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Lehman May 27
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E&Y, American National Reach Deal Over Lehman Losses
May 26, 2015 | Law360
By Kurt Orzeck
Ernst & Young LLP has settled allegations by American National Insurance Co. of Texas and certain of its affiliates that they lost over $21 million because of Lehman Brothers Holdings Inc.'s subprime exposure, the auditing firm told a New York federal judge Tuesday. Ernst & Young said in a letter to U.S. District Judge Lewis A. Kaplan ... -
County of San Mateo Settles With Lehman Brothers Auditors
May 26, 2015 | San Jose Mercury News
The County of San Mateo and other California public entities reached a $6.5 million settlement with Lehman Brothers auditors Ernst & Young, successfully concluding its legal efforts to recoup its losses from the 2008 Lehman bankruptcy. Lehman's failure spelled a $155 million loss to the County's Investment... -
Sign Of Courts' Growing Impatience With Procedural Errors
May 26, 2015 | Law360
By Carl A. Solano and Bruce P. Merenstein
On May 7, 2015, the U.S. Court of Appeals for the Third Circuit affirmed a district court’s grant of partial summary judgment in a dispute about an indemnification agreement. That decision, Lehman Brothers Holdings Inc. v. Gateway Funding Diversified Mortgage Services LP, 2015 U.S. App. LEXIS 7536, would not normally command a great deal... -
Jonathan Hoffman: The former Lehman Brothers Banker Who is Still Fighting For His Bonus
May 27, 2015 | The Independent (UK)
By Ben Chu
Florida, with its white sandy beaches and sweltering climate, is not the typical habitat of the Wall Street financier. Yet it is where one of the Street’s biggest earners, Jonathan Hoffman, made a fortune trading US Treasury bonds in the years before the global financial crisis in 2008. While most Lehman Brothers traders worked... -
Underpaid By $83 Million? Senior Barclays Trader Jonathan Hoffman Thinks So
May 26, 2015 | LeapRate
By Andrew Saks-McLeod
The financial crisis which blighted the economies of the European and American continents during 2008 and 2009 created an extremely difficult financial markets landscape in its wake, which has lasted until this day, requiring some top level talent to recover the fortunes of banks affected. British multinational banking giant Barclays...
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E&Y, American National Reach Deal Over Lehman Losses
May 26, 2015 | Law360
By Kurt Orzeck
Ernst & Young LLP has settled allegations by American National Insurance Co. of Texas and certain of its affiliates that they lost over $21 million because of Lehman Brothers Holdings Inc.'s subprime exposure, the auditing firm told a New York federal judge Tuesday.
Ernst & Young said in a letter to U.S. District Judge Lewis A. Kaplan that the firm had reached an agreement in principal with American National Insurance, Comprehensive Investment Services Inc. and the Moody Foundation after mediation.
The firm, which audited Lehman's financial statements, reviewed its quarterly financial results and provided written reports regarding the company's internal controls.
The parties are expected to finalize papers detailing the deal in the coming weeks, Ernst & Young's counsel said on Tuesday. The letter didn't provide information about the terms of the settlement.
Ernst & Young's counsel also asked the court to suspend ongoing proceedings or dismiss the action with prejudice, subject to reinstatement if the parties don't execute the settlement within 30 days.
The settlement comes after Ernst & Young agreed in mid-March to settle suits brought by municipalities in New Jersey and California, according to documents in New York federal court.
American National Insurance, which filed suit in February 2009, claimed Ernst & Young and others actively concealed the risk Lehman faced as the real estate market crashed and refused to properly value the company's assets.
In early April, Judge Kaplan ordered briefing on whether the Supreme Court's landmark Omnicare decision bears on fraud suits accusing E&Y of backing transactions that masked Lehman's fragile and deteriorating financial state. The Omnicare ruling, which held that a false opinion doesn't confer liability on an auditor unless it can be shown the auditor knew of its falsity, could entitle Ernst & Young to summary judgment against plaintiffs who opted out of a previous settlement.
In mid-April, New York Attorney General Eric. T. Schneiderman said Ernst & Young would pay $10 million to settle a state court suit with similar allegations against Lehman.
In announcing the settlement, Schneiderman said that this was the sole enforcement action brought in connection with the 2008 collapse of Lehman, and that the suit was the first filed against an auditor of a public company under New York state securities laws.
In addition to the $99 million federal court settlement, Ernst & Young has agreed to settlements in related cases, including a May 2014 settlement with California Public Employees' Retirement System, which bought more than $700 million in Lehman bonds before its collapse.
The firm has not admitted wrongdoing as part of the settlements, and the company told Law360 in mid-April that it admitted no wrongdoing in the New York state deal.
Attorneys for American National Insurance, Comprehensive Investment Services and the Moody Foundation didn't immediately respond to requests for comment on Tuesday. An attorney for Ernst & Young didn't immediately respond to a request for additional comment on Tuesday...For full story:
http://www.law360.com/articles/660175/e-y-american-national-reach-deal-over-lehman-losses
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County of San Mateo Settles With Lehman Brothers Auditors
May 26, 2015 | San Jose Mercury News
The County of San Mateo and other California public entities reached a $6.5 million settlement with Lehman Brothers auditors Ernst & Young, successfully concluding its legal efforts to recoup its losses from the 2008 Lehman bankruptcy.
Lehman's failure spelled a $155 million loss to the County's Investment Pool which held funds for the county, school districts, special districts, and other public agencies in more than 1,050 different accounts. The County's Investment Pool ultimately recovered more than $71 million -- or 46 percent of losses -- through bankruptcy proceedings and litigation against Lehman Brothers' directors and officers and Lehman's auditors, Ernst & Young.
Steve Fuentes, associate superintendent of business services, Jefferson Union High School District, said, "We are getting repaid 43 cents on the dollar. We were paid back $1.1 million over the last few years, but we lost $2.5 million in 2009."
Supervisor Carole Groom, president of the Board of Supervisors, said the county is pleased to reach a resolution.
"The County of San Mateo takes very seriously its responsibility to taxpayers and to the agencies, school districts and special districts participating in its investment pool. This settlement doesn't fix all the hurt caused by the collapse but it is one way to recoup some part of the loss," Groom said.
County officials credited the financial recovery to the hard work of the Treasurer's Office, the law firm of Cotchett, Pitre & McCarthy which represented the county, and the County Counsel's Office who worked together to develop the County's legal strategy widely considered novel at the time.
Ultimately, the county's approach served as a template for other jurisdictions seeking redress. Unlike bankruptcy proceedings, the county's litigation targeted the personal assets of specific executives like former CEO Richard Fuld, holding them responsible for the firm's financial failure. The suits claimed Lehman executives knowingly misled investors leading up to the Sept. 15, 2008 collapse and used accounting gimmicks to hide its true financial condition.
County Counsel John Beiers said, "The county's legal approach shows that Main Street's determination and perseverance can be as powerful as Wall Street's mighty resources. Since the collapse seven years ago, we held strong in our belief that Wall Street firms like Lehman should be held accountable for using public entities to finance their risky practices and paying themselves millions of dollars in compensation while their companies deteriorated," Beiers said...
For full story:
http://www.mercurynews.com/pacifica/ci_28193204/county-san-mateo-settles-lehman-brothers-auditors
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Sign Of Courts' Growing Impatience With Procedural Errors
May 26, 2015 | Law360
By Carl A. Solano and Bruce P. Merenstein
On May 7, 2015, the U.S. Court of Appeals for the Third Circuit affirmed a district court’s grant of partial summary judgment in a dispute about an indemnification agreement. That decision, Lehman Brothers Holdings Inc. v. Gateway Funding Diversified Mortgage Services LP, 2015 U.S. App. LEXIS 7536, would not normally command a great deal of attention — but for the way in which the court reached its result. The court held that Gateway, the party that unsuccessfully opposed partial summary judgment, waived its right to maintain its appeal because it failed to order a transcript of the underlying proceeding in the trial court. That decision, and some strong words from the court in its opinion, have raised concern within the Third Circuit bar that the court may be becoming more rigid in its application of procedural rules.
The issue before the court was whether Gateway had abandoned a contractual defense to liability during a telephonic oral argument held by the district court. Gateway denied doing so, and claimed there was no record to support Lehman’s claim to the contrary. In fact, however, the oral argument had been transcribed and Gateway had failed to file a copy of the transcript with the court, in violation of Federal Appellate Rule 10(b) (“the appellant must ... order ... a transcript of [relevant] parts of the proceedings” and “include in the record a transcript of all [relevant] evidence”).
Gateway claimed that it believed the argument had not been transcribed, and pointed out that its error was corrected when Lehman filed the transcript with its own appellate brief, but the court described Gateway’s argument as “cavalier.” Treating the case as “an opportunity to emphasize the importance of following the rules,” the court held that Gateway’s appeal from the summary judgment decision was “forfeited” by its failure to comply with Rule 10, explaining that Gateway’s violation “at best shows a remarkable lack of diligence and at worst indicates an intent to deceive this Court.”
Third Circuit practitioners have often noted that court’s preference for deciding cases on their merits, rather than on procedural technicalities, and it is too early to predict that the Lehman decision signals some fundamental change in that attitude. The court made clear that dismissals on such grounds are “not favored” and should occur “sparingly,” and said it was dealing with an “unusual situation.” That the court viewed the case as an “opportunity” to teach a lesson, and that it did so even though Lehman’s provision of the missing transcript prevented the Rule 10 error from depriving the court of relevant information, shows that it would be dangerous to ignore this decision, however.
For better or worse, recent decisions like Lehman signal that federal appellate courts may be losing patience with procedural errors and what they view as unacceptable advocacy. In In re Shipley, 135 S. Ct. 779 (U.S., Dec. 8, 2014), for example, the U.S. Supreme Court issued an order to show cause as to why a lawyer should not be disciplined for filing a petition for certiorari drafted by his client that was so full of impenetrable jargon, prose and style that it failed to meet the requirement of the court’s Rule 14.3 that a petition be stated “in plain terms.” The court accompanied the show cause order with a denial of the cert petition, see Sigram Schindler Beteiligungsgesellschaft MBH v. Lee, 135 S. Ct. 759 (U.S., Dec. 8, 2014), and, although it ultimately discharged the disciplinary order without imposing sanctions, In re Shipley, 2015 U.S. Lexis 1883 (U.S., Mar. 23, 2015), the discharge order included a pointed reminder that counsel are responsible “as Officers of the Court” for compliance with the rules and may not delegate that responsibility to others.
On April 23, 2015, the Advisory Committee on Rules of Appellate Procedure approved a proposed amendment that would reduce the permissible length of federal appellate briefs. A primary reason for the suggested reduction: federal appellate judges believe they receive briefs that are too wordy and too long in the majority of cases. Although appellate practitioners pleaded for retention of the current limits because they are needed in complex appeals, the judges emphasized that there are so many lawyers filing unnecessarily long briefs that they prefer shortening the limits for everyone and then granting extensions only in appropriate cases. (The proposed amendment still needs approval by additional authorities, including the U.S. Supreme Court.)..For full story:
http://www.law360.com/articles/659877/sign-of-courts-growing-impatience-with-procedural-errors
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Jonathan Hoffman: The former Lehman Brothers Banker Who is Still Fighting For His Bonus
May 27, 2015 | The Independent (UK)
By Ben Chu
Florida, with its white sandy beaches and sweltering climate, is not the typical habitat of the Wall Street financier. Yet it is where one of the Street’s biggest earners, Jonathan Hoffman, made a fortune trading US Treasury bonds in the years before the global financial crisis in 2008.
While most Lehman Brothers traders worked at the bank’s Manhattan headquarters, Mr Hoffman was permitted to base himself at the firm’s Miami office. The returns were as hot as the weather.
In 2005 Mr Hoffman, the son of a Philadelphia sweets manufacturer, earned $14.8m (£10.1m). That rose to $20m in 2006, $31m in 2007 and $77m in 2008. But Mr Hoffman doesn’t seem to be looking back fondly on this period in his life. Instead, the 42-year-old is suing the estate of his former employer, which went bust in 2008, in a Manhattan court, seeking $83m in unpaid bonuses.
That’s an eye-catching legal claim in itself, given that the Lehman bankruptcy, which was a consequence of its own management’s reckless attitude to risk, sent the Western world into its most serious economic tailspin since the Great Depression.
Still more astonishing is that Barclays snapped up Lehman’s trading business in 2009 and hired Mr Hoffman with a special $83m signing-on bonus. The trustees of the Lehman estate say the payment from the British bank was intended to compensate Mr Hoffman for the loss of those Lehman bonuses, and that he is now, quite shamelessly, trying to get paid twice. “Double dipping” is how a spokesman for James Giddens, the Lehman bankruptcy trustee, has described it.
Mr Hoffman, however, insists the Barclays signing-on bonus was unrelated to anything he had done for Lehman and was merely the price of retaining his lucrative trading services. He claims that he could actually have earned more money going to work for hedge funds. A ruling is expected in July, with the outcome likely to hinge on legal arguments over why Barclays made the $83m payment and technical questions over whether Mr Hoffman’s contract changed. But the case has already become a spectacular demonstration for some that Wall Street’s entitlement culture persists, a full seven years after the financial crisis.
Further, it has shone a rare ray of light on the vast sums that a select group of privileged traders at investment banks can earn. Under new rules introduced by the UK regulatory authorities in the wake of the crisis, the pay of senior executives has to be fully revealed. But there is no legal obligation to publish the remuneration of employees such as Mr Hoffman.
Leaving aside the issue of the $83m bonus, the court case shows that Mr Hoffman carried on receiving astronomical levels of remuneration while at Barclays. He earned about $183m between 2009 and 2013. That’s more than even Bob Diamond, the former Barclays chief executive who drove through the 2009 acquisition of Lehman.
The case has also shed some light on the mechanism by which traders are paid. Mr Hoffman’s contract with Barclays apparently entitled him to 12 per cent of the first $25m of trading profits he made and 14 per cent on anything above that figure. “I never had a losing quarter, never had a losing year,” Mr Hoffman told the court.
But is such a remuneration structure reasonable? Mr Hoffman’s lawyer, Douglas Baumstein, has claimed his client generated about $1.25bn in profits for Barclays between 2009 and 2013. Yet financial experts say these figures, taken in isolation, are meaningless and that one must look to the amount of risk taken by individual traders to judge their performance.
“People say, ‘Oh, you made £200m for the bank, £200m for the [trading] desk’. Yes, but how much did you risk?” says one former investment banker who now manages assets for clients. “Did you risk a trillion, two trillion? If so those returns are actually minuscule.”
Mr Hoffman claims he was typically allocated between $200m and $400m of Lehmans’ capital to trade with. He has not disclosed an equivalent figure for Barclays, but it is likely to have been a similar amount. City analysts say in that in the wake of the financial crisis traders still held the whip hand over managers and could effectively dictate terms. “Nobody wanted to disrupt things” says one former employee of a large City of London bank. “There was a huge amount of loyalty – all driven by money”
But has the tide now turned at Barclays? Mr Diamond was ejected in 2012 in the wake of the Libor rate-rigging scandal. His two lieutenants, Rich Ricci and Skip McGee, have also now departed. The bank’s new chief executive, Antony Jenkins, after some initial resistance, has laid out plans to downsize the investment bank, where returns on equity have collapsed in recent years. The returns from the fixed-income, commodities and currencies department, where Mr Hoffman would have worked, have been especially poor...
For full story:
http://www.independent.co.uk/news/business/analysis-and-features/jonathan-hoffman-the-former-lehman-brothers-banker-who-is-still-fighting-for-his-bonus-10277604.html
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Underpaid By $83 Million? Senior Barclays Trader Jonathan Hoffman Thinks So
May 26, 2015 | LeapRate
By Andrew Saks-McLeod
The financial crisis which blighted the economies of the European and American continents during 2008 and 2009 created an extremely difficult financial markets landscape in its wake, which has lasted until this day, requiring some top level talent to recover the fortunes of banks affected.
British multinational banking giant Barclays PLC (LON:BARC) is not only one of the world’s largest banks, but also one of the world’s largest FX dealers. The bank’s corporate performance has suffered tremendously of late, with flagging profits, and most recently an unprecedented $1.53 billion in settlement of class action law suits and regulatory censuring for its part in the FX rate manipulation scandal.
Last year, LeapRate reported that traders employed by Barclays would rather remain in their positions than seek employment with competitors HSBC or RBS due to high remuneration by Barclays, however for one particular senior trader, it appears that enough is not quite enough.
New York-based Jonathan Hoffman was paid $170 million over a five year period which spanned the financial crisis and its aftermath, a payout which was greater than that awarded to Bob Diamond, the firm’s former CEO.
Mr. Hoffman, however, is not satisfied with this and has turned to the courts in order to secure what he considers to be $83 million in unpaid bonuses from his days at Lehman Brothers, the North American multinational financial institution which collapsed in 2008.
Mr. Hoffman had joined Barclays from Lehman Brothers, and upon his appointment by Barclays had negotiated an $83 million payment by Barclays as part of his remuneration in order for him to move on from his lost bonuses.
According to a report by The Guardian, Trustee James W Giddens has accused Mr. Hoffman of “double-dipping”, saying the payment from Barclays had already compensated him for the lost Lehmans bonuses.
In a deposition, Michael Keegan, a Barclays managing director, recalled thinking Mr. Hoffman was a “sneaky bastard” for seeking payment from the Lehman estate because he had assumed Barclays’ payout had been intended as compensation for the lost Lehman payouts. “I thought he was paid for it,” Mr Keegan said. However, he conceded that Barclays chose to pay Hoffman and was under no obligation to do so.
Barclays wanted to secure the services of high-rolling Lehman traders including Mr. Hoffman after buying out the bank’s investment arm and was clearly prepared to ensure they were motivated by settling this matter voluntarily on behalf of Mr. Hoffman at the time.
Mr. Hoffman has argued that his payment was related to Barclays’ desire to secure his services against competing job offers from elsewhere. He said he was incredibly loyal to Lehman Brothers and did a good job for them. “If I am owed money by the estate, it’s not clear to me why I would not collect it,” he told the Wall Street Journal.
His lawyer Douglas Baumstein told The Guardian: “Mr. Hoffman was not paid for his Lehman bonus by Barclays. Rather, as the contemporaneous evidence shows, the payments made to Mr. Hoffman were retention payments, made to induce Mr. Hoffman to accept employment and to remain at Barclays for a period of years.” He said his client had earned Barclays more than $1.25bn.
The son of a sweet manufacturer, Mr. Hoffman began working for Lehman Brothers in 1994 and became an expert in trading US government debt. By the time the bank collapsed he was working from a small Lehman Brothers office in Miami and living on the exclusive Palm Island, just off Miami Beach...
For full story:
http://leaprate.com/2015/05/underpaid-by-83-million-senior-barclays-trader-jonathan-hoffman-thinks-so/
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