FirstBank Puerto Rico cannot get back securities it transferred to an affiliate of Lehman Brothers Holdings more than 10 years before Lehman’s bankruptcy, Southern District Bankruptcy Judge James Peck ruled on May 10. FirstBank pledged the disputed securities to a Lehman unit specializing in derivatives trading as collateral in an interest rate swap agreement. It alleges the securities were then improperly transferred to Lehman and sold to Barclays Capital in Lehman’s bankruptcy sale. Instead of filing a claim in Lehman’s bankruptcy, FirstBank sued Barclays directly.
Peck said that, although FirstBank "tried to distinguish its claims against Barclays and to treat them as if they are not directly related to the Lehman bankruptcy cases," its claim was barred by the bankruptcy code, which makes Lehman’s sale final. "Therefore, FirstBank’s claims against Barclays are prohibited by the Sale Order," Peck wrote in FirstBank Puerto Rico v. Barclays Capital Inc., 10-04103. "That unambiguous final order was structured purposefully to protect the purchaser from claims such as these. Barclays purchased the Disputed Securities in good faith and has the right to retain them."
