Barclays Plc's President Robert Diamond said on Tuesday that Lehman creditors fared better under his bank's purchase of Lehman Brothers core U.S. brokerage business than they would have if the assets had been sold on the open market.
The testimony came on the second day of a trial over whether the British bank received an unfair $11 billion windfall when it acquired parts of Lehman Brothers after the investment bank's collapse in September 2008. Lehman wants the judge to review the sale.
The trial, held at Manhattan's bankruptcy court for the Southern District of New York, has brought the testimony of the top architects of the Lehman purchase. The deal was approved in September 2008 after a chaotic few days of negotiations that took place as U.S. markets were collapsing.
Barclays Chief Executive John Varley took the stand on Tuesday after Diamond. In early testimony before a break, he called the Lehman purchase the riskiest week in my life. Varley's testimony will resume at 2 P.M. EST.
Diamond faced tough questions on whether creditors would have benefited more if some assets had been sold on the open market rather than being acquired by Barclays.
I think they were better off under the deal, Diamond said.
He added he was not able to specify the value of the assets because markets were gyrating, making valuation impossible.
Barclays was struggling to find (Lehman) securities, during the chaotic week, Diamond said.
Some had no value on the books, some were more illiquid. It was a real dog's breakfast. There were some issues with marks being old and some marks were fairly current, he added.
Diamond was also asked if bankruptcy judge James Peck had received all information about the valuation of Lehman assets at the September 19, 2008, sales hearing.
I have confidence that the lawyers from all sides presented the information that was necessary for approval, said Diamond, who had not attended the hearing.
Diamond's testimony displayed little of the bob-and-weave answers that characterized his first session on the stand on Monday. Repeatedly, Lehman attorney Robert Gaffey entreated Diamond to answer questions with a simple yes or no, rather than long explanations.
You're coming across as evasive, Judge James Peck told Diamond.
In contrast on Tuesday, Diamond gave short answers. He was serious and sat up straight, looking at Gaffey and Barclays attorney David Boies. He leaned forward to give his answers into the court microphone.
Barclays has said Lehman's assets were inflated when the deal was struck and it marked them to their true value. It has accused Lehman's lawyers of trying to change the deal after markets improved.
The marks were taken on Friday night, said Varley. By Monday morning, as markets were falling, those marks were irrelevant.
Varley has run Barclays since 2004 and steered his bank through the crisis without any need for state aid. A keen angler and table tennis player, known for his precise language and close attention to detail, he was less involved in the transaction and had not been expected to be called.
The case is In re: Lehman Brothers Holdings Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555.
(Reporting by Chelsea Emery; editing by Andre Grenon)