Lehman swap agreement party seeks return of $41.5 million collateral

By Caroline Salls

Pittsburgh, July 29 - Lehman Brothers Special Financing, Inc. swap agreement party Federal Home Loan Bank of Pittsburgh is looking to recover more than $41.5 million in cash deposited as collateral for derivative transactions, according to a lawsuit filed Wednesday with the U.S. Bankruptcy Court for the Southern District of New York.

The bank said Lehman Brothers Special Financing was required to hold the collateral in a segregated account and was prohibited from pledging the collateral or using it in any way.

However, Federal Home Loan said the Lehman Brothers Holdings, Inc. subsidiary kept the collateral in a non-segregated operating account and transferred it to bank accounts held by each of the defendants.

Since the defendants had no right to receive or hold the collateral, the bank said they were unjustly enriched, and the cash should be returned.

The defendants include Lehman Brothers Holdings, Lehman Brothers Inc., Lehman Brothers Commercial Corp., Woodlands Commercial Bank and Aurora Bank FSB.

New York-based Lehman Brothers Holdings Inc. was the fourth-largest investment bank in the United States. The company filed for bankruptcy on Sept. 15, 2008. Its Chapter 11 case number is 08-13555.

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