Crony capitalism: Goldman Sachs bonuses bigger than its earnings

A lawsuit filed against investment bank Goldman Sachs by a shareholder
alleges that the company spent more money on corporate bonuses than it
earned in 2008.
Shareholder Ken Brown's lawsuit is one of two suits filed against
the company this week over its controversial decision to hand out
billions of dollars in bonuses even after it was accused of playing a
central role in the financial collapse of 2008 and receiving $10
billion in direct aid from the US government.
In his lawsuit
(PDF), Brown states that Goldman Sachs gave out $4.82 billion in
bonuses in 2008, despite earnings of only $2.32 billion that year. The
lawsuit alleges that the company spent 259 percent of its income in the
first quarter of 2009 on compensation.
Goldman Sachs handed out $16.7 billion in compensation in the first nine months of 2009, according to
Bloomberg news service, and that figure may reach $22 billion for the
entire year. Brown's suit says the company typically sets aside 44
percent of its net revenue for employees.

“Payment of this exorbitant amount of compensation, which
has little to do with Goldman Sachs’s performance, and was financed in
large part with government bailout and taxpayer money, is a waste of
the company’s assets and a breach of duty and loyalty," Brown asserts
in the suit.
Brown's suit asks the court to order the company to return the bonus money to company coffers.
In another lawsuit, filed Thursday, an Illinois pension fund that is
a Goldman shareholder demanded that Goldman return some of the
compensation it has handed out since the financial collapse. The
Central Laborers' Pension Fund wants compensation for damages to
shareholders from the company's compensation spending.
Reuters reports:

The lawsuit contends that Goldman's revenue for the year was
artificially inflated by government bailouts of the banking industry
and the insurer American International Group Inc, as well as a change
in Goldman's fiscal year.

Such sums, and Goldman's practice of continuing to pay out
nearly 50 percent of net revenue as compensation, show "scant regard"
for the interests of shareholders, it said.

Both lawsuits "are completely without merit," Goldman Sachs spokesman Michael DuVally told Bloomberg news.
Goldman Sachs has paid back the $10 billion it received in direct
aid from taxpayers, meaning the company is not bound by government
compensation limits. But the $10 billion figure doesn't include the
billions more the company received thanks to pressure by the Fed on insurance giant AIG to pay all of its debts to Goldman -- and other AIG creditors -- in full.
On Thursday, it was revealed that during the financial crisis, the
New York Fed -- then run by current Treasury Secretary Tim Geithner -- tried to cover up its demand that AIG use taxpayers' money to compensate Goldman Sachs.
RS

Crony capitalism: Goldman Sachs bonuses bigger than its earnings

Crony capitalism: Goldman Sachs bonuses bigger than its earnings

Anarcho-Capitalist Categorical Imperatives

AnCaps' Laissez-faire Free Trade Zone