Oct. 7 (Bloomberg) -- Top executives and money managers at Lehman Brothers Holdings Inc. will get retention bonuses valued at $400 million when their investment-management business is sold to Bain Capital LLC and Hellman & Friedman LLC.

Bain and Hellman on Sept. 29 agreed to buy most of the asset-management unit from bankrupt Lehman in a deal that values the business at $2.15 billion, about half the buyout firms' initial bids. The purchasers will deduct the employee awards from the amount they pay the investment bank for the assets, Lehman's lawyers said yesterday in a court filing.

The bonus proposals, which a U.S. bankruptcy judge must approve, were filed as lawmakers in a House Oversight and Government Reform Committee hearing faulted Lehman Chief Executive Officer Richard Fuld's compensation -- $484.8 million since 2000. Under 2005 bankruptcy laws, creditors could try to recover Fuld's pay and the money managers' retention bonuses, said Lynn LoPucki, who teaches bankruptcy law at Harvard University and the University of California at Los Angeles.

``Fuld took huge bonuses while running a highly risky business, and these executives are taking their money after the end came,'' he said. ``The estate of the bankrupt company is entitled to recover the payments.''

$230 Billion

Two top Lehman executives who stand to receive bonuses are George Walker, global head of money management, who the company said will be CEO of the new $230 billion-asset Neuberger Investment Management, and Joseph V. Amato, who'll run Neuberger Berman. Michael Odrich, head of private equity, and Tony Tutrone, who runs the private funds group, also will join, the company said in a Sept. 29 statement.

Names of top money managers haven't been disclosed, though entities being bought include Neuberger Berman's International Large Cap Institutional Fund, run by Benjamin Segal, and Lehman Brothers' Strategic Commodities fund, managed by Jonathan Spencer and Douglas Hepworth, according to Morningstar Inc. data.

Under the proposed arrangement, top Lehman employees and portfolio managers will get 16.8 percent of the equity in the purchased assets. The awards are valued using the ``gross purchase price'' of $2.15 billion, which includes assumption of liabilities, according to the filing.

If the purchase falls through, Bain and Hellman will get a termination fee of $70 million, or 4 percent of the net price, plus a reimbursement of $35 million under the proposal.

Termination Fee

``The sellers recognize that the seller termination fee and the reimbursement amount are on the high end of the range of similar fees approved by the court,'' according to the filing.

Lehman was the fourth-largest investment bank before it filed for bankruptcy Sept. 15. Fuld bought Neuberger Berman in 2003 for $3.2 billion to expand the firm's wealth-management business and later consolidated its asset-management operations into a single division. He had hoped to hold onto a stake in the unit as part of his failed plan to keep the 158-year-old firm afloat.

Roy Neuberger and Robert Berman founded the company named after them in 1939 to serve wealthy clients. During the 1950s, it was among the first firms to offer customers mutual funds that didn't charge transaction fees. Neuberger, now 105, retired before the 1987 stock market crash. The firm manages about $130 billion, out of $230 billion of assets being acquired in the deal.

As equal partners, the buyout firms Bain and Hellman will get the Neuberger Berman mutual-fund division as well as part of a private-equity group that invests in corporate takeovers and real estate, the companies said last month in a statement.

Bain, based in Boston, and Hellman of San Francisco paid less than they initially offered separately earlier in September before teaming up. Private-equity firms were the only bidders in a rushed auction after New York-based Lehman filed for bankruptcy.

The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Linda Sandler in New York at lsandler@bloomberg.net;

Last Updated: October 7, 2008 14:41 EDT