Bloomberg News

SEC Seeks to Intervene in Lehman Unit Fight With Barclays

September 26, 2012

The U.S. Securities and Exchange Commission asked for permission to intervene in Lehman Brothers Inc.’s appeal of a $5.5 billion award to Barclays Plc (BARC) that stemmed from the purchase of the Lehman parent’s North American businesses in 2008.

The SEC has the legal right to participate in all cases involving a brokerage that’s being liquidated under the Securities Investor Protection Act, the regulator said in a letter to the U.S. Court of Appeals in New York.

The SEC previously sided with the Lehman brokerage in district court, saying that as long as there is a shortfall in what’s owed to clients, Barclays has only a conditional claim on as much as $1.3 billion reserved for customers.

The dueling between the second-biggest U.K. bank and Lehman brokerage trustee James Giddens followed a 2010 bankruptcy court trial. Both sides challenged the trial judge’s order on the disputed assets, as well as the district judge’s order that mostly favored Barclays.

Michael O’Looney, a Barclays spokesman, declined to comment on the SEC filing. John Nester, an SEC spokesman, didn’t immediately respond to an e-mail asking what the SEC might say when it files papers in the case or appears in court.

The Lehman brokerage went into liquidation in September 2008 separately from its parent, Lehman Brothers Holdings Inc.

The Lehman parent, now out of bankruptcy, said yesterday it has paid advisers $60.1 million in fees since completing a liquidation plan March 6, including $26.9 million to Alvarez & Marsal LLC for “interim management.”

Asset Sales

The defunct investment bank, which continues to sell assets to pay the average creditor about 18 cents on the dollar, said it paid an additional $8 million to advisers for services rendered before March 6, bringing total fees for its bankruptcy case, the biggest in U.S. history, to $1.73 billion.

The Lehman parent, which is due to make a second payment to creditors of $10.2 billion on Oct. 1, disclosed the fees in an operating report filed in U.S. Bankruptcy Court in Manhattan yesterday. The brokerage, which transferred most of its retail accounts to Barclays four years ago, hasn’t yet paid hedge funds and other big investors.

The appeal is In re Lehman Brothers Holdings Inc., 12-2328, U.S. Court of Appeals for the Second Circuit (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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