September 13, 2012
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in September 2010, Claimant Lehman Brothers sought to recover the balance due on a promissory note to former employee Respondent Reilly. Claimant Lehman Brothers asked for $158,709.88 in compensatory damages, $22.57 daily interest, costs, fees, and expenses. In the Matter of the FINRA Arbitration Between Lehman Brothers Holdings Inc., as assignee of Lehman Brothers Inc., Claimant, vs. Robert James Reilly, Respondent (FINRA Arbitration 10-04080, September 11, 2012).
Respondent Reilly generally denied the allegations, asserted various affirmative defenses, and counterclaimed for $1.5 million seeking a set-off or recoupment (and further citing Claimant's unjust enrichment). Respondent also sought an expungement of the matter.
The FINRA Arbitration Panel denied all parties' claims.
Bill Singer's Comment
Once upon a time, way back when as it now seems, Lehman Brothers was one of the big four of Wall Street - alongside Goldman Sachs, Morgan Stanley, and Merrill Lynch. Then, life as we knew it, ended. And after the lives of far too many folks were upended - folks on Main Street and Wall Street - the corporations started the dirty job of calling in the loans. BrokeAndBroker.com has reported on Lehman Brothers, Inc.'s attempts to collect on millions of dollars in promissory notes that it had extended to a number of its employees.
In the once halcyon days of Wall Street, Lehman Brothers Inc. (LBI), the broker-dealer subsidiary of Lehman Brothers Holding, Inc. (LBHI), gave 113 of its employees about $80 million in loans. If you look at the dates of the promissory notes involved, they go as far back as 1998 and as recently as August 2008, just before Wall Street imploded. On September 15, 2008, LBHI filed for Chapter 11 bankruptcy, which was the largest in the nation's history. However, before that enormous blast, those 113 LBI employees managed to get about $700,000 each. . .
Comes December 2009, amidst the shards of what once was, LBHI entered into a stipulation with its debtors and LBI as part of the Securities Investors Protection Act (SIPA) liquidation of LBI. Based upon court papers, those 113 notes had a net balance due of about $51 million and were deemed to be LBHI's to collect. Pre- or post-Great Recession, no one is going to walk away from $51 million.
I have made it a point of disclosing my bias on this issue. I don't like Lehman's efforts. I think it's victimizing victims and, frankly, unsavory, to say the least. As such, I root for those who lost their jobs to keep their loans, regardless of the legal issues involved. The likes of Lehman should be squeezing blood out of other rocks. In these days where firms such as Wachovia, Bear Stearns, Smith Barney, and others have all but vanished as we knew them, where the likes of JP Morgan, Knight Capital, and MF Global are bedeviled by a host of glitches and miscues, it irks me to see that there isn't more of a sense of fairplay in the industry - particularly when it comes to folks who intended to go to work but for the fact that their place of work no longer existed.