Barclays and Lehman wrap up US lawsuit

Marion Dakers
LEHMAN Brothers’ lawsuit against Barclays over its $1.75bn (£1.09bn) purchase of the bankrupt group’s assets draws to a close today, as lawyers on both sides submit their final arguments on whether Barclays made a secret windfall on the sale.

Lehman, which filed for the world’s biggest bankruptcy in September 2008, is expected to claim Barclays made $13bn from business assets and securities added to the purchase at the last minute.

Barclays will argue that the terms of the sale were fair, and were made clear in a letter given to both Lehman and the New York bankruptcy judge who approved the purchase.
Judge Peck, who presided over the original bankruptcy hearings, must now re-examine his ruling and decide whether Barclays deceived Lehman and the court. If he decides Barclays must repay Lehman, the money could go towards paying the hundreds of billions of dollars still owed to creditors.

Peck said in court in October that he “never approved [Barclays’] clarification letter,” adding: “There are over 12,000 docket entries. I do not know everything that is contained.”

New Barclays chief executive Bob Diamond took to the stand in June to defend the bank, but was slammed by the judge for his “evasive” answers, with Peck adding: “I think that this is a witness that needs to have the leash held tightly.”

Peck is expected to take until January or February to reach a decision, extending the prolonged legal battles linked to the collapse of Lehman Brothers.

Last week, the same judge ruled that Bank of America must return $500m of deposits it seized from Lehman Brothers Holdings shortly after the bankruptcy.

Lehman is also suing JP Morgan for allegedly siphoning off assets during the early stages of the bankruptcy, which the bank denies.