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Lehman Derivatives Were Threatened With Liquidation in 2008, Lawyer Says
The Options Clearing Corp. threatened to liquidate Lehman Brothers Holdings Inc.’s trading positions in the 2008 financial crisis unless Barclays Plc bought its brokerage and took on the defunct firm’s obligations, a lawyer for the U.K. bank told a judge.
Attorney David Boies today in U.S. Bankruptcy Court in Manhattan presented an e-mail sent by the derivatives clearing organization to Lehman and Barclays lawyers, dated shortly before the brokerage sale was completed on Sept. 22, 2008. The OCC said it would close out the trades if the deal fell through, or it risked being “exposed to loss.”
A similar liquidation of Lehman derivatives the same month by options and futures exchange CME Group Inc. cost Lehman’s creditors $1.2 billion, according to a report by bankruptcy examiner Anton Valukas.
Boies displayed the OCC e-mail as he defended London-based Barclays against Lehman’s claim that it should pay as much as $11 billion for an allegedly undisclosed “windfall” on the defunct brokerage. The total includes billions of dollars of margin deposits that Barclays needed to take over Lehman’s trading business, Barclays has said.
The bench trial resumed yesterday after a summer holiday.
The brokerage sale, approved by U.S. Bankruptcy Judge James Peck, closed a week after Lehman’s Sept. 15, 2008, bankruptcy, the biggest in U.S. history.
Lehman, its creditors and the brokerage trustee, James Giddens, sued Barclays last November as markets rebounded.
The cases are In re Lehman Brothers Holdings Inc., 08- 13555, and Giddens v. Barclays Capital Inc., 09-01732, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Linda Sandler in U.S. Bankruptcy Court in New York at +1- lsandler@bloomberg.net and;
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