Lehman Preferred Series "J" Preferred (fka LEHJQ)

[DJN]

Lehman warns on ‘unreasonable’ US claims

By Anousha Sakoui

http://www.ft.com/cms/s/0/c4fc9870-fef1-11de-a677-00144feab49a.html

Published: January 11 2010 22:34 | Last updated: January 11 2010 22:34

Big banks seeking to make windfall profits by making “outrageously unreasonable” claims against Lehman Brothers’ US business will be forced to prove their case in public courts, the executive leading the unwinding of the failed bank has warned.

Bryan Marsal, the chief executive of Lehman Brothers Holdings, who is responsible for maximising recoveries to all its creditors, said he was planning to make an example of big banks seeking to claim more than they should on billions of dollars of losses linked to trades in derivatives.
EDITOR’S CHOICE
In depth: Lehman Brothers - Oct-13
Lehman seeks to expose ‘silly’ claims - Jan-11
Lehman Europe set to return assets - Dec-29
Collapsed Lehman pays out big bonuses - Dec-21
Bangkok group takes aim at Lehman sale - Dec-03

He said: “We are going to go after the outliers. “We plan to bring these claimants in front of the judge to argue why this claim is not warranted and by doing so persuade the other claimants to be more reasonable.”

His comments come as the unwinding of Lehman Brothers moves into its second year.

Mr Marsal and his team are expected to focus this year on resolving the more than $800bn (£496bn) of claims for losses that have been made against the US estate of Lehman.

Those claims linked to derivatives are expected to pose the biggest challenge to unwind and the bankruptcy of the investment bank is being widely watched for precedents in this process.

Mr Marsal said: “There are a lot of innocent people that got hurt big time by the collapse of Lehman and we need to make sure the banks understand that this is not a profit windfall, that damages being claimed [ ... ] are in most cases far in excess of losses.

“We will be in court with these claims in the second quarter, if these banks don’t come to their senses before.”

About $60bn in claims linked to derivatives have been made including those from about 40 of the largest US banks.

While Mr Marsal said they were not rejecting legitimate claims, he wanted the large institutions to co-operate in proving their claims.

Banks have been using provisions under standard contracts by the trade body for the derivatives industry to calculate their potential losses.

But Lehman’s representative believes the process provides banks with “theoretical loss in a market that has no bearing on reality” and permits “extremism” in the calculation of the value of the claims.

However, people familiar with some of the claims said the bankruptcy process allowed banks to make claims and that the losses accounted for the increased cost at the time to replace those trades.

Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.