Ecotality, an electric car charger maker, files for bankruptcy

By Jonathan Stempel

Sept 17 | Tue Sep 17, 2013 7:18pm EDT

Sept 17 (Reuters) - Ecotality Inc, a maker of charging stations for electric cars that won a $99.8 million grant from the U.S. Department of Energy four years ago, has filed for bankruptcy protection and said it plans to auction its assets next month.

The San Francisco-based company is among a growing number of U.S. alternative-energy companies that have struggled or succumbed amid consumer resistance to the high cost and restricted driving range associated with electric vehicles.

Ecotality and five affiliates filed for Chapter 11 protection on Monday night with the U.S. bankruptcy court in Phoenix.

The company said eight parties have expressed interest in bidding on its assets and that it wants to hold an auction on Oct. 9, with a closing to occur within two days.

Citing "significant liquidity constraints and the difficulty of obtaining long-term financing," Ecotality said an auction is necessary to maximize value for creditors and avoid a "fire-sale liquidation."

Ecotality makes systems for electric vehicles under the Blink and Minit Charger brands. It had warned on Aug. 12 that a bankruptcy filing was possible, amid disappointing sales and a suspension of payments from the federal government.

Among other U.S. alternative energy companies, green car startup Coda Holdings Inc filed for bankruptcy protection in May after selling just 100 all-electric sedans.

Meanwhile, the Energy Department on Tuesday said it will in October sell a non-performing loan made to another green car startup, Fisker Automotive.

Ecotality's $99.8 million grant was awarded in August 2009 to help develop the EV Project, a network of charging stations for vehicles such as the Chevrolet Volt and Nissan Leaf in major U.S. metropolitan areas.

The company said Nissan North America Inc agreed to provide up to $1.25 million of financing to keep it operating during the bankruptcy. Court approval is required for that loan.

According to a court filing, the Energy Department is owed $6.5 million as the largest unsecured creditor of Ecotality affiliate Electric Transportation Engineering Corp.

A hearing on Ecotality's "first-day motions," including that it be allowed to pay employees and vendors, is scheduled for Thursday morning.

Shares of Ecotality closed on Tuesday down 7.2 cents, or 31.1 percent, at 15.9 cents on the Nasdaq. They closed at $1.46 on Aug. 9, the last trading day before Ecotality warned of a possible Chapter 11 filing.

The case is In re: Ecotality Inc, U.S. Bankruptcy Court, District of Arizona, No. 13-16127.

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Bahrain's Arcapita exits chapter 11, plans asset sales

By Bernardo Vizcaino

DUBAI, Sept 18 | Wed Sep 18, 2013 4:59am EDT

DUBAI, Sept 18 (Reuters) - Bahrain-based Islamic investment firm Arcapita has become the first Gulf company to emerge from U.S. bankruptcy under Chapter 11 rules, in a move that could help clarify how Islamic finance is treated in Western courts.

Arcapita's plan, which came into effect on Tuesday, will see it transfer its assets into a new holding company which will dispose of them over time to pay off creditors, effectively a gradual wind-down of the firm.

"We expect to have a complete exit of the portfolio over the next four to five years," a spokesman told Reuters. "Exits so far have been better than expected, and the reorganisation plan allows exactly just that in order to maximize values."

The case could prove to be a step forward for the Islamic finance industry by offering a degree of certainty as to how Western courts treat contracts and disputes that make reference to sharia, or Islamic law.

Islamic finance follows religious principles such as bans on interest and gambling, but Islamic law is not codified in legal form and Western courts have often struggled over the treatment of such contracts.

Arcapita's case was not straight-forward either. It filed for bankruptcy protection in March 2012 with about $7.4 billion in assets under management spread across the globe, as a $1.1 billion Islamic loan came due.

The portfolio includes holdings in 30 different investments covering private equity, real estate, infrastructure and a small portfolio of venture capital investments.

The U.S. court also had to approve a rare $350 million debtor-in-possession financing from Goldman Sachs, arranged to fund Arcapita's wind-down operations, which was challenged by an Arcapita investor but eventually approved.

A search of court records in the Westlaw legal database suggests this was the first time a question of a fatwa, or Islamic ruling, had been presented to a U.S. bankruptcy judge.

Arcapita's filing in a U.S. court was an unprecedented move by itself, in a region where debt workouts involve consensual talks that end in maturity extensions, as creditors have little recourse when dealing with insolvency.

The end to the 18 month-long proceedings, which some analysts estimated could have stretched to three years, will allow some secured creditors to recoup most of their money, while creditors in the $1.1 billion loan are projected to recover 64 percent of their cash.

Arcapita's creditors include Barclays, CIMB , Royal Bank of Scotland, Standard Bank , Standard Chartered and the Central Bank of Bahrain - its largest creditor with $255.1 million owed.

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REFILE-SEC settlement over money fund that 'broke the buck' breaks down

Sat Sep 14, 2013 12:00am EDT

By Nate Raymond and Jonathan Stempel

NEW YORK, Sept 13 (Reuters) - The U.S. Securities and Exchange Commission has backed out of a settlement with the managers of a large money market fund that "broke the buck" during the 2008 financial crisis, according to court papers made public on Friday.

Lawyers for defendants including Reserve Management Co said in a court filing they reached a settlement in principle with the regulator at the end of August, only to learn on Sept. 5 that the SEC subsequently rejected it.

The breakdown could derail a separate accord reached last week in which the founder of the fund, Bruce Bent Sr, and others agreed to settle a class-action lawsuit by the fund's investors.

The case stems from events on Sept. 16, 2008, when the net asset value of the $62 billion Reserve Primary Fund fell below the $1 per share it was designed to maintain.

Reserve Primary had held $785 million of debt from Lehman Brothers Holdings Inc, which went bankrupt the day before, and worries about the Lehman stake had spurred a flood of redemption requests that the fund could not meet.

Last November, a federal jury in New York cleared Bent and his son Bruce Bent II of civil fraud charges relating to the collapse, while finding the son liable for negligence.

The jury also found two corporate entities, Reserve Management and Resrv Partners Inc, liable on one count of securities fraud, and Reserve Management for violating a federal law governing investment advisers.

According to Friday's filings, the SEC and the Reserve defendants had negotiated over issues left over from the trial.

But in one of the filings, the SEC said it was "unable to reach a settlement" with the Bents. The SEC also asked U.S. District Judge Paul Gardephe not to approve the related class-action accord because resolution of its claims might affect the distributions available for investors.

The class-action settlement called for the Bents and others to, among other things, pay $10 million and give up $42 million of legal and other claims against a court-ordered expense fund.

Meanwhile, John Dellaportas, a lawyer for the Bents, complained that the SEC's "sudden refusal to settle" harmed fund shareholders with additional delays and costs.

"We were informed that, not only had the Commission rejected the proposed settlement agreement in principle that had been negotiated between defendants and the SEC staff, but it was also unwilling to settle with defendants on any other terms," he wrote, italicizing the last four words for effect.

Florence Harmon, an SEC spokeswoman, on Friday said the SEC plan "would put more money in the pockets of investors, which is why we have asked the court to decide how best to proceed."

John Browne, a lawyer for shareholders in the class-action case, in a court filing said the SEC's reasons to delay approval of that accord lack merit.

A spokesman for the Bents said: "We were disappointed that we were not able to resolve the remaining issues in that case but in any event we do not believe the SEC's request for a new trial is warranted."

It is unclear what may have prompted the SEC's alleged change of heart. Terms of the rejected settlement were not disclosed, though the Bents' spokesman said Bruce Bent Sr had nothing to settle because he had prevailed at trial.

Mary Jo White, who became SEC chair this year, has promised to take a tougher line in resolving higher-profile lawsuits.

Last month, the SEC extracted an admission of wrongdoing and a five-year industry ban from Philip Falcone over his management at the hedge fund Harbinger Capital, after the commission rejected an earlier accord as too lenient. [ID:nL2N0GK1CA)

The cases are SEC v. Reserve Management Co, U.S. District Court, Southern District of New York, No. 09-04346; and In re: The Reserve Primary Fund Securities & Derivative Class Action Litigation in the same court, No. 08-08060.

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Hedge funds reap rewards from bet on Lehman Europe carcass

By Steve Slater and Tommy Wilkes

LONDON, Sept 15 | Sat Sep 14, 2013 7:00pm EDT

LONDON, Sept 15 (Reuters) - Hedge funds which gambled on how much money would be recovered from the bankrupt carcass of Lehman Brothers are set to make hundreds of millions of pounds from a full payout to creditors of the European arm.

Five years on from the collapse, payouts to Lehman's creditors in Europe are on course to top 100 percent some time next year, following a recovery of assets by administrators and legal victories over other parts of the ex-U.S. investment bank.

"We were reasonably confident there would be some significant funds, but never in our wildest dreams would we have thought it would be 100 pence in the pound," said Tony Lomas, joint administrator for Lehman Brothers International Europe (LBIE) and partner at PricewaterhouseCoopers.

The collapse of Lehman Brothers on Sept. 15, 2008, plunged the global financial system into chaos. Its European arm, headquartered in London, was the largest and most complex part of the group because it was a hub for trading and investments, spanning asset classes and dozens of countries.

Closing down the business and trying to recover assets for creditors has involved unwinding thousands of derivatives contracts and share trades and figuring out who owns what, making it the most complex bankruptcy of a single entity ever.

Creditors' claims now trade between 120 and 135 percent in a secondary or "grey" market for their value, compared to as low as 10 percent in the weeks after the collapse, reflecting an expectation that a premium will be paid.

After creditors are fully paid, LBIE should also have cash left over to pay interest to unsecured creditors - who can get 8 percent a year under UK law - or subordinated bondholders.

Original creditors, including hedge funds which had Lehman as their prime broker, banks, and trade suppliers such as a photocopying or legal firms, may not all be winners, however.

"A lot (of original creditors) have sold their claims, particularly as pricing improved and got towards 100 percent,"

said Alyson Lockett, partner at UK law firm Simmons and Simmons, who has advised over 100 original creditors and also worked for distressed debt investors trading the claims.

LUCRATIVE TRADE

The list of hedge funds which bought Lehman paper after the bank's demise reads like a Who's Who of so-called "distressed debt" funds, and includes Baupost Group, Elliott Management, King Street Capital and Paulson & Co, industry sources said.

The sources said it was hard to quantify how many of the claims were held by distressed debt specialists, but it could be half or more.

"A significant proportion of these claims is now in the hands of a small collection of distressed debt investors," Lomas said.

The bankruptcy has turned into one of most lucrative trades since the financial crisis for these largely New York-based funds which pride themselves on snapping up debt when panicked sellers have rushed for the exit.

Paulson, which led an investor group pushing for a better payout for creditors, started buying Lehman bonds the day it filed for bankruptcy, paying as little as 7.5 cents on the dollar in late 2008, according to news reports citing U.S. court papers.

Others got in later and the trade became the largest position on some funds' books, topping 10 percent of their assets.

"It was a big bankruptcy and if you had the patience and did the work, it was a great trade," said one fund executive.

All the named funds declined to comment or could not immediately be reached.

PwC expects about 40 billion pounds ($63.3 billion) to be returned to LBIE's creditors, including near 23 billion pounds for trust claimants and about 16 billion pounds for up to 3,400 unsecured creditors.

Two dividends worth a combined 68.5 percent of claims have already been paid to unsecured creditors and another dividend in November should take the tally towards 100 percent, Lomas said.

Legal wins against other defunct Lehman units and past settlements with the bank's trading counterparties has freed up cash for distribution. More payouts will be made, but the final dividend may take more than a decade because of legal wrangling.

"It's not inconceivable that it could be 10 or 20 years," said Lockett.

LBIE has had about 500 staff working on the wind-down, complemented by 200 PwC staff, all under Lomas in a Canary Wharf tower that has sight of the former Lehman European headquarters. More than 350 staff are former Lehman employees.

Costs including wages, rent, systems and legal advice, are running at about 300 million pounds a year, and PwC's fees had reached about 600 million pounds by March.

Lomas, 56, who has previously worked on the bankruptcies of MG Rover and the European arm of Enron, said LBIE was likely to keep him busy until he retires in four years.

"It's 20 times as complex and big as Enron. It's unparalleled," he said.

For other stories on Lehman Brothers:

Five years after Lehman, risk moves into the shadows

In post-Lehman clean-up, top banker prosecutions stumble

"You work for Lehman? I thought that went bust"

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"You work for Lehman? I thought that went bust"

By Steve Slater

LONDON, Sept 15 | Sat Sep 14, 2013 7:00pm EDT

LONDON, Sept 15 (Reuters) - From his 23rd floor office of Citi's Canary Wharf tower, Tom Bolland can see the old European HQ of Lehman Brothers, where five years ago hundreds of his former colleagues were abruptly turfed out onto the street carrying their belongings in boxes.

The investment bank's collapse was the symbolic moment of the financial crisis, and it is a surprise to many that Lehman Brothers in Europe still lives on. It is under administrators, but two-thirds of its 500 staff are former Lehman employees helping to clear up the mess that is left.

"You work for Lehman? I thought that went bust," Bolland laughs at the typical response when he tells people he works for Lehman Brothers. "Most people are still surprised."

Bolland is the most senior of the "ex-Lehmanites" and recently celebrated 20 years with the bank - including 15 years pre-crash in a range of senior roles, which included overseeing its expansion in Russia, Turkey and the Middle East.

Now chief operating officer for Lehman Brothers International Europe (LBIE), he and more than 350 others were drafted in by Tony Lomas, joint administrator and PwC partner, to accelerate the wind-down of the business and maximise the assets that can be recovered.

"Yeah, you are working yourself out of a job. But you go out with an enhanced CV. And if you were at Lehman before you go out with your head held high, because you stayed and returned this money to the creditors," Bolland told Reuters.

Lomas expects to repay creditors fully and said the integration of LBIE staff with 200 PwC employees has been crucial to that success.

They take up three floors in Citigroup's London tower, less than 200 metres from the site Lehman occupied from April 2004 and now home to JPMorgan.

"A lot of people walked out with the cardboard box, but were back in two days later," Bolland said. Many had not realised the skills that administrators would need to unravel thousands of complex trades across dozens of countries and legal entities.

That has included disputes with other parts of the former Lehman group. In bankruptcy, each entity fights for itself.

"In the beginning it was a bit strange. People you had worked with, you were disagreeing with and over time you were negotiating with. There was no fundamental ill-will and if you win a legal argument you win it, that's life. It's commercial, not personal," Bolland said.

Finance, operations, legal, risk and asset valuation experts all stayed, or were hired in the months after collapse.

Lehman's operations had also shared an IT system, but that had to be separated and rebuilt.

"It was the biggest IT project Lehman had ever undertaken, and we had to do inside the administration. It has been an enormous task operationally, apart from the legal and valuation issues and negotiations," Bolland said.

Staff have been paid at commercial rates. They know fewer people will be needed as the major work slows and Bolland said LBIE will have a lot fewer staff by the end of next year.

He said the work has been good experience for mid-level staff, and "rewarding and satisfying" for the senior people.

"People were proud to work for Lehman. A lot of the people who stayed on, part of the reason was to do the right thing."

For other stories on Lehman Brothers:

Five years after Lehman, risk moves into the shadows

In post-Lehman clean-up, top banker prosecutions stumble

Hedge funds reap rewards from bet on Lehman Europe carcass

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REFILE-SEC settlement over money fund that 'broke the buck' breaks down

Sat Sep 14, 2013 12:00am EDT

By Nate Raymond and Jonathan Stempel

NEW YORK, Sept 13 (Reuters) - The U.S. Securities and Exchange Commission has backed out of a settlement with the managers of a large money market fund that "broke the buck" during the 2008 financial crisis, according to court papers made public on Friday.

Lawyers for defendants including Reserve Management Co said in a court filing they reached a settlement in principle with the regulator at the end of August, only to learn on Sept. 5 that the SEC subsequently rejected it.

The breakdown could derail a separate accord reached last week in which the founder of the fund, Bruce Bent Sr, and others agreed to settle a class-action lawsuit by the fund's investors.

The case stems from events on Sept. 16, 2008, when the net asset value of the $62 billion Reserve Primary Fund fell below the $1 per share it was designed to maintain.

Reserve Primary had held $785 million of debt from Lehman Brothers Holdings Inc, which went bankrupt the day before, and worries about the Lehman stake had spurred a flood of redemption requests that the fund could not meet.

Last November, a federal jury in New York cleared Bent and his son Bruce Bent II of civil fraud charges relating to the collapse, while finding the son liable for negligence.

The jury also found two corporate entities, Reserve Management and Resrv Partners Inc, liable on one count of securities fraud, and Reserve Management for violating a federal law governing investment advisers.

According to Friday's filings, the SEC and the Reserve defendants had negotiated over issues left over from the trial.

But in one of the filings, the SEC said it was "unable to reach a settlement" with the Bents. The SEC also asked U.S. District Judge Paul Gardephe not to approve the related class-action accord because resolution of its claims might affect the distributions available for investors.

The class-action settlement called for the Bents and others to, among other things, pay $10 million and give up $42 million of legal and other claims against a court-ordered expense fund.

Meanwhile, John Dellaportas, a lawyer for the Bents, complained that the SEC's "sudden refusal to settle" harmed fund shareholders with additional delays and costs.

"We were informed that, not only had the Commission rejected the proposed settlement agreement in principle that had been negotiated between defendants and the SEC staff, but it was also unwilling to settle with defendants on any other terms," he wrote, italicizing the last four words for effect.

Florence Harmon, an SEC spokeswoman, on Friday said the SEC plan "would put more money in the pockets of investors, which is why we have asked the court to decide how best to proceed."

John Browne, a lawyer for shareholders in the class-action case, in a court filing said the SEC's reasons to delay approval of that accord lack merit.

A spokesman for the Bents said: "We were disappointed that we were not able to resolve the remaining issues in that case but in any event we do not believe the SEC's request for a new trial is warranted."

It is unclear what may have prompted the SEC's alleged change of heart. Terms of the rejected settlement were not disclosed, though the Bents' spokesman said Bruce Bent Sr had nothing to settle because he had prevailed at trial.

Mary Jo White, who became SEC chair this year, has promised to take a tougher line in resolving higher-profile lawsuits.

Last month, the SEC extracted an admission of wrongdoing and a five-year industry ban from Philip Falcone over his management at the hedge fund Harbinger Capital, after the commission rejected an earlier accord as too lenient. [ID:nL2N0GK1CA)

The cases are SEC v. Reserve Management Co, U.S. District Court, Southern District of New York, No. 09-04346; and In re: The Reserve Primary Fund Securities & Derivative Class Action Litigation in the same court, No. 08-08060.

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Hedge funds reap rewards from bet on Lehman Europe carcass

By Steve Slater and Tommy Wilkes

LONDON, Sept 15 | Sat Sep 14, 2013 7:00pm EDT

LONDON, Sept 15 (Reuters) - Hedge funds which gambled on how much money would be recovered from the bankrupt carcass of Lehman Brothers are set to make hundreds of millions of pounds from a full payout to creditors of the European arm.

Five years on from the collapse, payouts to Lehman's creditors in Europe are on course to top 100 percent some time next year, following a recovery of assets by administrators and legal victories over other parts of the ex-U.S. investment bank.

"We were reasonably confident there would be some significant funds, but never in our wildest dreams would we have thought it would be 100 pence in the pound," said Tony Lomas, joint administrator for Lehman Brothers International Europe (LBIE) and partner at PricewaterhouseCoopers.

The collapse of Lehman Brothers on Sept. 15, 2008, plunged the global financial system into chaos. Its European arm, headquartered in London, was the largest and most complex part of the group because it was a hub for trading and investments, spanning asset classes and dozens of countries.

Closing down the business and trying to recover assets for creditors has involved unwinding thousands of derivatives contracts and share trades and figuring out who owns what, making it the most complex bankruptcy of a single entity ever.

Creditors' claims now trade between 120 and 135 percent in a secondary or "grey" market for their value, compared to as low as 10 percent in the weeks after the collapse, reflecting an expectation that a premium will be paid.

After creditors are fully paid, LBIE should also have cash left over to pay interest to unsecured creditors - who can get 8 percent a year under UK law - or subordinated bondholders.

Original creditors, including hedge funds which had Lehman as their prime broker, banks, and trade suppliers such as a photocopying or legal firms, may not all be winners, however.

"A lot (of original creditors) have sold their claims, particularly as pricing improved and got towards 100 percent,"

said Alyson Lockett, partner at UK law firm Simmons and Simmons, who has advised over 100 original creditors and also worked for distressed debt investors trading the claims.

LUCRATIVE TRADE

The list of hedge funds which bought Lehman paper after the bank's demise reads like a Who's Who of so-called "distressed debt" funds, and includes Baupost Group, Elliott Management, King Street Capital and Paulson & Co, industry sources said.

The sources said it was hard to quantify how many of the claims were held by distressed debt specialists, but it could be half or more.

"A significant proportion of these claims is now in the hands of a small collection of distressed debt investors," Lomas said.

The bankruptcy has turned into one of most lucrative trades since the financial crisis for these largely New York-based funds which pride themselves on snapping up debt when panicked sellers have rushed for the exit.

Paulson, which led an investor group pushing for a better payout for creditors, started buying Lehman bonds the day it filed for bankruptcy, paying as little as 7.5 cents on the dollar in late 2008, according to news reports citing U.S. court papers.

Others got in later and the trade became the largest position on some funds' books, topping 10 percent of their assets.

"It was a big bankruptcy and if you had the patience and did the work, it was a great trade," said one fund executive.

All the named funds declined to comment or could not immediately be reached.

PwC expects about 40 billion pounds ($63.3 billion) to be returned to LBIE's creditors, including near 23 billion pounds for trust claimants and about 16 billion pounds for up to 3,400 unsecured creditors.

Two dividends worth a combined 68.5 percent of claims have already been paid to unsecured creditors and another dividend in November should take the tally towards 100 percent, Lomas said.

Legal wins against other defunct Lehman units and past settlements with the bank's trading counterparties has freed up cash for distribution. More payouts will be made, but the final dividend may take more than a decade because of legal wrangling.

"It's not inconceivable that it could be 10 or 20 years," said Lockett.

LBIE has had about 500 staff working on the wind-down, complemented by 200 PwC staff, all under Lomas in a Canary Wharf tower that has sight of the former Lehman European headquarters. More than 350 staff are former Lehman employees.

Costs including wages, rent, systems and legal advice, are running at about 300 million pounds a year, and PwC's fees had reached about 600 million pounds by March.

Lomas, 56, who has previously worked on the bankruptcies of MG Rover and the European arm of Enron, said LBIE was likely to keep him busy until he retires in four years.

"It's 20 times as complex and big as Enron. It's unparalleled," he said.

For other stories on Lehman Brothers:

Five years after Lehman, risk moves into the shadows

In post-Lehman clean-up, top banker prosecutions stumble

"You work for Lehman? I thought that went bust"

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"You work for Lehman? I thought that went bust"

By Steve Slater

LONDON, Sept 15 | Sat Sep 14, 2013 7:00pm EDT

LONDON, Sept 15 (Reuters) - From his 23rd floor office of Citi's Canary Wharf tower, Tom Bolland can see the old European HQ of Lehman Brothers, where five years ago hundreds of his former colleagues were abruptly turfed out onto the street carrying their belongings in boxes.

The investment bank's collapse was the symbolic moment of the financial crisis, and it is a surprise to many that Lehman Brothers in Europe still lives on. It is under administrators, but two-thirds of its 500 staff are former Lehman employees helping to clear up the mess that is left.

"You work for Lehman? I thought that went bust," Bolland laughs at the typical response when he tells people he works for Lehman Brothers. "Most people are still surprised."

Bolland is the most senior of the "ex-Lehmanites" and recently celebrated 20 years with the bank - including 15 years pre-crash in a range of senior roles, which included overseeing its expansion in Russia, Turkey and the Middle East.

Now chief operating officer for Lehman Brothers International Europe (LBIE), he and more than 350 others were drafted in by Tony Lomas, joint administrator and PwC partner, to accelerate the wind-down of the business and maximise the assets that can be recovered.

"Yeah, you are working yourself out of a job. But you go out with an enhanced CV. And if you were at Lehman before you go out with your head held high, because you stayed and returned this money to the creditors," Bolland told Reuters.

Lomas expects to repay creditors fully and said the integration of LBIE staff with 200 PwC employees has been crucial to that success.

They take up three floors in Citigroup's London tower, less than 200 metres from the site Lehman occupied from April 2004 and now home to JPMorgan.

"A lot of people walked out with the cardboard box, but were back in two days later," Bolland said. Many had not realised the skills that administrators would need to unravel thousands of complex trades across dozens of countries and legal entities.

That has included disputes with other parts of the former Lehman group. In bankruptcy, each entity fights for itself.

"In the beginning it was a bit strange. People you had worked with, you were disagreeing with and over time you were negotiating with. There was no fundamental ill-will and if you win a legal argument you win it, that's life. It's commercial, not personal," Bolland said.

Finance, operations, legal, risk and asset valuation experts all stayed, or were hired in the months after collapse.

Lehman's operations had also shared an IT system, but that had to be separated and rebuilt.

"It was the biggest IT project Lehman had ever undertaken, and we had to do inside the administration. It has been an enormous task operationally, apart from the legal and valuation issues and negotiations," Bolland said.

Staff have been paid at commercial rates. They know fewer people will be needed as the major work slows and Bolland said LBIE will have a lot fewer staff by the end of next year.

He said the work has been good experience for mid-level staff, and "rewarding and satisfying" for the senior people.

"People were proud to work for Lehman. A lot of the people who stayed on, part of the reason was to do the right thing."

For other stories on Lehman Brothers:

Five years after Lehman, risk moves into the shadows

In post-Lehman clean-up, top banker prosecutions stumble

Hedge funds reap rewards from bet on Lehman Europe carcass

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RPT-SEC settlement over money fund that 'broke the buck' breaks down

Fri Sep 13, 2013 6:39pm EDT

By Nate Raymond and Jonathan Stempel

NEW YORK, Sept 13 (Reuters) - The U.S. Securities and Exchange Commission has backed out of a settlement with the managers of a large money market fund that "broke the buck" during the 2008 financial crisis, according to court papers made public on Friday.

Lawyers for defendants including Reserve Management Co said in a court filing they reached a settlement in principle with the regulator at the end of August, only to learn on Sept. 5 that the SEC subsequently rejected it.

The breakdown could derail a separate accord reached last week in which the founder of the fund, Bruce Bent Sr, and others agreed to settle a class-action lawsuit by the fund's investors.

The case stems from events on Sept. 16, 2008, when the net asset value of the $62 billion Reserve Primary Fund fell below the $1 per share it was designed to maintain.

Reserve Primary had held $785 million of debt from Lehman Brothers Holdings Inc, which went bankrupt the day before, and worries about the Lehman stake had spurred a flood of redemption requests that the fund could not meet.

Last November, a federal jury in New York cleared Bent and his son Bruce Bent II of civil fraud charges relating to the collapse, while finding the son liable for negligence.

The jury also found two corporate entities, Reserve Management and Resrv Partners Inc, liable on one count of securities fraud, and Reserve Management for violating a federal law governing investment advisers.

According to Friday's filings, the SEC and the Reserve defendants had negotiated over issues left over from the trial.

But in one of the filings, the SEC said it was "unable to reach a settlement" with the Bents. The SEC also asked U.S. District Judge Paul Gardephe not to approve the related class-action accord because resolution of its claims might affect the distributions available for investors.

The class-action settlement called for the Bents and others to, among other things, pay $10 million and give up $42 million of legal and other claims against a court-ordered expense fund.

Meanwhile, John Dellaportas, a lawyer for the Bents, complained that the SEC's "sudden refusal to settle" harmed fund shareholders with additional delays and costs.

"We were informed that, not only had the Commission rejected the proposed settlement agreement in principle that had been negotiated between defendants and the SEC staff, but it was also unwilling to settle with defendants on any other terms," he wrote, italicizing the last four words for effect.

Florence Harmon, an SEC spokeswoman, on Friday said the SEC plan "would put more money in the pockets of investors, which is why we have asked the court to decide how best to proceed."

John Browne, a lawyer for shareholders in the class-action case, in a court filing said the SEC's reasons to delay approval of that accord lack merit.

A spokesman for the Bents said: "We were disappointed that we were not able to resolve the remaining issues in that case but in any event we do not believe the SEC's request for a new trial is warranted."

It is unclear what may have prompted the SEC's alleged change of heart. Terms of the rejected settlement were not disclosed, though Mahoney said Bruce Bent Sr had nothing to settle because he had prevailed at trial.

Mary Jo White, who became SEC chair this year, has promised to take a tougher line in resolving higher-profile lawsuits.

Last month, the SEC extracted an admission of wrongdoing and a five-year industry ban from Philip Falcone over his management at the hedge fund Harbinger Capital, after the commission rejected an earlier accord as too lenient. [ID:nL2N0GK1CA)

The cases are SEC v. Reserve Management Co, U.S. District Court, Southern District of New York, No. 09-04346; and In re: The Reserve Primary Fund Securities & Derivative Class Action Litigation in the same court, No. 08-08060.

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