Quinn Emanuel raises stakes in Lehman-Barclays dispute
The official creditors committee in the Lehman Brothers bankruptcy fired the latest shot on Tuesday (24 November) 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. 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 favourable to the buyer.
November 25, 2009 at 07:53 AM
3 minute read
The official creditors committee in the Lehman Brothers bankruptcy fired the latest shot on Tuesday (24 November) 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.
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 favourable to the buyer.
On 15 September, 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 lawyers have declined to comment on the matter.
That brings us to Tuesday. 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 UK court to require that two UK-based entities turn over documents related to the Barclays deal. The entities? The Financial Services Authority, and PricewaterhouseCoopers, which served as the auditor for Barclays in its deal talks with Lehman
Specifically, the Quinn Emanuel 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.
The exact size of the alleged Barclays 'windfall' is unclear. In the past, lawyers have estimated the unexpected gain as somewhere between $5bn (£3bn) and $8.2bn (£4.9bn), and Lehman has also alleged that the dealmakers inflated the value of liabilities (including employee bonuses) that Barclays would take on in the deal.
According to Quinn Emanuel's filing on Tuesday, the deal, as presented to a federal judge for approval, consisted of "the transfer of liabilities totaling $45.5bn (£27.2bn), plus $4.25bn (£2.5bn) of cure and compensation liabilities, and the transfer of assets totaling $47.4bn (£28.4bn)."
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