October 16, 2008 / 7:36 PM / 9 years ago

UPDATE 1-Lehman Brothers Holdings is focus of grand jury probes

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By Emily Chasan

NEW YORK, Oct 16 (Reuters) - Prosecutors have opened three grand jury investigations into the collapse of Lehman Brothers Holdings Inc LEHMQ.PK, Lehman bankruptcy attorney Harvey Miller told a court hearing on Thursday.

The U.S. attorney's offices in the Eastern and Southern districts of NY, and in the district of New Jersey are handling the probes, Miller said at the hearing in the Bankruptcy Court for the Southern District of New York.

Some 12 people are already subpoenaed in Lehman probes, the attorney said.

Miller did not specify during the hearing the nature of the investigations.

Miller's remarks were part of a status update in U.S. bankruptcy court in Manhattan on Thursday, where Miller detailed how the firm has been trying to sort out its affairs since its collapse last month.

The investment bank filed for Chapter 11 bankruptcy protection on Sept. 15.

Miller also disputed a claim from the administrator of Lehman's European unit that $8 billion was transferred out of the Lehman Brothers International (Europe) unit to the U.S. unit on the eve of Lehman's bankruptcy filing.

He said that when the bankruptcy and administration proceedings began, the firm's accounts went into lock-down, and transactions scheduled to be completed on Sept. 15 could not take place. Lehman's books now show that the U.S. unit owes the European unit $2 billion to $3 billion and the European unit owes the U.S. unit more than $8 billion, Miller said.


The dispute over the $8 billion illustrates how Lehman's bankrupt parent company is working to reconstruct the pieces of its business.

"This is really an atypical case, a case without any pre-planning, a case with a high level of chaos in the first week," Miller told the court.

Lehman sold its core U.S. assets to Barclays last month, and Japan's largest broker Nomura Holdings (8604.T) has said it would buy the Indian back office units of the collapsed investment bank, as well as the company's franchises in the Asia Pacific region, among other operations.

Miller said 164 original Lehman employees were now working at the legacy company, primarily in the legal and treasury departments.

The firm has hired restructuring company Alvarez & Marsal, which has more than 100 employees working on the case. That number is expected to swell to more than 400, Miller said, with many of the additions expected to focus on unwinding the firm's derivatives contracts.

Miller said the firm was working to unwind approximately 1.5 million derivative transactions involving about 8,000 counterparties.

Lehman has received thousands of information requests from trading counterparties, but is still working to locate and sort through data related to many of those trades, Miller said.

"In 45 to 60 days we should be in a position where we can answer specific inquiries," Miller told the court. (Additional reporting by Chelsea Emery)

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