Bloomberg News

Lehman Brokerage Loses Appeal of Barclays Asset Ruling

June 05, 2012

Lehman Brothers Holdings Inc.’s defunct brokerage failed to overturn a bankruptcy court ruling requiring it to pay Barclays Plc (BARC) at least $1.1 billion, while losing a bid to make Barclays return assets to the brokerage.

The appeal stems from the Lehman brokerage’s fight of more than three years with the U.K. bank over $3 billion in assets tied to the bank’s purchase of Lehman’s North American business. U.S. District Judge Katherine Forrest in Manhattan told the brokerage to pay Barclays what it owed, saying the final sale documents showed the parties’ true intent.

At the same time, Forrest reversed the lower court ruling that said Barclays wasn’t entitled to margin assets used to support a trading operation bought from Lehman.

In his ruling, U.S. Bankruptcy Judge James Peck had told Barclays to return $2 billion in margin assets to Lehman brokerage trustee James Giddens. At the same time, Peck ordered Giddens, who is also handling the MF Global Inc. brokerage liquidation, to give Barclays at least $1.1 billion, and possibly another $769 million.

Forrest said Barclays wasn’t entitled to the $769 million, and awarded about $500 million of the margin assets to the Lehman brokerage.

Lehman Assets

“We are gratified by the court’s decision today confirming that Barclays is entitled to the Lehman assets it purchased in September 2008,” the bank’s litigation lawyer, Jonathan Schiller of Boies, Schiller & Flexner LLP, said in an e-mail.

Giddens will appeal Forrest’s ruling, he said.

“We strongly believe that the former customers of Lehman Brothers Inc. are entitled to these assets,” he said in an e- mailed statement today. “Our duty to customers mandates that we continue to pursue all legal avenues to recover the assets.”

Giddens has reserved money for the Barclays litigation and still aims to pay some money to the brokerage’s creditors before the end of the year, he said.

The brokerage went into liquidation after the Lehman parent filed the biggest bankruptcy in U.S. history in September 2008, listing assets of $639 billion.

The district court case is Giddens v. Barclays Capital Inc., 11-cv-06052, U.S. District Court, Southern District of New York (Manhattan).

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

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net


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