From 1998 until August 2008, the broker-dealer subsidiary of Lehman Brothers Holding, Inc. (LBHI) gave 113 of its employees approximately $80 million in loans. Before LBHI filed for Chapter 11 bankruptcy on September 15, 2008, those 113 employees managed to receive $700,000 each. This led LBHI to enter into a stipulation with its debtors in December 2009. As a part of the Securities Investors Protection Act (SIPA) liquidation of Lehman Brothers, Inc. (LBI), the 113 notes were deemed to be LBHI’s to collect, which happened to have a net balance due of about $51 million. Many professionals in the industry are following these LBI’s employee forgivable loan (“EFL”) cases.
In May 2011, LBI filed a claim in FINRA against its former employee seeking to recover by the close of the hearing $357,142.86 in outstanding principal; $79,244.88 accrued interest; and $53,571.43 in collection costs. LBI alleged causes of action on a promissory note, breach of contract, and unjust enrichment. Respondent former employee generally denied the allegations and asserted various affirmative defenses. The sole FINRA arbitrator denied LBI’s claims.
Eccleston Law Offices counsels, represents and defends financial advisers nationwide in regulatory, compliance, disciplinary and employment matters in arbitration and litigation, and before regulatory bodies such as the SEC, FINRA and state securities regulators. We frequently defend forgivable loan collection actions, prosecute Form U-5 defamation actions, counsel advisers as to how to transition successfully from firm to firm and negotiate the best possible agreements with their new firm, and provide succession planning, buy-sell agreements and other exit strategies and strategic consulting, practice transitions, mergers, acquisitions and divestitures.