By Bernard Collins
A judge called the Barclays deal to have ‘helped to save every one of us from an even greater economic calamity.’ Claims that Barclays took illegal advantage of the prevailing chaos in the financial markets in 2008 to acquire the US operations of the bust Lehman Brothers at an unfair price, have been rubbished by a bankruptcy court judge in New York.

Judge James Peck described the sale process as “imperfect, but still adequate under the exceptional circumstances,” as he threw out a claim brought by lawyers overseeing the Lehman Brothers bankruptcy estate.

Shares in Barclays rose 2.25p to 324p by 9am. Ian Gordon, a banks analyst at Exane BNP Paribas, said, “Barclays is to be congratulated for its steadfast approach throughout this long-running saga. Whereas one might be tempted to suggest that this was a speculative action which was always bound to fail, we have no doubt that the unquantified litigation risk weighed heavily in the minds of many would-be Barclays investors.”

The lawyers who filed the claim had alleged that Barclays was involved in dishonest and abusive behavior during the sale process wherin the bank improperly receiving an amount of $11bn (£6.78bn) from the transformational deal. One of their prime allegations was that Lehman bankers had hurriedly putting sale valuations on the assets of the failed banks that may have been influenced by the prospect of future employment with Barclays.

Judge Peck dismissed these claims in a 103-page ruling, finding that Barclays had acted in good faith throughout. “The court does not believe that any Lehman employees breached their duties of loyalty to the estate because of the prospect of future employment or as a consequence of signing lucrative employment contracts with Barclays. That aspect of the movants' [claimants'] case is built on a faint aroma of venality and conflicted loyalty, but no breach of duty or other misconduct was demonstrated.”

The judge suggested that the claimants’ case was based on hindsight valuations, as he described the Barclays deal as “the largest, most expedited and probably the most dramatic asset sale that has ever occurred in bankruptcy history.” He reminded the court that at the time of the sale, it was conducted at “a speed that takes ordinary transactional coping skills to the breaking point and beyond,” and “regarded by many as an admirable, even heroic, achievement.”

“The perception was that the transaction with Barclays benefited all interested parties, mitigated systemic risk and helped to save every one of us from an even greater economic calamity. Nothing in the voluminous record presented to the Court in these protracted proceedings has done anything to change that undeniably correct perception.”