BUSINESS

Lehman Brothers Trustee Sues Citibank To Recover $1B Deposit

03/18/2011 04:24 pm ET | Updated May 25, 2011

NEW YORK (Reuters) - The trustee overseeing the liquidation of Lehman Brothers Holdings'(LEHMQ.PK: Quote, Profile, Research, Stock Buzz) broker dealer has sued Citibank to recover more than $1.3 billion in cash and other assets, according to court papers filed on Friday.

The assets include a $1 billion deposit that Citibank demanded to continue providing foreign exchange settlement services to broker-dealer Lehman Brothers Inc after its parent filed for Chapter 11 bankruptcy protection, according to a complaint filed in U.S. bankruptcy court in Manhattan.

Citibank, part of Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz), also froze over $300 million in additional deposits, according to the complaint, filed by Lehman Brothers trustee James Giddens.

When Lehman requested the return of the $1 billion deposit, Citibank said it had set the deposit off against other obligations Lehman owed to Citibank, according to the lawsuit.

In a statement, Citigroup said it demanded the deposit to cover any losses it suffered in settling Lehman Brothers Inc's trades during the panic caused by its parent's bankruptcy filing in September 2008.

It called the trustee's claims "unjustified and without merit" and said it will vigorously defend its right to recover its losses, which amounted to more than $1 billion for helping settle the Lehman trades.

(Reporting by Dena Aubin, editing by Dave Zimmerman)

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