Lehman Brothers Holdings Inc said it plans to sue Marubeni Corp, Japan's fifth-biggest trading company, to recover "fraudulently misappropriated" funds that newspaper reports say may amount to more than US$250 million.
"We are confident in our legal claim, which we will pursue until we receive repayment from Marubeni," said Matthew Russell, a spokesman for New York-based Lehman, the fourth-largest US securities firm.
Lehman is seeking to recoup a loan to a fund controlled by a now-bankrupt unit of LTT Bio-Pharma Co, the Japanese biotechnology company, the Wall Street Journal reported on Saturday. The loan was secured by certificates from Marubeni, the Journal said. Marubeni, whose businesses range from importing petrochemicals to metals and minerals, denied wrongdoing, saying in a statement that the transaction involved forged documents and may also have involved former employees.
The Tokyo-based company said it was a victim of fraud and has asked for a criminal investigation. Spokesman Takashi Hashimoto declined to comment on Lehman's planned legal action.
Lehman loaned as much as US$250 million to the LTT Bio-Pharma unit, the Journal said. The company obtained as much as ¥40 billion (US$403 million) from investors, according to a report on Saturday in the Tokyo newspaper.
Russell, the Lehman spokesman, declined to say how much the firm is seeking to recover.
"After we became aware of the fraud, we launched a fact-finding investigation and then informed the appropriate authorities," Lehman said in an e-mailed statement on Saturday. "We are confident that we undertook all the appropriate measures on the transaction and will commence legal action against Marubeni."
Lehman officials said they have filed a criminal complaint with Japanese police, the Journal reported.
Another US brokerage may have recovered its investment in the deal, the Nikkei Shimbun newspaper reported on Saturday. Several other investors may have lost billions of yen, the paper said.
Asclepius Ltd was the LTT Bio-Pharma unit that obtained the Lehman loan, the Nikkei reported. The medical consulting company initiated bankruptcy proceedings on March 19. A spokesman for LTT Bio-Pharma couldn't be reached for comment.
LTT Bio-Pharma researches and sells drug-delivery systems to treat arteriosclerosis. The company went public in November 2004 on the Tokyo Stock Exchange Mothers market. The shares have fallen 82 percent in the past 12 months.
The planned legal action by Lehman in Japan comes as US regulators are investigating whether traders spread false rumors about the company's financial soundness to profit from a decline in its share price.
Lehman has tumbled 23 percent this month in New York trading.
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