Barclays' triumph in £7 billion Lehman deal lawsuit
A US judge has thrown out an $11 billion (£7 billion) lawsuit against Barclays brought by the bankruptcy trustee charged with clearing up the collapse of Lehman Brothers.
The ruling was hailed as a major victory for the UK bank, which bought the Wall Street arm of Lehman for £1.75 billion just five days after the US bank filed for bankruptcy protection in September 2008.
The deal, struck by Barclays' new chief executive Bob Diamond, was seen as one of the most audacious takeovers at a time when many banks failed or needed government bailouts at the height of the global financial crisis.
Judge James Peck said: "The sale process may have been imperfect, but it was still adequate under the exceptional circumstances of Lehman Week." He was referring to the turbulent few days when then-Chancellor Alistair Darling blocked Barclays from buying the whole of Lehmans and the bank had to be sold off piecemeal.
Lehman had argued in court that Barclays got a "sweetheart" deal and received a windfall in terms of assets it had received which had not been fully disclosed at the time of the sale.
The judge rejected that and said any disclosure lapses did not affect the "fairness" or outcome of the sale hearing. He said there was an "undeniably correct" perception at the time that the sale "mitigated systemic risk", helped avert "an even greater economic calamity", and benefited all interested parties. Diamond, who gave evidence to the court last summer, said Lehman was in a sorry state: "Employees weren't coming in, phones weren't working, bills weren't being paid, clients weren't picking up the phone."
Barclays shares rose 2.6p to 324.5p. The judge said Barclays should also be handed $1.9 billion of Lehman assets which had been kept back.
Ian Gordon, banking analyst at Exane BNP Paribas, described the ruling as the "sweet smell of victory". He said: "Barclays could have attempted to settle the litigation. The fact it chose not to is evidence both of a proper desire to uphold the principles of contract law and reject short-term expediency."
