BARCLAYS CAPITAL INC.
115. In addition to the assets Barclays has already received under the Purchase
Agreement, Barclays has made formal demands (and filed corresponding claims in the
claims process) for an additional $2 billion to 3 billion or more of assets based on its
interpretation of the Purchase Agreement and Clarification Letter. These demands
involve claims to items in LBI’s former Rule 15c3-3 customer reserve account and
margin and other property at exchanges or clearing agencies that may be needed to satisfy
customer claims. The demands also include property in clearance boxes at DTCC that
may also be needed to satisfy customer claims and which Barclays, the Trustee, and
DTCC had specifically agreed in a letter agreement were excluded assets under the
purchase transaction. The Trustee believes that the transfer of these additional assets, as
well as an amount in excess of $3 billion of similar assets that are already in the
possession of Barclays, were not approved by the Bankruptcy Court on the Filing Date,
and that the transfer of these assets to Barclays would create an unfair windfall for
Barclays at the expense of public customers.
116. On June 25, 2009, the Bankruptcy Court entered an Order granting
LBHI’s motion under Federal Rule of Bankruptcy Procedure (“FRBP”) 2004 for
permission to seek written discovery and depositions from Barclays into the assets
Barclays received and liabilities assumed under the Purchase Agreement (“the June 25
Order”). The June 25 Order specifically permitted the Trustee to participate in the Rule
2004 discovery, and ordered the Trustee to work with LBHI, the Examiner in LBHI’s
Chapter 11 case, and the Creditors’ Committee to develop a protocol to govern the
discovery sought from Barclays, and to confer with Barclays regarding the discovery
requests. Due to the extraordinarily cooperative efforts of the Trustee and counsel for the
other parties, the parties succeeded in coordinating and completing an extremely
demanding discovery schedule that included the depositions of more than 30 current and
former Barclays and Lehman employees in a period of just over six weeks.
117. Based in part on information learned during the Rule 2004 discovery, on
September 15, 2009, the Trustee filed a motion for relief pursuant to the Sale Orders or,
alternatively, for certain limited relief under Federal Rule of Civil Procedure (“FRCP”)
60(b). If the Trustee were not granted the relief sought in its motion, the Trustee could be
denied recovery of about $3 billion or more in cash and other assets transferred to
Barclays and might have to pay or release to Barclays $3 billion dollars or more of
additional cash and securities, all of which could have a major impact on satisfaction of
claims in this proceeding. LBHI and the Creditors’ Committee also filed motions seeking
relief under Rule 60(b).
118. The Trustee has conferred with the other parties to agree upon an efficient
and realistic procedure and timetable to resolve this important dispute. To that end, the
parties appeared before Judge Peck on October 15, 2009, and have agreed to a schedule
under which further discovery and briefing will be completed by March 18, 2010. The
Court has scheduled oral argument on the Trustee’s and the other motions for March 25,
2010, and, if needed, an evidentiary hearing is scheduled to begin on April 26, 2010.
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