County officials fight for larger Lehman payout

San Mateo County is fighting for a bigger payout from the Lehman Bros. bankruptcy as officials aim to recoup some of the $155 million that Peninsula agencies lost when the investment bank went belly up.

County officials are challenging Lehman’s existing plan for repaying some of the $1 trillion in claims from its creditors, which they say is unfair to public agencies because it gives large banks and foreign investors a bigger share of the firm’s assets.

On Wednesday, the county and an ad hoc group of other creditors, including the California Public Employees’ Retirement System, filed a rival reorganization plan in New York bankruptcy court that county officials said would treat all creditors equally.

“[Lehman] picked one pocket when they went bankrupt, and now they’re trying to pick our other pocket,” Chief Deputy County Counsel John Beiers said.

The county investment pool — which includes school districts, cities and special districts — held $155 million worth of Lehman securities when the firm declared bankruptcy in September 2008.
The county’s loss was among the largest of any municipality nationwide, with K-12 schools losing a combined $37 million and SamTrans losing $25 million.

The Lehman Bros. Holdings plan unveiled in April would give creditors that invested in the parent company, such as the county pool, 17.4 cents on the dollar, compared with payments of around 30 or 40 cents on the dollar for creditors who invested in Lehman’s subsidiaries, Beiers said.

The ad hoc group’s proposal asks the judge to give all creditors 24.5 cents on the dollar, which would give the county a payment of at least $38 million compared to $27 million under Lehman’s original plan.

Lehman is expected to file an updated reorganization plan in the coming months. In a statement, company CEO Bryan Marsal said that “significant progress has been made on getting creditor consensus.”

“We try to be thoughtful and listen to the position or concerns of each creditor constituency,” Marsal said in the statement.

Beiers said Lehman “essentially struck deals with the large banks and the foreign investors, trying to hang us out to dry. We are fighting hard and aggressively to protect that taxpayer money.”

The county is still involved in a separate civil lawsuit accusing Lehman’s top executives and its auditor of concealing the firm’s precarious financial condition up until its failure.  

sbishop@sfexaminer.com

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