Lehman Brothers Holdings Inc -- whose North American business was taken over by Barclays Plc in 2008 -- has asked a U.S. judge on Wednesday to force the British bank to pay it back $500 million it says was meant to go to employees.
The Lehman bankruptcy in September 2008, with $639 billion in assets, was by far the largest in U.S. history and a major catalyst of the financial crisis.
Lehman told a hearing in U.S. Bankruptcy Court in Manhattan that Barclays agreed to pay $2 billion in bonuses to employees it inherited when it acquired its U.S. investment bank and brokerage operations, but paid only $1.5 billion. Lehman said the remainder should go back to its estate for the benefit of creditors.
A Barclays attorney rejected that argument, saying the $2 billion figure was an estimate of what it would need to spend to keep its employees and it never agreed to a hard number.
It was a question of exposure, Barclays attorney Hamish Hume said at the hearing.
Hume said the estimate also included potential severance and tax considerations and that Barclays has paid nearly the full $2 billion when those costs are included.
Lehman said the $2 billion figure included only bonus payments.
Judge James Peck did not make a ruling, but he seemed skeptical of Lehman's argument.
If it turned out that all of the bonus obligations could be valued at $1.5 billion instead of $2 billion, and as a result no employee was out of pocket and Lehman didn't have any claims against it, I don't see how Lehman is damaged, Peck said.
The sale, made in the days following the bankruptcy filing, was challenged later by Lehman, which accused Barclays of withholding information to get a sweetheart deal. It said Barclays had not made key disclosures and received an illegal windfall of about $11 billion.
The sale was upheld by Peck in February, but Lehman appealed his ruling on Wednesday. Other parties in the case, including Barclays and the trustee liquidating Lehman's brokerage, have also filed appeals.
The case is In re Lehman Brothers Holdings Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555.
(Reporting by Nick Brown; editing by Andre Grenon)