Trader gets £5m payout in dispute over bonus

A city trader won at least £5m yesterday in an out-of-court settlement with his former employer after claiming the investment bank reneged on promises to pay him twice that amount in bonuses and then told him his job no longer existed.

Kerim Derhalli, who was poached in 1996 by Lehman Brothers to run its Russian office, suddenly ended his court case on the ninth day by issuing a joint statement with the bank. "Kerim Derhalli has withdrawn his claim. A mutually agreeable settlement has been reached and both parties have expressed a desire to get back to work," it said. Mr Derhalli, now the global head of commodities trading at Deutsche Bank, took the unusual step of pursuing Lehman Brothers for an alleged US$16.5m (£10.5m) of lost earnings and wrongful dismissal all the way to the High Court.

Secretive investment banks usually settle disputes with employees before they get to court because they believe the bad publicity and disclosure of sensitive information is highly damaging to their reputation. Since the case opened, Lehman Brothers has had to fend off a broad range of criticism, including allegations that it hired former KGB spies to help to recover money it had lent to Russian businesses.

Mr Derhalli told the High Court his former employer offered to hire bodyguards for him at the end of 1998. He said he declined because "if someone wants to kill you, they're going to kill you anyway". Lehman Brothers has contested Mr Derhalli's version of events. It has also been forced to disclose losses it made during the financial crisis in Russia in the late Nineties, and has had to detail its approach to paying bonuses, another sensitive issue.

Mr Derhalli, 40, who was educated at Oxford, was hired by Lehman Brothers in September 1996 to help build its emerging markets business in Eastern Europe and Russia. He was paid $1m for his first two months at the bank, a guaranteed bonus he was offered in his initial employment contract. In 1997, he was paid just short of $3m, made up of bonuses and his salary.

Mr Derhalli alleged that in 1998, when the Russian rouble crisis rocked the financial community and left investment banks with heavy losses, Lehman Brothers put him on a special contract with an incentive to salvage what he could of the bank's Russian exposures. Mr Derhalli said under the contract he was owed $16.5m in unpaid bonuses. Both sides were bound by confidentiality agreements in yesterday's settlement, but Mr Derhalli is thought to have received substantially less than the full amount.

The two sides, which have been negotiating behind the scenes since the case began, finally thrashed out a compromise over the weekend.

Andrew Popplewell QC, who was acting for Mr Derhalli, told Mr Justice Cresswell, who was hearing the case: "The parties have agreed to resolve their differences and propose that the proceedings be disposed of by way of a consent order."

Jeffery Vanderbeek, Leh-man Brothers' head of risk management and Mr Derhalli's former boss, had been due to appear in the witness box yesterday morning. Mark Benson, Lehman Brothers' head of fixed income in Europe, was also due to be called as a witness at the High Court.

Mr Derhalli, a British citizen born in Kuwait, left Lehman Brothers in 2000 and joined Deutsche Bank in January 2001. He began his investment banking career at JP Morgan in 1983. He moved to Bankers Trust in Singapore and then joined Merrill Lynch in London in 1994.