Lehman Brothers International client money handling judgment appealed

By Caroline Salls

Pittsburgh, Jan. 26 - Lehman Brothers International (Europe)'s joint administrators said four respondents have appealed a Dec. 15 judgment related to their application seeking direction concerning the company's obligations for handling client money received before it was placed in administration, according to a news release.

The joint administrators said the appeal will impact the timing of interim client money distributions.

As previously reported, six respondents to the application were granted permission to appeal the judgment by Jan. 15.

Of those six, the joint administrators said respondents CRC Credit Fund Ltd., Lehman Brothers Inc., Lehman Brothers Finance AG and Lehman Brothers Holdings Inc. have appealed the judgment.

The other two respondents that were eligible to appeal were Goldman Sachs GSIP Master Co. (Ireland) Ltd. and Paragon Capital Management Fund Ltd.

The administrators said the general estate of Lehman Brothers International (Europe) and clients for whom client money was segregated should be represented at the appeal by Hong Leong Bank Bhd and by GLG Investments plc: sub-fund GLG European Equity Fund, respectively.

A date for the appeal has not yet been set.

As previously reported, the High Court said in the judgment:

• The pool of pre-administration client money consists of bank accounts and transaction accounts used by LBIE in order to segregate client money. The balances of these accounts total $2.1 billion, but the joint administrators may not recover all of the balances;

• LBIE is not required to top up or adjust the client money pool, whether for clients for whom no money or insufficient money was segregated at the time of administration; for movements between the time of last segregation and the time of administration; or to make good any credit loss shortfall, including the shortfall arising from the insolvency of Lehman Brothers Bankhaus AG;

• The client money pool is to be distributed to clients for whom LBIE had segregated client money at the time of its administration;

• Clients' client money entitlements are to be calculated at the time of administration by reference to what was segregated by LBIE for them at that time;

• Clients will be required to give credit for client money paid to them by LBIE before the time of administration. If LBIE segregated money for clients for fails and those clients have subsequently received the relevant securities, clients will also be required to give credit accordingly; and

• In the absence of an agreement to the contrary, LBIE may not exercise any right of set-off or retention against clients' distributions from the client money pool.

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 in the U.S. Bankruptcy Court for the Southern District of New York. Its Chapter 11 case number is 08-13555.

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