Zero Hedge

As Zero Hedge has claimed on numerous occasions in the past, the ultra-expedited sale of Lehman's North American Broker Dealer operations to Barclays Capital a mere 4 days after Lehman filed for bankruptcy, was likely rife with not just impropriety and judicial incompetence, stupidity and hubris (here's looking at you James "Stella" Peck), but potentially fraud. Of course, it is one thing for a tin-hat clad, conspiratorial-minded, paranoid (and recursively humorous) wannabe financial blog to make such accusations, but when the bankrupt entity itself (Lehman Brothers Holdings) does so itself (finally), it is a different story.

And indeed, the debtor did just that yesterday in bankruptcy court, in a filing demanding additional discovery from Barclays which, just like it American brethren, has been recently frothing at the mouth with glee at the phenomenal profits it has been able to muster, however, presumably as the AIG funnel was closed to Barlcays, it had to use other alternatives of "profit" generation: buying a multi-billion business for a few dollars - literally - in this case the perfectly viable broker dealer division of Lehman brothers. The filing body itself has some scathing language, and as the outcome will inevitably point to some sort of shenanigans, Barlcays better get ready to pony up several billion, either in damages or compensatory cash. We hope Barclays managed to pull off however many follow on offerings it needed in the short squeeze that its fellow banks across the Atlantic have been cavorting in. From the filing:

Since the completion of this expedited negotiation and sale of one of the largest investment banks in the world, the Debtor [Lehman Bros Holdings] has become aware of apparent material discrepancies relating to the liabilities Barclays was to assume and the benefits LBHI (or related entities) was to receive under this and related transactions. As noted below, these apparent discrepancies concern, inter alia, Barclays’ obligation to pay employee bonuses and certain contract cure amounts (both of which materially impacted the value of the sale) as well as to certain asset transfers related to repurchase transactions conducted during the week the Sale Transaction was negotiated. In the aggregate, these apparent discrepancies may have resulted in a windfall to Barclays at the expense of the estate, its creditors and other parties in interest, in an amount that could reach into the billions of dollars. As a result, the Debtor now seeks discovery from Barclays to enable the estate to properly review these issues and determine Debtor’s rights and obligations (and to assess whether it may have claims) under these transactions.

If I was Barclays I would be shaking in my boots right now. Especially if, as the filing's exhibits demonstrate, there was a perverse attempt by Barclays to mask any sort of impropriety. But all is good in the land of fish and chips and Mary Poppins - Barclays is actively studying how to dump its anti-cash cow, BGI, which, just like its East Setauket brethren, has discovered the hard way, just how much fun it is to be right when the market is wrong (for over 60 days running now).

However the biggest idiot in this whole affair will end up being without doubt Judge Stella himself, who vaingloriously trampled over every creditor objection to the sale motion, and conducted himself with the restraint of a horny and recently ethered-out, freshman frat brother at a Tri Delt kegger, when instead he should have been delving into the millions of potential complications from the ultra rushed sale much more studiously. But what can you expect from a Judge whose career will now only culminate with the somewhat memorable punch out of his wife after she dared to be stuck in Hamptons' reverse commute traffic.

Judge Gonzalez - all eyes are looking at you next. Yes, we all know you would love to close the Chrysler case asap, but please do remember that all the dead bodies always eventually rise to the surface. Always.

All the relevant filings are presented below: some juiciness in the exhibits.