Barclays 2012 Annual Report Download - page 284

29 Legal Proceedings continued
On 22 February 2011, the Bankruptcy Court issued its Opinion in relation to these matters, rejecting the Rule 60 Claims and deciding some of the
Contract Claims in the Trustee’s favour and some in favour of BCI. On 15 July 2011, the Bankruptcy Court entered final Orders implementing its
Opinion. Barclays and the Trustee each appealed the Bankruptcy Court’s adverse rulings on the Contract Claims to the United States District Court
for the Southern District of New York (the District Court). LBHI and the Committee did not pursue an appeal from the Bankruptcy Court’s ruling on
the Rule 60 Claims. After briefing and argument, the District Court issued its Opinion on 5 June 2012 in which it reversed one of the Bankruptcy
Court’s rulings on the Contract Claims that had been adverse to Barclays and affirmed the Bankruptcy Court’s other rulings on the Contract
Claims. On 17 July 2012, the District Court issued an amended Opinion, correcting certain errors but not otherwise affecting the rulings, and an
agreed Judgment implementing the rulings in the Opinion. Barclays and the Trustee have each appealed the adverse rulings of the District Court to
the United States Court of Appeals for the Second Circuit.
Under the Judgment of the District Court, Barclays is entitled to receive:
 $1.1bn (£0.7bn) from the Trustee in respect of ‘clearance box’ assets;
 property held at various institutions to secure obligations under the exchange-traded derivatives transferred to Barclays in the Sale (the ETD
Margin), subject to the proviso that Barclays will be entitled to receive $507m (£0.3bn) of the ETD Margin only if and to the extent the Trustee
has assets available once the Trustee has satisfied all of LBI’s customer claims; and
 $769m (£0.5bn) from the Trustee in respect of LBI’s 15c3-3 reserve account assets only if and to the extent the Trustee has assets available
once the Trustee has satisfied all of LBI’s customer claims.
A portion of the ETD Margin which has not yet been recovered by Barclays or the Trustee is held or owed by certain institutions outside the United
States (including several Lehman affiliates that are subject to insolvency or similar proceedings). Barclays cannot reliably estimate at this time how
much of the ETD Margin held or owed by such institutions Barclays is ultimately likely to receive. Further, Barclays cannot reliably estimate at this
time if and to the extent the Trustee will have assets remaining available to it to pay Barclays the $507m (£0.3bn) in respect of ETD Margin or the
$769m (£0.5bn) in respect of LBI’s 15c3-3 reserve account assets after satisfying all of LBI’s customer claims. In this regard, the Trustee
announced in October 2012 that if his proposed settlement agreements with LBHI and with the Administrator for the liquidation of Lehman
Brothers Inc. (Europe) are approved by the relevant courts, then the Trustee should be in position to satisfy all customer claims and make
meaningful distributions to creditors (without having to use any of the assets that Barclays claims). If the District Court’s rulings were to be
unaffected by future proceedings, conservatively assuming no recovery by Barclays of any of the ETD Margin not yet recovered by Barclays or the
Trustee that is held or owed by institutions outside the United States and no recovery by Barclays of the $507m (£0.3bn) in respect of ETD Margin
or the $769m (£0.5bn) in respect of LBI’s 15c3-3 reserve account assets, Barclays estimates its loss would be approximately $0.9bn (£0.5bn).
Under the same scenario, but assuming the Trustee’s proposed settlement agreements with LBHI and the Administrator for the liquidation of
Lehman Brothers Inc. (Europe) are implemented, and result in the receipt by Barclays of the $507m ETD Margin and $769m in respect of the
15c3-3 reserve account assets, Barclays estimates its profit would be approximately $0.4bn (£0.2bn) plus the value of any recovery of the ETD
Margin held or owed by institutions outside of the United States. In this context, Barclays is satisfied with the valuation of the asset recognised on
its balance sheet and the resulting level of effective provision.
American Depositary Shares
Barclays Bank PLC, Barclays PLC and various current and former members of Barclays PLC’s Board of Directors have been named as defendants in
five proposed securities class actions (which have been consolidated) pending in the United States District Court for the Southern District of New
York (the Court). The consolidated amended complaint, dated 12 February 2010, alleges that the registration statements relating to American
Depositary Shares representing Preferred Stock, Series 2, 3, 4 and 5 (the ADS) offered by Barclays Bank PLC at various times between 2006 and
2008 contained misstatements and omissions concerning (amongst other things) Barclays portfolio of mortgage-related (including US subprime-
related) securities, Barclays exposure to mortgage and credit market risk and Barclays financial condition. The consolidated amended complaint
asserts claims under Sections 11, 12(a) (2) and 15 of the Securities Act of 1933. On 5 January 2011, the Court issued an Order and, on 7 January
2011, Judgment was entered, granting the defendants’ motion to dismiss the complaint in its entirety and closing the case. On 4 February 2011,
the plaintiffs filed a motion asking the Court to reconsider in part its dismissal order. On 31 May 2011, the Court denied in full the plaintiffs’ motion
for reconsideration. The plaintiffs have appealed both decisions (the grant of the defendants’ motion to dismiss and the denial of the plaintiffs’
motion for reconsideration) to the United States Court of Appeals for the Second Circuit. Oral argument was held on 18 October 2012.
Barclays considers that these ADS-related claims against it are without merit and is defending them vigorously. It is not practicable to estimate
Barclays possible loss in relation to these claims or any effect that they might have upon operating results in any particular financial period.
US Federal Housing Finance Agency and Other Residential Mortgage-Backed Securities Litigation
The United States Federal Housing Finance Agency (FHFA), acting for two US government sponsored enterprises, Fannie Mae and Freddie Mac
(collectively, the GSEs), filed lawsuits against 17 financial institutions in connection with the GSEs’ purchases of residential mortgage-backed
securities (RMBS). The lawsuits allege, amongst other things, that the RMBS offering materials contained materially false and misleading
statements and/or omissions. Barclays Bank PLC and/or certain of its affiliates or former employees are named in two of these lawsuits, relating to
sales between 2005 and 2007 of RMBS, in which BCI was lead or co-lead underwriter.
Both complaints demand, amongst other things: rescission and recovery of the consideration paid for the RMBS; and recovery for the GSEs’
alleged monetary losses arising out of their ownership of the RMBS. The complaints are similar to other civil actions filed against Barclays Bank
and/or certain of its affiliates by other plaintiffs, including the Federal Home Loan Bank of Seattle, Federal Home Loan Bank of Boston, Federal
Home Loan Bank of Chicago, Cambridge Place Investment Management, Inc., HSH Nordbank AG (and affiliates), Sealink Funding Limited,
Landesbank Baden-Württemberg (and affiliates), Deutsche Zentral-Genossenschaftsbank AG (and affiliates), Stichting Pensioenfonds ABP, Royal
Park Investments SA/NV, Bayerische Landesbank, John Hancock Life Insurance Company (and affiliates), Prudential Life Insurance Company of
America (and affiliates) and the National Credit Union Administration relating to purchases of RMBS. Barclays considers that the claims against it
are without merit and intends to defend them vigorously.
barclays.com/annualreport282 I Barclays PLC Annual Report 2012
Notes to the financial statements
For the year ended 31 December 2012 continued