But now Lehman’s Jones Day lawyers contend that Barclays got perhaps too good a deal. The firm, which is acting as special litigation counsel for Lehman, has been pushing for discovery on what turned out to be one hell of an investment for the British bank: At the end of 2008, Barclays booked a $4.2 billion gain on the Lehman assets. On Monday, as first reported by Dealbook, Jones Day filed a brief in Manhattan federal bankruptcy court asking Judge James Peck to order discovery on “exactly what happened during the short, tumultuous period of time at issue.”
“There appear to be significant discrepancies that raise serious questions about the economics of the sale transaction, the adequacy of disclosures made to the court, and even whether former Lehman executives breached duties owed to Lehman in agreeing to this and related transactions,” the brief says. Jones Day alleges, for instance, that the $2 billion set out for bonuses at the time of the purchase “was not based on a valid calculation and could have been overstated simply to justify a gratuitous transfer of property to Barclays.” A hearing on the Jones Day request for discovery is scheduled for Wednesday.
Barclays, represented by Jack Stern at Boies, Schiller & Flexner, contends that Lehman already has all the documents it needs. The information Barclays has offered to turn over is “more than reasonable given the meritless nature of the claims you purport to be investigating,” Stern wrote in a letter to Jones Day on Monday. In a separate filing Tuesday, Barclays contends that the Lehman estate “has no right to reexamine and renegotiate a transaction that [Lehman] itself negotiated” and urged the court to approve.
Some Lehman creditors, meanwhile, are pushing for a suit against Barclays. “For unsecured creditors, litigation and similar types of recoveries may well be among the most significant sources of distributions given the severe detrimental effect of the sudden filing of [Lehman's Chapter 11] without any advance preparation,” White & Case partner Gerard Uzzi, a lawyer for an ad hoc group of Lehman creditors, wrote in a filing Monday.
No doubt, the prospect of litigation between the Lehman estate and Barclays would mean more billables for all sides. Jones Day through April had billed Lehman nearly $1.26 million, but in May it received permission to expand its representation in light of the Barclays investigation.