Lawyers for the various directors and officers, including former CEO Richard Fuld, filed papers Wednesday in Lehman’s Manhattan federal bankruptcy proceedings seeking the release of $90 million in insurance funds to settle securities fraud claims pending since June 2008. Also on Wednesday, the same defendants petitioned for the release of another $8.25 million to settle a separate suit brought by the state of New Jersey asserting similar claims.
In a 110-page ruling issued July 27, Judge Kaplan allowed much of the class action suit to move forward, ruling that co-lead plaintiffs counsel at Bernstein Litowitz Berger & Grossman and Kessler Topaz Meltzer & Check had sufficiently alleged that Lehman officers and directors had misled investors. As we’ve reported, the plaintiffs lawyers borrowed much of the detail in their amended complaint from Jenner & Block chairman Anton Valukas’ exhaustive examiner’s report in the Lehman bankruptcy and its revelations about the investment bank’s infamous “Repo 105″ accounting maneuver.
“While it perhaps may be said with some assurance that Lehman, given the assets it held, would have been in trouble in any case, it is entirely plausible to conclude also from the facts alleged in the [amended complaint] that the misleading picture that Lehman portrayed played a material part in keeping its stock higher during the class period than it otherwise would have been and, in consequence that some part of the losses the plaintiffs suffered was attributable to the alleged fraud,” Judge Kaplan ruled last month.
Max Berger of Bernstein Litowitz said Thursday that he couldn’t comment on any potential settlement. News of the deal– reported earlier on Thursday by The Wall Street Journal–comes on the heals of Berger’s successful negotiation of a $627 million settlement on behalf of Wachovia bondholders.
Lawyers for the various defendants, including Andrew Levander of Dechert for Lehman’s independent directors and Patricia Hynes of Allen & Overy for Fuld, did not respond to requests for comment. Merrill Davidoff of Berger & Montague, a lawyer for New Jersey, referred a request for comment to the state’s attorney general’s office. Lee Moore, a spokesman for the AG’s office, confirmed the state was settling with the directors and officers. “The case continues against Ernst & Young, who was Lehman’s auditor,” he said.
The plaintiffs in the class action are seeking “billions of dollars” in damages, according to Wednesday’s motion. New Jersey meanwhile alleges $192 million in damages, court papers state. The lead plaintiffs in the class action include the Alameda County Employees’ Retirement Association, the Government of Guam Retirement Fund, and the Northern Ireland Local Governmental Officers Superannuation Committee.
It was unclear if other defendants, such as Lehman’s underwriters and auditor Ernst & Young, were also nearing a settlement. Lawyers and spokespeople for those defendants either didn’t respond to requests for comment or declined comment. The parties in the class action agreed last week to extend the time for the defendants to answer the amended complaint until Oct. 3.