UK/US - The Pensions Regulator's determinations panel has issued its reasons for chasing Lehman Brothers subsidiaries with a financial support direction.
The panel has set out that it would be reasonable to issue an FSD against US parent company Lehman Brothers Holdings Inc (LBHI), and the three main operating companies within the UK, together with two intermediate UK holding companies.
The panel concluded that LBHI and the UK operating companies had strong associations with Lehman Brothers Limited (LBL) - a UK subsidiary and sponsoring employer of the pension scheme.
They also benefited from this relationship, including from the provision of staff and back-office services provided via LBL, which employed approximately 4,400 people, of which about 2,000 were seconded to other Lehman group companies.
The panel also found that the US parent, acting as group treasurer, was the source of employer contributions to the pension scheme and guarantor of LBL's liabilities to the pension scheme.
It said the scheme was left without a means of ongoing support when the US parent company, LBHI, filed for bankruptcy in the US on 15 September, 2008.
This triggered the insolvency of a number of UK subsidiaries, including LBL, a service company. At the time of the group's collapse, it is estimated that the deficit in the scheme calculated on a buyout basis was £148m.
TPR executive director for delivery June Mulroy (pictured) said: "We welcome the panel's decision that the US parent and the key UK companies should support the pension scheme.
"This is an important first step and we will vigorously support the trustees as they pursue the liability owed to the pension scheme in the various insolvency processes. The FSD will give them a voice in those proceedings.
"We continue to do everything we can to protect pension scheme members' benefits and to shield the PPF when companies fail."
However, the panel did not agree it would be reasonable to seek financial support from 38 smaller UK group subsidiaries as it was not possible to conclude how close their relationships were with LBL or whether they derived any benefit.
The regulator's case team had earlier decided not to proceed against 29 target companies, narrowing the number of targets to 44 prior to the hearing.
The parties are able to refer the decision to the Tax and Chancery Chamber of the Upper Tribunal.
To read the determinations panel's full reasons, click here.
The determinations panel is a committee of the regulator but is separate from the watchdog in that it has a separately appointed membership and legal support.
Lehman Brothers Holdings Inc filed for bankruptcy in September 2008, triggering insolvency for the majority of the group.
The insolvency of the main UK Lehman Brothers entities left the sponsor Lehman Brothers Limited without the means of providing ongoing support for the scheme.
Subsequently, a case for the imposition of an FSD was put before the determinations panel.
The regulator has already issued two FSD determinations in the Nortel (Global Pensions; July 8, 2010) and Sea Containers cases.
Lawyers have brought into question TPR's power to enforce an FSD against companies with a foreign parent due to technicalities around ongoing insolvency proceedings (Global Pensions; September 29, 2010).
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