BARCLAYS president Bob Diamond will today deny the British bank planned to pocket a secret $11bn (£7.5bn) windfall when it bought Lehman Brothers’ US brokerage at the height of the financial crisis.
In a resumption of the bitter legal wrangle between Barclays and parties representing Lehman Brothers, Diamond is expected to tell a New York bankruptcy court it would be unfair to renegotiate the deal nearly two years after Lehman’s collapse.
Diamond will be cross-questioned by lawyers for Lehman Brothers’ creditors, its trustee and its estate. The three groups allege Barclays Capital, Barclays’ investment banking arm, unfairly profited from its $1.9bn buyout of Lehman Brothers in September 2008 by arranging a hidden profit that would kick in after the takeover.
They claim Lehman Brothers gave Barclays Capital $4.2bn to cover liabilities such as bonuses and redundancies. Barclays Capital booked a further $5bn profit by rearranging a repurchase agreement with the Federal Reserve, lawyers say, with the remainder of the $11.2bn inheritance coming from extra Lehman Brothers assets seconded at the 11th hour.
Lawyers acting for the three Lehman Brothers plaintiffs accused Barclays Capital of purchasing the US brokerage at a discount, and say the British bank did not give details of the windfall to the bankruptcy judge in charge, James Peck.