Apparently, the Lehman bankruptcy executor discovered emails from Lehman employees to Barclays showing that the employees had been offered new positions at Barclays. In return, they wrote down Lehman assets to make it seem as though Barclays were buying much more of a dog than Lehman actually was.
Money quote after the fold.
"Barclays planned on and insisted on the discount and they planned on the liability numbers being inflated," Robert Gaffey, a Jones Day attorney representing Lehman, told the court.
"It was not the wash described to the (Lehman) board, it was not the net benefit described to the estate," he continued, claiming that Barclays received an $11.2 billion immediate windfall profit on the assets it acquired, while the court was told that the sale would actually give Lehman a benefit of about $4 billion in terms of reduced liabilities and cash.
Gaffey showed the court emails from Lehman employees who had been offered new jobs at Barclays, revealing the conflicts they may have had as they were working to arrange the deal.
OK, for many of us, this might seem like no big deal, unless you were an investor in Lehman's directly or else your mutual fund, 401k or IRA had some residual Lehman involvement.
But remember, much of the economic crisis was brought on by Lehman's corporate bonds and the credit default swaps on Lehman bonds. TARP and a lot of the losses sustained by other banks came as a result of Lehman's bankruptcy, and those losses have been made whole at a lot of banks--courtesy of the US taxpayer. Remember the term "toxic paper?" That's Lehman Brothers, and they were selling the paper for 5 cents on the dollar after the crisis. The government wanted to buy that paper back for a huge premium, something like 50 cents or more, and the taxpayer would swallow the loss. Worse, other investment banks sold a lot more in credit default swaps on Lehman than Lehman had actually issued in bonds, which made the ensuing default so much more painful.
Now we learn that Barclays conspired with Lehman employees to show bigger losses at Lehman (that US taxpayers were ultimately responsible for) than actually existed. This created a much bigger problem since the CDS out there create exponential losses. So, Barclays $12 billion scam actually creates much bigger losses elsewhere in the system.
This is a dynamic that government should NEVER have gotten involved with. The conspiracies are why we should totally steer clear of saving banks and instead create new mechanisms to keep our economy running when banksters commit their heists.
Who is going to jail?