CSUN University News Clippings

CalPERS hit by $17.2 million Lehman Bros. claim

(August 31, 2009)

By Dale Kasler
Published: 08/28/09

As if CalPERS didn’t have enough problems, the big pension fund has to fend off a $17.2 million claim from Lehman Brothers.

Lehman, the brokerage firm whose bankruptcy helped trigger the collapse of the stock market last fall, is demanding payment from the California Public Employees’ Retirement System to fulfill a financial deal called a swap contract.

CalPERS, which just sued Gov. Arnold Schwarzenegger over furloughs and is struggling to recover from a $56 billion investment loss, acknowledges the debt to Lehman but says it shouldn’t have to pay it yet.

Rather, it says the $17.2 million claim should be deducted from the $433 million Lehman owes CalPERS. That debt stems from some Lehman corporate bonds CalPERS purchased prior to the bankruptcy filing.

In papers this week filed in U.S. Bankruptcy Court in New York, CalPERS attorney Steve Felderstein said “it would be unjust” to make CalPERS repay its debt “when it is owed more than 25 times that amount.”

A swap contract is a complicated arrangement in which two parties promise to make payments to each other under a set timeline. Four days after Lehman filed for bankruptcy protection last September, CalPERS terminated the swap contract while still owing Lehman $17.2 million.

Publication: Sacramento Bee