US - The California Public Employees' Retirement System sued former Lehman Brothers Holdings Inc. executives and underwriters alleging they hid Lehman's exposure to subprime loans when they sold the pension fund about $700m in bonds.
The retirement system known as Calpers said in a complaint filed in federal court in San Francisco today that the executives and about 34 investment banks made false statements in offering documents for bonds issued from June 2007 to September 2008.
CalPERS, the largest US pension fund, is among a group of Lehman creditors that filed a competing reorganization plan in December for the company after objecting to Lehman's original plan to emerge from court protection. Lehman filed a revised plan to exit Chapter 11 on January 25, offering bondholders more money.
CalPERS, hedge fund Paulson & Co., and other sponsors of the rival plan together hold about $16bn of senior Lehman bonds.
Defendants named in today's lawsuit include former Lehman Chief Executive Officer Richard Fuld and Citigroup Inc.'s Citigroup Global Markets unit. Patricia Hynes, Fuld's attorney, and Alexander Samuelson, a Citigroup spokesman, didn't immediately return voice-mail messages left after regular business hours.
Lehman, once the fourth-largest investment bank, filed the biggest bankruptcy in US history in September 2008, listing $613bn in debt.
The case is The California Public Employees' Retirement System v. Fuld, 11-00562, US District Court, Northern District of California (San Francisco).
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