Lehman Loses Another Promissory Note Collection Case

June 11, 2012

Once upon a time, way back when as it now seems, Lehman Brothers one of the big four of Wall Street - alongside Goldman Sachs, Morgan Stanley, and Merrill Lynch. Then, life as we knew it, ended.

This story is part of the process in which many folks with large brooms are cleaning up after the circus parade of those days moves on.

"Street Sweeper" 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.

"High Noon for 113 Former Lehman Employees" ("Street Sweeper" February 15, 2011).

Also see, "Lehman Seeks To Collect Unpaid Loans From Furious Former Employees" (" Street Sweeper", November 19, 2010).

Several months ago, I reported about Lehman Brothers' first loss in regard to its efforts to collect on promissory notes allegedly owed by former employees.  "Lehman Suffers First Loss In FINRA Arbitration Collection of Promissory Notes" (" Street Sweeper" October 12, 2011).   Also see, Lehman Brothers Loses Another FINRA Promissory Note Collection Case" (" Street Sweeper" May 7, 2012).

Another Stinging Rebuke

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in October 2010, Claimant Lehman Brothers asserted breach of contract and promissory note, and sought $375,074.55 in principal plus interest, attorneys' fees, costs, and fees.  In the Matter of the FINRA Arbitration Behween Lehman Brothers Holdings Inc.,as assignee of Lehman Brothers Inc., Claimant, vs. Jack Petersen, Respondent  (FINRA Arbitration 10-04602, June 6, 2012).

The FINRA Arbitration Panel denied Claimant's claims in their entirety.