December 2, 2011

Lehman Payouts to Former Clients Will Begin in 2012: Trustee

$18.3 billion in assets remain

Lehman Brothers sign being taken to auction house. (Photo: AP) Lehman Brothers sign being taken to auction house. (Photo: AP)

James Giddens says that he intends to begin paying the customers of bankrupt brokerage Lehman Brothers early next year from an $18.3 billion asset pool.

Giddens, the trustee who is liquidating both Lehman and broker-dealer MF Global, said in a Friday Bloomberg report that he intended to make “a significant” payment. He did not indicate how much money customers might expect to receive. He added that large payouts must wait for remaining claims disputes to be resolved. He asked Thursday for a judge to approve the distribution.

In his court filing, Giddens said, “The trustee would like to be in a position to proceed with interim distributions to customers in early 2012, with reserves as appropriate for disputed claims. Disputes involving the largest dollar values will have to be resolved before large distributions of customer property can proceed.”

Giddens is obliged by law to distribute assets among customers equally. Records in U.S. Bankruptcy Court in Manhattan indicate that so far he has accumulated $23.7 billion from settlements, litigation, and negotiation with banks and other business partners of the defunct firm. Held in reserve is a $3 billion portion of the whole, against an ongoing court dispute with Barclays Plc; Barclays bought North American businesses of the parent company, Lehman Brothers Holdings Inc., in 2008.

The filing indicated that billions of dollars are also in limbo thanks to unresolved trustee disputes with Lehman Brothers Holdings, its London affiliate, and counterparties to mortgage contracts and repurchase transactions.

In an October disclosure, Giddens revealed that the brokerage has spent $642 million on its liquidation. Most of that sum has paid professional and consulting fees, with Giddens as trustee and his law firm, Hughes Hubbard & Reed LLP, accounting for approximately $169 million in fees since September 2008.

Most of Lehman Brothers Inc.’s 110,000 former customer accounts, valued at $92.3 billion, were taken over by Barclays and Neuberger Berman Holdings LLC, with the remaining customers largely by hedge funds and other institutions.

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