Former exotic dancers who were employed at Rick’s Cabaret International Inc. are entitled to be paid a minimum wage, said a U.S. judge who ruled that they were club employees and not independent contractors under the law. Former strippers sued Rick’s Cabaret and its corporate parent RCI Entertainment New York in U.S. District Court in Manhattan in 2009, alleging they weren’t paid any salary in violation of federal and state labor laws. The dancers said they instead received money from customers including “performance fees” for personal dances. Publicly traded Rick’s Cabaret argued that it exercised “minimal control” over the women, whom the company said were independent contractors not covered by labor law. Rick’s Cabaret also filed a countersuit for “unjust enrichment” claiming that the performance fees the dancers earned should be counted against any statutory wage obligation of the defendants. U.S. District Judge Paul Engelmayer in New York today rejected the defendants’ bid for summary judgment, or a ruling before trial, concluding that Rick’s Cabaret had “regulated almost every aspect of the dancers’ behavior within the club.” [Bloomberg, Related: Bankers And Traders “Legitimately” Expensing Strip Clubs Do Rick’s Cabaret A Solid]
Even When He Wasn’t Engaging In Securities Fraud, Admitted Insider Trader Richard Lee Found Ways To Get His Jollies OnBy Bess Levin
Richard Lee, the ex-SAC Capital trader who pleaded guilty to insider trading last week, was fired from a rival hedge fund over a bonus-boosting scheme that was uncovered his first day in a new job, The Post has learned. Lee was ousted from Ken Griffin’s $15 billion Citadel Investment Group in 2008 for fiddling with the trading books in a ploy to pump up his payout, sources said. What’s more, it happened during Lee’s first few hours as head of Citadel’s value special situation team, which focused on mergers, according to sources. Lee never made it to a second day. Citadel accused him of pulling profits from other trading groups to boost his own performance numbers, a source said. The 34-year-old Lee, a graduate of Brown University who lives on Chicago’s tony Gold Coast, had been promoted to head of the trading group after the former chief left in March 2008. Citadel has programs to track such changes and Lee was caught within “three hours,” sources said. In a statement, Citadel hinted at the reason for Lee’s firing, saying he “transferred positions” in such a way that it “would have impacted only his potential future compensation.” [NYP]
Swiss bank annual earnings are here so we might as well check in on what they’re up to with comp. You and I may think of comp in pretty straightforward ways – if you did good, and your employer did good, you get paid well, and if not not – but Credit Suisse and UBS take a delightfully arcane wheels-within-wheels approach, constantly changing how they pay employees to send signals, fine-tune incentives, and optimize regulatory capital. I suppose if I worked there I’d be so pleased by the complexity of the edifice that I’d be okay with otherwise disappointing pay. Current employees may disagree.
Anyway we talked about UBS the other day; per the FT they are handing out bonuses in the form of high-trigger CoCo bonds that get written down to zero if UBS’s regulatory capital falls below 7 percent. The bonds “will pay a market-based interest rate” though that’s not saying much; any interest rate is “market-based” in the sense that it can be decomposed into, like, Treasuries plus a number. Presumably the number here is high.
If you read a lot of media coverage of Goldman Sachs earnings you get the sense that the most important number the firm reports is average compensation per employee, which this year was a nice oh-so-close-to-round $399,506. I CONCUR, of course.1 Also of interest is the comp ratio, which was only 39% this year, as less of the spoils of Goldman’s labors go to the people in the building doing the labors, and more go to the people providing the capital. Progress!
The analysts on the earnings call were not all that focused on comp, which I attribute to jealousy, but there were some exceptions. Like JPMorgan’s Kian Abouhossein, who pressed the Viniar/Schwartz CFO tag-team about expenses and headcount in Investing & Lending, playing an enjoyable guessing game with the twin CFOs about staffing levels in Investing & Lending:2
I mean, there are only few hundred — I assume there are only a few hundred people running in this division. I can’t believe there’s thousands of — I would be even surprised if it’s 1,000 people. So I’m just wondering why you’re having $2 billion to $3 billion of expenses. Is it interest expenses or is it something else? I just don’t understand why there’s such a big expense level.
Because the few hundred people are paid really well? Other? Dunno. You can guess why Schwiniar might have stalled here (and on a later question about I&L Basel III RWAs); the Investing & Lending business model has gotten some negative attention recently. The problem is basically that it does things like investing and lending, which almost violate the Volcker Rule, or would if it existed, which it doesn’t, yet.
Here is an important cultural difference between the US and the UK that you should, like, stick in the boot of your lorry or whatever: in the UK, it’s apparently not socially acceptable to put off paying bonuses by two months to save your employees five percentage points in taxes. In America, it’s considered perfectly reasonable to die to avoid a tax increase.1
I was not aware of this difference and it seems neither was Goldman Sachs:
Goldman Sachs has backed down from a plan to delay UK bonus payments until after the new UK tax year, which would have allowed bankers to benefit from a cut in the top rate of tax from 50 to 45 per cent. … The idea – first reported by the Financial Times on Sunday – would have seen the payment of the deferred portion of bonuses from prior years delayed from February until after April 6.
News of the plan prompted a flurry of criticism from lawmakers and even from within the banking industry.
Addressing the House of Commons Treasury select committee earlier on Tuesday, Sir Mervyn King, governor of the Bank of England, had criticised the idea.
“I find it a bit depressing that people who earn so much find it would be even more exciting to adjust their payouts to benefit from the tax rate, knowing that this must have an impact on the rest of society, which is suffering most from the consequences of the financial crisis,” Sir Mervyn told MPs. “I think it would be rather clumsy and lacking in care and attention to how other people might react. And in the long run, financial institutions do depend on goodwill from society,” he added.
You can sympathize with Goldman’s misunderstanding here, no? Read more »