Pulsar Re, a Bermuda-based re-insurer, has filed a lawsuit in federal bankruptcy court in Manhattan against Lehman Brothers Holdings in which it alleged that Lehman improperly used $450m it had placed with the company as cash collateral for reinsurance policies.
According to the suit, Lehman took the cash in 2008 when it was increasingly short of funds.
Lehman saddled the unit with illiquid assets "worth far less than the inflated market values assigned to them by Lehman personnel," Pulsar said in the complaint filed in Bankruptcy Court.
"Lehman’s abuse of repurchase agreements throughout 2008 to create the false appearance of financial health was rampant," Pulsar said, citing a report into Lehman’s bankruptcy by examiner Anton Valukas.
In its claim, Pulsar pleaded the court to impose a constructive trust in order to shield the $450m of collateral, and to award it interest and attorneys’ fees.
Pulsar’s lawsuit is one of several that makes use of the Valukas report and other investigations into the largest bankruptcy in US history.