The Devil's Casino_ Friendship, Betrayal - Vicky Ward [111]
trustee, James Giddens, was appointed to investigate the assets and liabilities of the
broker-dealer business now owned by Barclays.
In short order, Giddens set his sights on the $5 billion so-called "haircut" that the British
bank had been rumored to have slipped through in its emergency takeover of the
brokerage--a sum that had grown to $8.2 billion by the time Giddens officially sued
Barclays to recover the ill-gotten "windfall" for creditors.
The court has deposed dozens of Barclays and Lehman executives in marathon sessions
in its attempt to re-create what took place during the 36 hours between Bart McDade's
call to Bob Diamond on the evening before the filing and Barclays ' predawn September
16 agreement to buy the broker-dealer, but it is still far from clear how this particularly
contentious subplot of the world's biggest bankruptcy will conclude.
Then there is the report of an official bankruptcy examiner, the former federal prosecutor
Anton Valukas, who was appointed in January 2009 at the motion of the Walt Disney
Company to probe the bankruptcy on behalf of the creditors of other Lehman
subsidiaries.
Exactly a year after that fateful Sunday when Lehman Brothers threw in the towel,
Valukas appealed to the court for three more months to put together his report. He told
the judge he had used the 2001 bankruptcy of Enron as a benchmark for estimating how
much time he would need, predicting the task at hand would require reviewing 1.5
million pages. But by September 2009, he reported, he had reviewed 10 million pages
and his work was nowhere near done. "If Enron was a mountain," opined the Wall Street
Journal, "Lehman is a mountain range."
In October the Journal revealed what might be the Kilimanjaro of Valukas's quest, a
potential lawsuit accusing the Federal Reserve of leapfrogging ahead of other Lehman
creditors when it was paid back in full for the cash Lehman borrowed through the
discount window in the four days before the Chapter 11 filing.
When it filed for Chapter 11 protection, Lehman reported more than $600 billion in
assets on its balance sheet, against $613 billion in liabilities. But as the market worsened,
the values of many of those assets shrunk considerably--and the claims of Lehman's
creditors (predictably) ballooned.
By November, creditors had filed $824 billion in claims against the holding company,
according to an SEC filing. "Some of the claim estimates are just flat-out silly," Alvarez
& Marsal chief executive Bryan Marsal told the judge at a hearing.
Amid all the wrangling, attention had turned away from the broader legal (and
philosophical) question about Lehman: Had Callan, Gregory, or Fuld lied to investors, or
had this simply been a massive case of incompetence?
As of December 2009, federal investigators had yet to bring criminal charges against
anyone for the spectacular collapse of the world's fourth-biggest investment bank. But all
former Lehman employees were waiting anxiously for Valukas's report, due in early
2010. "There's not a 't' he hasn't crossed and an ' i' he hasn't dotted," says Tom Hill. On
February 8, 2010, Valukas filed his report under seal. The report was a mammoth 2,200
pages long. Valukas said in court filings that, if necessary, he would argue before a judge
that all of the report should be made public, including many sections that interviewees
had asked to be redacted. A date for Valukas to argue for the report's unsealing was set
for March 11, 2010.
To the astonishment of many, Joe Gregory brought a $232,999,549 civil suit against the
Lehman estate, calculating that the terms of his employment contract said the firm owed
him an annual salary of just over $3.1 million for the next 15 years and $700,000 per year
for the following decade. Tom Russo sued for the less audacious sum of $17.3 million.
Dick Fuld made no claim, nor did George Walker, Scott Freidheim, Erin Callan, Skip
McGee, or Bart McDade. Gregory told people he sued because he had nothing to lose.
Fuld disagreed: They'd all gotten rich