PwC’s Lehman’s team dealt creditor blow by appeal courts

The PwC administration team handling the European arm of Lehman Brothers have
been dealt a blow in the courts after judges ruled that creditors must be paid
back from a single pool instead of allowing some to be ring-fenced.

PwC administrators had successfully argued in an earlier case that this
separation would make it easier to return funds, but appeal court judges
overturned the decision.

The appeal was upheld because of FSA rules, which state that client money
held outside of Lehman Brothers International Europe’s segregated accounts, has
to be pooled with client money held in its segregated accounts.

“All clients who ought to have had money segregated for them by LBIE as
client money prior to administration are now entitled to share in the client
money pool, regardless of whether or not LBIE did in fact segregate client money
for them,” judges said.

Tony Lomas, joint administrator warned that the ruling would dent efforts to
return funds quickly to creditors.

“What is significant about the judgment is that it not only widens the
pre-administration client money that must be pooled, but also the number of
clients entitled to claim against that pool,” Lomas said.

“This is likely to have a significant knock-on effect both on the timing and
level of any distribution of client money to LBIE’s clients. The proper and
prompt return of client money is a key priority for the administration, and we
remain committed towards achieving that objective.”

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