"They're investing in illiquid assets thatmature over many years and for anyone'scompensation to be heavily weighted toward thenear term in that sort of circumstance is absolutelunacy," the source said. "It's a license to stealin the hands of those inclined to do that."

The source alleged that Sperling and Eisensonreceived a total of 4 percent of Aeneas' profitson every investment overperformance in excess of10 percent.

Based on that system, the two managers werepermitted to keep their 1989 bonuses and were notpenalized for the 1991 devaluation's.

"They each got two percent on $50 million thatwas overperformance that year," the source said."The subsequent write-offs of $200 million wipedthat out four-fold."

"To pay significant bonuses based on short termpaper profits is preposterous," said anothersource. "The evaporation of those profitscertainly proves the point."

Sperling and Eisenson, while declining toelaborate on either the old or new systems ofcompensation, denied that they were ever overpaid,or that their investments were held at inflatedvalues.

They said they never knowingly allowed theworth of the Aeneas protfolio to be overvalued.Those estimates, they said, are made by outsideauditors. And the sharp devaluation, theymaintained, must be kept in the context of thecollapsing real estate and commodities market in1990.

"In a hundred companies there may have beensome that were overvalued but if they were theyovervalued by somebody else," Eisenson said.

Eisenson asserted that during the four-yearperiod for which the 1989 bonuses were paid,Aeneas earned $290 million in realized profits andsaw its investment valuations marked up by #100million.

"Reasonable people can differ on what isappropriate compensation for that performance," hesaid. "I would say that we're comfortable that ourbonuses for that period were not unreasonable inrelation to the profit we generated."

But sources said that the pair's compensationwas far in excess of what would have beenappropriate for their performance, especiallygiven Aeneas' large subsequent write-offs.

"Kids shouldn't be getting million dollarbonuses for screwing around with valuations," onesource said.

"That is outrageous. It's tantamount to legallarceny," charged another. "I'm intimatelyfamiliar with the compensation structure thatpeople normally get and to have that occur andsubsequently have a substantial write-off is justtotally unacceptable."

Shortly after the million dollar salaries weredisclosed in October 1991, Sperling told TheCrimson that his and his partner's steepcompensation was justified. He said that if theyhad performed as well for a Wall Street firm,their salaries would likely have been 20 timeshigher.

But sources said Sperling's comment was, at theleast, mistaken.