12, which will be "grandfathered" out of the government's compensation restrictions and Feinberg's authority.

Nevertheless, some say, even if Feinberg can't use the the law to force compensation down, he can still employ public pressure to convince firms to voluntarily renegotiate pay packages.

So whose packages might catch Feinberg's eye? Below are a few of the Wall Street heavyweights at Bank of America and Citigroup who have made news in recent months for their seven-, eight- and, in at least one case, nine-figure deals:

Andrew Hall: As the head of Citigroup's Phibro L.L.C., a small but highly profitable commodities trading unit, Hall, who owns a castle in Germany, is now famous for commanding $100 million in compensation under a profit-sharing agreement with Citigroup. Though Hall's unit made some $2 billion for Citigroup in the last five years, Citi is now considering selling Phibro, the New York Times reported.

Late last month, White House spokesman Robert Gibbs said the $100 million payday was "probably a bit out of whack on any pay scale."

Sanaz Zaimi: Zaimi, a partner at Goldman Sachs, recently signed a two-year, $30 million contract to join Bank of America, according to the Times. Zaimi, who was stationed at Goldman's London office, will move to Bank of America's London office in 2010 to handle European, Middle Eastern and African business.

Bank of America, Citigroup Dole Out Millions

Fares Noujaim: A former Bear Stearns executive, Noujaim joined Merrill Lynch last year as a president overseeing business in the Middle East and North Africa. Months after Bank of America bought Merrill, Noujaim was appointed as Bank of America's vice chairman of investment banking. The New York Post reported that Noujaim was offered at least $5 million to stay at Bank of America in addition to a two-year, $15 million package he received when joining Merrill Lynch.

Bryan Weadock: Weadock, a former JPMorgan Chase bond salesman, joined Bank of America in exchange for a two-year contract, with the first year attached to a compensation package valued at $6 million in cash and stock, according to the Wall Street Journal.

Harry McMahon: Like Noujaim, McMahon has been offered a large payout to stay at Bank of America after working at Merrlll Lynch, according to the New York Post, but the size of the payout is unclear. McMahon is a 26-year-veteran of Merrill Lynch.

Stefanos Bitzakidis, Rachel Lord and Dan Petherick: Bitzakidis, Lord and Petherick are all senior traders whom Citigroup managed to hire away from JPMorgan Chase in recent months by offering multimillion-dollar guaranteed compensation over several years, according to the New York Times.

As Bank of America and Citigroup struggle against a tide of negative perceptions, experts say the banks are relying on large pay packages to keep or recruit top talent at firms with better reputations like JPMorgan and Goldman Sachs, both of which have returned the Troubled Asset Relief Program funds provided to them by the federal government. Bank of America and Citi, in contrast, are viewed as having weaker balance sheets and they continue to hold on to tens of billions in TARP funds.

"We have a very quickly emerging two-tier system, with Goldman and JPMorgan at the top, and eveyone else beneath them," said Sydney Finkelstein, a professor of management at the Tuck School of Business at Dartmouth College. "That enables Goldman and JPMorgan to cherry pick some great talent. ... Anyone who has a big investment in trading and investment banking has no choice but to ante up to stay in the game."

A report by New York State Attorney General Andrew Cuomo earlier this month spurred fresh furor over compensation excesses. Cuomo's report, which didn't name names, found that 28 Bank of America employees, 149 Merrill Lynch employees and 124 Citigroup employees received compensation of more than $3 million while the banks floundered in 2008.

According to the Wall Street Journal, bank executives earning tens of millions included Merrill Lynch's Andrea Orcel and Thomas Montag, who received cash and stock packages of $33.8 million and $39.4 million, respectively. Both now work for Bank of America.

Orcel and Montag's reported 2008 compensation actually dwarfed that of Bank of America CEO Ken Lewis, who received a total of just over $9 million, according to Equilar, Inc., an information services firm specializing in executive compensation.

Setting Aside Less, Paying More?

Lewis' pay was also several times smaller than that of his Citigroup peer, CEO Vikram Pandit, who received $38.2 million in 2008, according to Equilar.

Will last year's Citi and Bank of America top earners be due similar pay packages this year? That remains unclear -- Bank of America declined to comment on compensation for any specific employees, as did Citigroup.

"I can tell you that we are taking the steps necessary to attract and retain key talent and respond to competitive pressures," Bank of America spokeswoman Kelly Sapp said in an e-mail.

The amount that Citi and Bank of America set aside in compensation thus far this year provides only limited clues. Citi has set aside substantially less, $12.8 billion, than it did by this time last year, when it accrued $18.3 billion.

Bank of America's total -- $16.6 billion -- is more consistent with last year, when the bank and Merrill Lynch, combined, accrued $16.7 billion, according to Equilar.

"I think on an overall basis, these companies are being more careful about how they're paying their employees," said Equilar associate research manager, David Sasaki.

But the fact that banks are setting aside less money doesn't mean that individual pay will shrink. Sasaki noted that both banks have had layoffs, meaning that fewer people will be drawing from the compensation pool.

"There's certainly still large compensation packages out there," he said.

It also remains unclear how the CEOs at the other five firms under Feinberg's purview will fare. Last year, GMAC chief Alvaro G. de Molina received $17.6 milllion while interim GM chief Fritz Henderson currently makes $105,000 a month, for an annual rate of $1.26 million according to Equilar.

If new AIG CEO Robert Benmosche follows the lead of his successor, Edward Liddy, his would be among the few pay packages that could escape Feinberg's scrutiny. Liddy earned just $1 in salary and roughly $460,000 in other compensation, according to Equilar. Under the Treasury Department's guidelines, packages worth less than $500,000 receive automatic approval.

AIG was at the center of the first compensation maelstrom earlier this year after it was revealed that the troubled insurer, which received $170 billion in bailouts from the federal government, paid $165 million in bonuses to employees of its flailing financial products division, AIG FP.

AIG is still figuring out how to compensate some of its employees. The insurer told ABC News that it would seek clarification from Feinberg on three compensation issues: bonuses for AIG FP employees, retention payments for certain employees and 2008 bonuses for AIG's 40 highest paid employees. Those 40 people received half of the bonuses due to them last year and were supposed to receive the rest later this year.

With reports from ABC News' Charles Herman.

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