Lehman Trustee Sues Citigroup Unit for $1.3 Billion (C)

The trustee overseeing the liquidation of Lehman Brothers Holding's broker dealer is seeking to recover $1.3 billion from Citigroup's C Citibank unit, according to a complaint filed in U.S. bankruptcy court in Manhattan on Friday.

The trustee hopes to recover cash and other assets that CItibank froze after Lehman's infamous bankruptcy in 2008. A Reuters report notes that "The assets include a $1 billion deposit that Citibank demanded to continue providing foreign exchange settlement services to broker-dealer Lehman Brothers Inc (LBI) after its parent filed for Chapter 11 bankruptcy protection."

Shares of Citigroup gained more than 1% on Friday, to close at $4.50.

A Citigroup statement called the trustee's claims "unjustified and without merit.'' The bank also said it would vigorously defend its right to recover its losses, which allegedly totaled more than $1 billion to help settle Lehman trades.

According to the Reuters report, the complaint notes that "Citibank representatives attended meetings held the weekend of Sept. 13-14, 2008, at the Federal Reserve Bank in New York and at Lehman Brothers Holdings and knew LBI would not be able to remain a viable business without access to foreign exchange settlement services."

The lawsuit states that "Citibank had considerable leverage—and knew that it had considerable leverage—to extract concessions from LBI for its benefit and to the detriment of LBI's customers and other creditors,'' the complaint said.

Lehman Brothers trustee James Giddens said he and his staff had discussed the return of the assets at length with Citibank, but "good faith disagreements exist over the proper sums to be returned.''

Shares of Citigroup have slumped since trading above $5.10 in mid-January.