The Work

November 24, 2009 4:12 PM

Quinn Emanuel Raises Stakes in Lehman-Barclays Dispute

Posted by Zach Lowe

The official creditors committee in the Lehman Brothers bankruptcy fired the latest shot Tuesdsay afternoon in the dispute between Lehman and Barclays over whether Barclays received an improper "windfall" in its purchase of Lehman's North American assets and liabilities last September, court records show. 

The dispute has been brewing for months and has resulted in several motions for discovery and at least three lawsuits. In short: Lehman, its creditors, and the trustee of its estate allege that certain higher-ups at both Lehman and Barclays arranged--without the knowledge of Lehman's counsel at Weil, Gotshal & Manges--to sell most of Lehman's North American assets to Barclays in late September 2008 under terms that were far too favorable to the buyer, according to court records and our prior reporting. On September 15, 2009, exactly one year after Lehman filed for Chapter 11 protection, Lehman's special counsel at Jones Day filed papers asking a federal judge to reconsider the terms of the sale and to allow Lehman access to various Barclays documents. Barclays, represented by Boies, Schiller & Flexner, responded by issuing subpoenas for various documents to Lehman's lawyers at Weil; the subpoenas listed documents protected by attorney-client privilege, but a source familiar with the matter has told us Weil is complying with the subpoenas and turning over formerly privileged records. Weil attorneys have declined to comment on the matter. 

That brings us to today. The creditors committee in the Lehman case (represented by Quinn Emanuel Urquhart Oliver & Hedges) filed a motion under the terms of the Hague Convention seeking permission to ask a U.K. court to require that two U.K.-based entities turn over documents related to the Barclays deal. The entities? They're biggies--the Financial Services Authority, the U.K.'s version of the Securities and Exchange Commission, and PricewaterhouseCoopers International, the megafirm that served as the auditor for Barclays in its deal talks with Lehman, according to court records. (You can download today's motion below.)

Specifically, the Quinn lawyers want to see correspondence between Barclays and those entities in which the parties discussed the terms of the Lehman transaction, especially on the matter of how much Barclays expected to earn from the deal. 

James Tecce, the lead Quinn lawyer listed on the complaint, was not immediately available for comment. Jonathan Schiller, name partner at Boies Schiller, did not immediately respond to messages seeking comment.

The exact size of the alleged Barclays "windfall" is a bit unclear. In the past, lawyers have estimated the unexpected gain as somewhere between $5 billion and $8.2 billion, and Lehman has also alleged that the dealmakers inflated the value of liabilities (including employee bonuses) Barclays would take on in the deal. According to Quinn's filing Tuesday, the deal as presented to a federal judge for approval consisted of "the transfer of liabilities totaling $45.5 billion (plus $4.25 billion of cure and compensation liabilities) and the transfer of assets totaling $47.4 billion."

Download Lehman Barclays Motion

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