A U.S. judge rejected a request Wednesday from the administrators of failed investment banking giant Lehman Brothers to recoup $500 million from British bank Barclays it says was for employee bonuses.
Lehman says Barclays agreed to pay $2 billion in bonuses to its staff when it acquired the bank’s U.S. brokerage business in 2008 but only paid $1.5 billion. Lehman was therefore looking to recover the last $500 million.
Barclays countered that while it may have had some obligation to the employees in question, those workers have not made any claims, and the British bank has no liability vis-a-vis Lehman.
It also said it never formally agreed to the $2 billion payout.
“The court sides with Barclays,” Judge James Peck wrote in his ruling filed in U.S. bankruptcy court in New York. “The Lehman motion is baseless.”
“The parties... never agreed on a definitive single number for bonus compensation,” Peck said.
He called the $2 billion figure “an approximation, a rough, good faith estimate of the total compensation amounts that were to be assumed by Barclays.”
Lehman collapsed in September 2008 in the largest bankruptcy in U.S. history, setting off a financial shockwave that dragged the global economy into recession.
The Wall Street investment bank had $639 billion in assets on September 15, 2008, when it filed for bankruptcy protection.
Less than a week later, Barclays bought Lehman’s U.S. brokerage business for $1.54 billion and assumed its debt pile of $4.2 billion.
Lehman liquidators filed suit against the firesale, estimating it should have fetched billions of dollars more.
But in February, Peck cleared Barclays’ purchase of Lehman’s assets, saying the British bank had acted fairly.