A workman waits for commercial operation in a bend of Barclays bank in London Feb 16, 2010.
Credit: Reuters/Jas Lehal
NEW YORK (Reuters) - Lehman Brothers Holdings Inc (LEHMQ.PK) told a U.S. failure decider on Friday that Barclays Plc (BARC.L) should be forced to lapse certain resources it perceived in the 2008 merger of Lehman"s core U.S. brokerage, since Barclays organised a tip $5 billion discount.
In opening arguments at a conference in U.S. Bankruptcy Court in Manhattan, an profession for Lehman Brothers claimed that Lehman and Barclays employees had dark report about the bonus from their lawyers and the court, among heated understanding negotiations in the darkest days of the monetary crisis.
Lehman filed the largest failure in story on Sep 15, 2008, offering the flagship U.S. brokerage commercial operation to Barclays for about $1.85 billion less than a week later.
But Lehman is right away asking Judge James Peck to have changes to the sequence that certified the understanding after months of review suggested that the sale described to the justice was not the sale essentially executed.
"Barclays programmed on and insisted on the bonus and they programmed on the guilt numbers being inflated," Robert Gaffey, a Jones Day profession representing Lehman, told the court.
"It was not the wash described to the (Lehman) board, it was not the net good described to the estate," he continued, claiming that Barclays perceived an $11.2 billion evident asset distinction on the resources it acquired, whilst the justice was told that the sale would essentially give Lehman a good of about $4 billion in conditions of marked down liabilities and cash.
Gaffey showed the justice emails from Lehman employees who had been offering new jobs at Barclays, divulgence the conflicts they might have had as they were operative to prepare the deal.
"They were on their approach to new careers, they were portion their new master," Gaffey said.
He pronounced the Lehman employees had organised for Barclays to get a $5 billion bonus on Lehman"s $70 billion book of bonds -- personally shortening the values of the resources on Lehman"s books, whilst their lawyers told the justice that the markets had forced the change.
"It was not since the markets dropped, it"s since the Lehman traders had instructions from Barclays to revoke the values to murder value," Gaffey said.
Gaffey pronounced that either the send of resources was a inapplicable designation or conscious did not matter, and that Lehman is entitled to the lapse of assets.
In opening the hearing, Judge Peck pronounced that this was "the begin of a prolonged slog," on this dispute, and he might listen to multiform alternative arguments prior to creation any decision.
BARCLAYS SAYS THE DEAL WAS RISKY
Barclays" profession David Boies fought behind opposite Lehman"s claims after on Friday, revelation the justice that the understanding was regularly dictated to be rught away certain for the British investment bank.
"This was a "bet your company" investment for Barclays -- it was an huge risk," Boies said. "It was something where Barclays was the usually bidder -- there wasn"t anybody else."
Boies pronounced that Barclays had been concerned, similar to most others on Wall Street, that Lehman had been overly assertive with the outlines on the assets, and Barclays didn"t wish to risk carrying to after take a write-down on the acquisition.
He told the justice that Lehman and the creditors are perplexing to shift the understanding right away that the markets have improved, observant the sheer contrariety with the wild swings going on in the surrounded by of the 2008 negotiations.
Lehman attorneys additionally told the justice that Barclays might have arrogant a little of the liabilities it pronounced it would assume, such as those associated to stability practice of Lehman staff, and that a "clarification letter" tacked on to the understanding after the justice authorized it materially altered the deal.
Barclays doubtful Lehman"s claims that their attorneys had been kept in the dark, and pronounced that Lehman could have addressed these concerns most earlier.
"Everybody supposed it since that was the understanding and at the time. They knew it was the deal," Boies said. "Yes, people were scrambling at the last minute. Yes, the understanding was becoming different at the last minute, but once the construction minute was created everyone had a duplicate of it."
James Giddens, the keeper in assign of liquidating Lehman"s brokerage and creation certain commercial operation embrace their assets, additionally assimilated the brawl opposite Barclays. An profession for the keeper pronounced that $769 million of supervision bonds and a little $4 billion in money never should have been eliminated to Barclays.
Susheel Kirpalani, an profession for Lehman"s Official Committee of Unsecured Creditors, told the justice that Barclay"s was creation a "circular argument" and that Lehman was usually in justice right away since new justification showed the understanding had left wrong.
"This is not a box about seller"s remorse," Kirpalani said. "There is an even larger open process issue at fool around -- that is transparency."
Lehman shares sealed down some-more than 5 percent at about eleven cents in the over-the-counter marketplace on Friday, whilst Barclays shares sealed at 356.5 pence on the London Stock Exchange, down 0.2 percent.
The box is In re: Lehman Brothers Holdings Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555.
(Reporting by Emily Chasan, modifying by Matthew Lewis and Bernard Orr)
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