Kaminsky's Call: Profiting From the Collapse of Lehman Brothers

Some anniversaries on Wall Street stir emotions of anger, frustration, and despair. Have one in mind? Now multiply it by billions (lost) and you get today's commemoration of the collapse of Lehman Brothers.


The empathy I have for those employees who did nothing but work hard every day, oblivious to the twisted debacle that took down the firm, is stronger than ever. So many innocents lost their jobs and their nest eggs.

But to those that knew what their strategies were doing, to those that contributed to the downfall, I reserve the most substantial level of scorn.

Skybridge Managing Partner, former Lehman Executive and author of Goodbye Gordon Gekko, Anthony Scaramucci said it best when he shook his head, and remarked, "Senior management rewarded people who were sycophants, not meritocrats."

Where were the board members whose responsibility should have been to ensure that management deliberated and protected shareholders?

To those that think I am dwelling on the past, there is a current phenomenon drawing my ire. Look at what's happening at Alvarez & Marsal. The very people who paved the path towards bankruptcy are the ones currently employed to manage and unwind the positions! And they are getting compensated for it!

I read an excellent piece in The Los Angeles Times about this incredible unfolding of events and all the anger came rushing back. Former Lehman CFO's Dave Goldfarb and Chris O'Meara along with Ted Janulis, former head of mortgage capital are all managing the disastrous positions they are responsible for and what's the sentence? None. Just executive pay. And while Mark Walsh is not working for Alvarez & Marsal any longer, he is working in private equity now, helping sell off all the commercial real estate he bought for Lehman shareholders.

But the definitive word comes from Lawrence McDonald, New York Times Best Selling Author of “A Colossal Failure of Common Sense—The Inside Story of the Collapse of Lehman Brothers.” This information is mind-boggling.

In 2007, he cited the following numbers for compensation:

  • Mark Walsh - $17-$19 million
  • Chris O'Meara - $8-$9 million
  • Dave Goldfarb - $20-$25 million

Lawrence McDonald estimates that in 2010, they are still making a third of those rich figures.

"The balance sheet is at a premium," McDonald told me, "and total compensation for major players within Lehman is off at least 55 percent to 65 percent. I would add there must be equity based performance incentives as well."

Performance incentives? Millions still being pocketed?

Alvarez & Marsal is profiting off the catastrophic past and they are using some of the chief lieutenants to manage the operation. Does anyone else think something's not right here?

This is one anniversary where the problems continue to manifest. The inequity of fairness here is just as difficult to accept as the fate we learned of two years ago.

Programming note: "The Strategy Session," hosted by David Faber and Gary Kaminsky, airs weekdays at Noon ET on CNBC.

Gary Kaminsky does not hold any equity positions.

The content of this blog is published in the United States of America and persons who access it agree to do so in accordance with applicable U.S. law.

All opinions expressed in this blog are solely the opinions of Gary Kaminsky and do not reflect the opinions of CNBC, NBC UNIVERSAL or their parent company or affiliates, and may have been previously disseminated on television, radio, internet or another medium. You should not treat any opinion expressed by Mr. Kaminsky as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Mr. Kaminsky’s opinions are based upon information he considers reliable, but neither CNBC nor its affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Kaminsky, CNBC, its affiliates and/or subsidiaries are not under any obligation to update or correct any information provided on this website. Mr. Kaminsky’s statements and opinions are subject to change without notice. No part of Mr. Kaminsky’s compensation from CNBC is related to the specific opinions he expresses.

Past performance is not indicative of future results. Neither Mr. Kaminsky nor CNBC guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment discussed on this website or on the show. Strategies or investments discussed may fluctuate in price or value. Investors may get back less than invested. Investments or strategies mentioned on this website or on the show may not be suitable for you. This material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned on this website or on the show. Before acting on information on this website or on the show, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.