Help

BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.

To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.

To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.

Login Register Subscribe

Lehman execs look to settle investors' lawsuit

Reprints

NEW YORK (Reuters)—Former Lehman Brothers Holdings Inc. officials, including one-time Chief Executive Richard Fuld, asked a bankruptcy judge to release $90 million in insurance funds so they can settle a fraud lawsuit brought by investors in the bankrupt investment bank.

In papers filed Wednesday in the U.S. bankruptcy court in Manhattan, Mr. Fuld and 13 other current and former directors asked Judge James Peck to modify bankruptcy rules to give them access to insurance policies to finance a settlement.

The lawsuit, which sought class-action status, was filed on behalf of investors in some of the more than $31 billion of equity and debt that Lehman sold starting in 2006.

The investors accused Lehman of painting a misleadingly rosy picture of the company's health in its financial statements and securities offerings.

U.S. District Judge Lewis Kaplan in Manhattan federal court is handling the lawsuit, which is being led by five retirement funds.

Before Judge Kaplan can consider any settlement, Judge Peck must first allow the release of the insurance funds, which are otherwise off-limits as part of the automatic stay provisions of the U.S. Bankruptcy Code, court papers show.

On July 27, Judge Kaplan dismissed some of the investors' claims but allowed them to pursue claims that Lehman materially misled them about its accounting and ability to manage risk prior to its bankruptcy on Sept. 15, 2008, the largest in U.S. history.

The lead plaintiffs include two California pension funds, the Alameda County Employees' Retirement Assn. and the Operating Engineers Local 3 Trust Fund, as well as public retirement funds in Guam, Northern Ireland and Edinburgh, Scotland.

Judge Peck has released insurance funds nine times in the past to pay for settlements, defense costs and legal judgments, according to Wednesday's filing.

The funds would come from liability policies worth $250 million in total, issued by such companies as ACE Bermuda Insurance Ltd., Liberty Mutual Insurance Co. and Arch Insurance Co., according to the filing.

Lehman filed for bankruptcy with $639 billion of assets, and its collapse was a principal trigger of the 2008 global financial crisis.

The settlement comes amid other investigations into Lehman's collapse, although there have been no U.S. prosecutions of top company officials.

In December 2010, then-New York Attorney General Andrew Cuomo sued Lehman's former auditor, Ernst & Young.

Read Next

  • New York sues Ernst & Young, alleges Lehman fraud

    NEW YORK (Reuters)—New York prosecutors sued Ernst & Young L.L.P., accusing the accounting firm of helping to hide Lehman Brothers Holdings Inc.'s financial problems, the first major government legal action stemming from the Wall Street bank's 2008 downfall.