Correction to Citigroup Lehman Trial Story on May 2

By Jonathan Randles Features Dow Jones Newswires

The head of Citigroup Inc.'s global trading desk recalled Tuesday the week Lehman Brothers Holdings Inc. collapsed into bankruptcy at a trial that will determine whether Citigroup can hold on to $2 billion.

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Brian Archer, head of global credit trading at Citigroup, said he remembered the week of Sept. 15, 2008, as turbulent and particularly challenging for financial institutions during a trial in New York examining how the bank terminated about 30,000 derivatives trades when Lehman filed the largest bankruptcy in history.

At stake is the fate of $2 billion that Lehman deposited with Citigroup to secure those trades. Representatives of the Lehman bankruptcy estate are attempting to wrest away that money for the benefit of other creditors. The trial before Judge Shelley Chapman in the U.S. Bankruptcy Court in Manhattan is anticipated to run several weeks.

The trial is expected to give a glimpse at how employees at Citigroup responded to the fall of Lehman and offers a look at how traders go about their business.

Lehman contends Citigroup manufactured a bankruptcy claim to hold on to the money. When the trial began last week, a lawyer for Lehman's creditors committee said the theme of its case is a "A Tale of Two Citis, " referencing the classic Charles Dickens novel to argue Citigroup used different methodologies to come up with its bankruptcy claim at odds with how the bank normally operated.

Citigroup, meanwhile, says the fault lies with Lehman and the unprecedented bankruptcy presented the bank with the challenging task of having to close out tens of thousands of trades. The bank says the way it calculated its bankruptcy claim is reasonable and consistent with how Citigroup normally does business.

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On Tuesday, Mr. Archer said the trading floor at Citigroup is about the size of a football field and "when things are happening in the market" the floor is usually peppered with the sound of people shouting and yelling.

Responding to questioning from a lawyer representing Citigroup, Mr. Archer described how employees at the bank manage risk. Employees generally take in a large amount of market information before making a trade, he said.

"Hope is not a good trading strategy," Mr. Archer said.

Lehman, once the world's fourth-largest investment bank, was a party to or had guaranteed over 10,000 derivative contracts representing more than 1.7 million transactions at the time of its collapse, according to court documents. The team working on unwinding the deals has so far recovered billions in cash for the benefit of creditors.

Write to Jonathan Randles at Jonathan.Randles@wsj.com

The head of Citigroup Inc.'s global trading desk recalled Tuesday the week Lehman Brothers Holdings Inc. collapsed into bankruptcy at a trial that will determine whether Citigroup can hold on to $2 billion.

Brian Archer, head of global credit trading at Citigroup, said he remembered the week of Sept. 15, 2008, as turbulent and particularly challenging for financial institutions during a trial in New York examining how the bank terminated about 30,000 derivatives trades when Lehman filed the largest bankruptcy in history.

At stake is the fate of $2 billion that Lehman deposited with Citigroup. Representatives of the Lehman bankruptcy estate are attempting to wrest away that money for the benefit of other creditors. The trial before Judge Shelley Chapman in the U.S. Bankruptcy Court in Manhattan is anticipated to run several weeks.

The trial is expected to give a glimpse at how employees at Citigroup responded to the fall of Lehman and offers a look at how traders go about their business.

Lehman contends Citigroup manufactured a bankruptcy claim to hold on to the money. When the trial began last week, a lawyer for Lehman's creditors committee said the theme of its case is a "A Tale of Two Citis, " referencing the classic Charles Dickens novel to argue Citigroup used different methodologies to come up with its bankruptcy claim at odds with how the bank normally operated.

Citigroup, meanwhile, says the fault lies with Lehman and the unprecedented bankruptcy presented the bank with the challenging task of having to close out tens of thousands of trades. The bank says the way it calculated its bankruptcy claim is reasonable and consistent with how Citigroup normally does business.

On Tuesday, Mr. Archer said the trading floor at Citigroup is about the size of a football field and "when things are happening in the market" the floor is usually peppered with the sound of people shouting and yelling.

Responding to questioning from a lawyer representing Citigroup, Mr. Archer described how employees at the bank manage risk. Employees generally take in a large amount of market information before making a trade, he said.

"Hope is not a good trading strategy," Mr. Archer said.

Lehman, once the world's fourth-largest investment bank, was a party to or had guaranteed over 10,000 derivative contracts representing more than 1.7 million transactions at the time of its collapse, according to court documents. The team working on unwinding the deals has so far recovered billions in cash for the benefit of creditors.

Write to Jonathan Randles at Jonathan.Randles@wsj.com

Corrections & Amplifications

This story was corrected May 3, 2017 at 9:06 a.m. ET because it incorrectly stated the $2 billion Lehman deposited with Citigroup was used to secure derivative trades in the third paragraph.

The trial concerns $2 billion Lehman deposited with Citigroup. "Citigroup Battles Lehman in 'Tale of Two Citis' Trial," at 4:40 p.m. EDT on May 2, incorrectly stated the $2 billion deposit was used to secure derivative trades in the third paragraph. (May 3, 2017)

(END) Dow Jones Newswires

May 03, 2017 09:18 ET (13:18 GMT)