There’s at least one former Wall Street trader who hasn’t received the memo that the glory days are over.
Deeb Salem left Goldman Sachs for the (potentially) more lucrative world of hedge fund trading two years ago, but he can’t seem to let go of the money to which he firmly believes he is entitled — and that he is absolutely convinced Goldman Sachs promised to pay him.
It wasn’t enough, it seems, that at the age of 30, in 2009, Salem pocketed a bonus of $15 million, larger than that awarded to CEO Lloyd Blankfein. What really, really annoys him, based on the lawsuit he filed against Goldman, is that he only got $8.25 million the next year.
After putting up with a string of such unfair bonuses (while still pocketing what Bloomberg News calculates to be some $35 million in compensation) Salem eventually decamped from Goldman Sachs. Clearly, however, he was in no mood to let bygones be bygones. His first attempt to recoup what he believed he was owed – a total of $21.15 million in bonuses, deferred compensation and other monies – was via a Financial Industry Regulatory Authority (FINRA) arbitration panel. Not only did he lose, but one of the members of that panel described the case as “bullshit.”
That seems to have prompted Salem’s latest attempt to demand justice: a lawsuit seeking $16.5 million from Goldman Sachs, filed in New York Supreme Court.
Sadly, many of the documents from the FINRA hearing that once accompanied that court filing have now been sealed, but thanks to the Bloomberg report, we can get a glimpse into just how much the spirit of ’07 — that would be 2007, before all those subprime chickens came home to roost — lingers on.
“Let’s be very clear: I was one of the most sought-after investment professionals in the mortgage industry,” Salem bragged to the FINRA panel during the February hearing. He had opportunities to leave “almost every month that I was at Goldman.” The implication was that he didn’t take them because he had been promised lavish rewards for staying. Of course, Lesson No. 1 for anyone negotiating a salary or bonus, on Wall Street as anywhere else, is to get that promise in writing. Salem didn’t. Whoops.
Also, one wonders whether he would have been such a star without the backing of Goldman Sachs and a team of equally strong traders? Or Goldman’s capital and network and reputation? A single trader is quite capable of bringing down an investment bank; rarely do we hear of one solely responsible for its health and wellbeing in the manner that Salem implies.
Nor do Masters of the Universe betray quite the same level of level of political foolishness that Salem did at his FINRA hearing. Back in the spring of 2007, CEO Lloyd Blankfein materialized at Goldman’s mortgage desk: The traders there were instructed to rein their short positions against mortgage-backed securities, a strategy that Salem saw as being “do-able and brilliant,” as he explained in his own self-evaluation for the year.
That self-evaluation — which contained far too explicit a description of how Goldman marketed the securities while limiting the disclosure of the risks, and far too gleeful a tone about the ways in which the firm would profit at the expense of others — later leaked. After it became fodder for Congressional criticism of Goldman, execs told Salem he had caused the firm “reputational harm,” and would be reflected in his bonus check.
All of this clearly still gets on Salem’s nerves – a lot. Regarding that 2007 trading order from Blankfein, Salem says, “Blankfein showed his lack of understanding of what was actually happening” in the mortgage market.” Gulp.
Hobbes was right: The life of a trader on Wall Street today is nasty, brutish and short. Ask anyone on Wall Street the rationale for the outsize compensation packages and, if they’re being honest with you, they’ll tell you that’s why they get paid what they do. Quality of life or work/life balance? Puhleez. You are as good as your last month’s P&L statement, and if you’re in it for some sense that you’re contributing to society, well, that won’t keep you going for long. It’s a game for young men, too: You want to have leveraged your trading skills into something else; something more civilized, by the time you’re in your 40s. In that context, the quest to maximize your earnings is utterly logical.
The way that Salem is going about it, however, is not. By any standards, he was very well compensated for doing a very good job for his firm. He pursued an arbitration claim, and lost. Chasing after Goldman Sachs in a court of law may be something he can afford to do in financial terms, but in reputational terms? Quite aside from the ridicule to which his lawsuit is already being subjected to in the press (“crybaby” is one word popping up in some commentary), there’s the little matter of good professional judgment.
Salem may have excellent judgment when it comes to knowing what trade to put on and when to close it out at a profit; his judgment in that respect may be far, far better than that of his erstwhile bosses at Goldman Sachs. But filing this kind of lawsuit shows that he doesn’t have a similar ability to judge people and situations.
You don’t call the CEO of Goldman Sachs a dimwit in your arbitration panel. Even if you’re convinced that you’re Superman, you don’t let on. (Remember how well that worked out for “the fabulous Fab” Tourre, also late of Goldman Sachs?) And in an industry full of traders, all of whom have also been promised (nudge, nudge) lavish bonus payments that never materialized, you don’t bring a case in New York Supreme Court based on some five-year-old conversations at a cocktail party.
It’s time for a reality check.
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