Lehman Retirement Plan Sues Former Chief Fuld Over Repo 105 Transactions

A Lehman Brothers Holdings Inc. 401(k) retirement plan and its participants sued ex-Chief Executive Officer Richard Fuld and other former executives of the defunct firm for failing to disclose Repo 105, a financing method allegedly used to conceal billions of dollars of debt.

The amended lawsuit, based partly on a 2,200-page report by Lehman bankruptcy examiner Anton Valukas, was filed under seal in September and ordered unsealed by a judge on Nov. 30, according to a filing in U.S. District Court in Manhattan. The original suit was filed in 2008.

The 401(k) plan had $228.7 million invested in the Lehman Brothers Stock Fund, which had 10.6 percent of its assets in Lehman shares trading at $65.44 each on Dec. 31, 2007, according to the lawsuit. The company’s benefits committee liquidated the fund nine months after Lehman went bankrupt in September 2008 and its stock was worthless, the suit said.

Fuld and other executives “knew or should have known” about Repo 105 and other risks taken by Lehman, “and therefore knew or should have known that the plan’s assets should not have been invested in company stock,” according to the complaint.

The plaintiffs asked the judge to force the executives to “make good” all losses to the 401(k), pay damages equal to the losses, and restore profits that participants “would have made if defendants had fulfilled their fiduciary obligations.”

Patricia Hynes, a lawyer for Fuld, didn’t immediately return a call seeking comment. She has said that Fuld wasn’t aware of Repo 105.

The lawsuit is In re Lehman Brothers ERISA Litigation, 08- cv-05598, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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