Derhalli claims bank used ex-KGB spies

A former bond trader who is suing Lehman Brothers for $16.5m (£11m) in lost earnings yesterday claimed the investment bank hired ex-KGB spies to help it recover money lost in Russia when the country's economy imploded in 1998.

Kerim Derhalli, a former managing director at the bank, told the High Court Lehman hired the former spies, but was advised by them to go easy when pressuring officials and executives that owed Lehman money "because they themselves were frightened".

Mr Derhalli added that Lehman offered to employ bodyguards for him at the end of 1998. He said he declined on the basis that "if someone wants to kill you, they're going to kill you anyway."

Lehman has had to defend itself, and divulge details of losses it incurred as a result of Russia's financial crisis, after its former employee decided to sue the bank for alleged breach of contract and constructive dismissal.

Lehman issued a statement saying it was "contesting" certain parts of Mr Derhalli's wide-ranging witness statement, which also referred to alleged accounting irregularities at the bank. Lehman's counsel, Nicolas Underhill QC, said: "Is it your intention in prosecuting these proceedings to do as much collateral damage to Lehman as possible?"

Mr Derhalli, 40, was hired by Lehmans in September 1996 to help build its emerging markets business in Eastern Europe and Russia. He was paid $1m for his first two months work 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 bonus and salary.

Mr Derhalli alleges that in 1998, when the Russian rouble crisis rocked the financial community and left investment banks suffering heavy losses, Lehman put him on a special contract incentivising him to salvage what he could of the bank's Russian exposures.

Mr Derhalli, now the global head of commodities trading at Deutsche Bank, claims that under the contract he is owed $16.5m in unpaid bonuses.