Prosecutors Building Case -vs- Dick Fuld & Lehman Execs For Making False Statements

Discussion in 'Wall St. News' started by ByLoSellHi, Oct 17, 2008.




    Posted: 4:39 am
    October 17, 2008

    Prosecutors have subpoenaed a dozen Lehman Brothers executives, including CEO Dick Fuld, in connection with three grand jury probes into the bankruptcy of the storied Wall Street firm.

    At a hearing yesterday, famed bankruptcy attorney Harvey Miller of Weil, Gotshal & Manges, who represents Lehman, said the US attorney's offices in the Eastern and Southern districts of New York, and in the district of New Jersey, are leading the grand jury investigations.

    Twelve people have been subpoenaed so far. Although Miller did not identify the nature of the investigation, sources say the focus is on whether Lehman executives made false comments about the health of the firm prior to its collapse.

    Miller said Lehman is emerging from the "chaos" that characterized its bankruptcy protection filing and the weeks following it. But the biggest obstacle remains unwinding over 1.5 million derivatives contracts, including credit default swap agreements that Lehman had involving over 8,000 counterparties.

    Lehman hopes to offer more details to creditors on the state of their cash and collateral within the next 45 to 60 days, Miller said.

    Many of Lehman's customers and trading counterparties, including big hedge funds and other investment banks, had their accounts frozen when Lehman rushed into bankruptcy court on Sept. 15.

    The firm has hired restructuring firm Alvarez & Marsal, which currently has a team of 125 employees working on the case. That number is expected to swell to more than 400, Miller said, with many of the additions focusing on unwinding the firm's derivatives contracts.

    Lehman, once a firm with over 30,000 employees globally, now has only 164 workers, primarily in the legal and treasury departments. The firm sold the bulk of its investment-banking operations to Barclays.

    Miller also disputed claims made by hedge funds including Harbinger Capital Partners that Lehman shifted cash among some of its subsidiaries before filing for bankruptcy. The funds, who say they are owed more than $250 million, want access to internal documents and want to depose CFO Ian Lowitt in connection with the supposed transfers.
  2. Almost forgot:

    It won't be a pretty mugshot, that's for sure: