Lehman Brothers has been tracking down dozens of its former brokers who received signing bonuses upon joining the firm.  So far the trustee for the bankrupt firm has been pretty darn successful.  All told, Lehman has been pursuing about 50 cases, some involving brokers hired right before the firm collapsed. 

The most lucrative case one ended in a $2.2mn judgment for the firm.  The FINRA arbitration panel ruled that former broker Bryon Botsford had breached his contract on 2 promissory notes.  Mr. Botsford, presently an MD at Citigroup's private bank, tried without success to get a reduction on what he owed.   In another recent case, FINRA arbitrators ruled that former broker Pauline Sheedy, must return about $800,000.

Many of the contracts in question state that brokers must return bonuses "upon termination of employment for any reason."  It's for that reason that, in these types of cases, brokers rarely win because arbitration panels tend to view the arrangement as an enforceable contract.  Of course, the "impossible" and "unexpected" can happen. 

Take for example, ex-Wells Fargo broker Stephen Lowther ... who not only represented himself in an arbitration hearing, but won his case and didn't have to repay his promissory note.   [see 8/15/11 posting on WWW, "Surprise Ending in Promissory Note Arbitration"]. 

One also can employ an "impossibility" defense ... as in the case where a broker is ready, willing and able to work, but the firm failed - i.e., it was impossible for the broker to to fulfill his or her contract because the job no longer existed - which was what happened with Lehman Brothers, when it closed down.  The ex-broker notes that, rather than quitting or being fired, he or she stayed on until the end. 

And then there are those brokers who have tried, without success, to blame Lehman for having overleveraged itself - which, in turn, drove the company into bankruptcy.  Arbitration panels have not bought into that argument.   [WS Journal, 8/17/11]