Five years after the financial giant filed bankruptcy, state government continues to battle Lehman Brothers over an investment loss.
“If we can resolve it for a million (dollars), we think that would be reasonable,” Richard McGimsey, director of the civil division for the state Attorney General’s Office, said Monday.
The dispute stems from a $14.7 million investment of a tobacco industry settlement that the state made with Lehman Brothers in 2001. The state was supposed to get a 4.4 percent guaranteed return on the investment, but Lehman Brothers declared bankruptcy in 2008.
The state recovered the initial investment and began pursuing the guaranteed return.
Attorney Ben Huxen told the Tobacco Settlement Financing Corporation on Monday that negotiations with the bankruptcy estate still are ongoing in New York.
At one point, Lehman Brothers made the claim that the state owed the bankrupt company money, attorney Meredith Hathorn told state officials.
“That’s the Lehman we all know and love,” state Treasurer John Kennedy said.
Major tobacco companies agreed to pay states more than $200 billion in 1998 to settle lawsuits over health care costs tied to smoking. The money was to be paid over 25 years.
Louisiana’s settlement helps pay for the Taylor Opportunity Program for Students and other expenses.
The state sold 60 percent of the future settlement in 2001, the same year it invested more than $14 million with Lehman Brothers.
In 2010, the Tobacco Settlement Financing Corporation Board agreed to hire Capital Solutions as a financial consult on pursuing the lost return on investment.
The board also agreed to continue to retain lawyers in New York, where the bankruptcy proceedings were centered.
At one point, the state thought it could pursue a $10 million claim against Lehman Brothers. That amount has dropped to $1 million.
McGimsey said the lost return on investment is being worked out through a mediation process.
“They’re still in bankruptcy and we’re still negotiating,” Hathorn said.
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