Finance Blog number 1

Greek Prime Minister George Papandreou said today the government has no plans for new measures to curb the European Union’s largest deficit.

Plans to tame the government finances are “credible,” he told reporters in New Delhi. The EU backed on Feb. 3 the government’s proposals to trim the deficit after Papandreou pledged to raise fuel taxes and the retirement age and extended a wage freeze to all public workers.

Papandreou said today the proposals need to be implemented to achieve their goals, and the nation has substantial funds available from the EU. Yesterday the International Monetary fund said the Greek plan is “appropriate” and European Central Bank President Jean-Claude Trichet said he’s confident Greece can get the deficit under control.

The risk premium investors demand to buy Greek debt over comparable German 10-year bonds widened 10 basis points to 364 basis points the highest in a week. The benchmark ASE stock index fell for a third day, declining 2 percent, bringing its slide for this week to more than 9 percent.

The deficit reached 12.7 percent of gross domestic product last year, and officials are battling to convince investors it can shrink the shortfall to within the EU’S 3 percent limit in 2012 and avoid a bailout. Yesterday Greece’s biggest union approved the second mass strike this month and tax collectors began a 48-hour walkout, suggesting that workers are ignoring Papandreou’s call for sacrifice.

“He can’t come out and say more needs to be done, he has to talk the plans up,” said Peter Dixon, an economist at Commerzbank AG in London. “The question becomes whether Greece can follow through with the plans they put in place and whether they are enough. The jury is still out on that.”

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Former U.S. Treasury Secretary Henry Paulson says in his new memoir that he was prepared to support a government backstop to prevent the bankruptcy of Lehman Brothers Holdings Inc. until he learned the firm’s assets were so mis- marked it would have guaranteed a loss to taxpayers.

Going into a Sept. 12, 2008, meeting at the New York Federal Reserve Bank with the leaders of the largest Wall Street firms, Paulson and then-New York Fed President Timothy Geithner agreed that “if a Bear Stearns-style rescue was the only option, we would take it,” the ex-secretary wrote in “On The Brink.”

Although the book isn’t scheduled for release until Feb. 1, Bloomberg News purchased a copy at a New York bookstore.

The government was able to facilitate the merger of Bear Stearns Cos., a failing New York investment bank, and JPMorgan Chase & Co. by having the Fed guarantee $29 billion of Bear Stearns’s assets. A similar rescue of Lehman proved impossible because a deal to sell the investment bank couldn’t be completed, Paulson wrote. The executives gathered at the New York Fed also concluded Lehman had overvalued its assets by at least $37 billion, he said.

“The toxic quality of Lehman’s assets would have guaranteed the Fed a loss,” Paulson 63, wrote, meaning the central bank couldn’t legally make a loan.

The U.K. government ultimately was responsible for forcing Lehman into bankruptcy, Paulson said. Lehman executives had reached a deal to sell the bank to Barclays Plc, a British bank, on Saturday, Sept. 13.

Chief Executives

The same day, the chief executives of the other New York banks gathered at the New York Fed had agreed their firms would, along with Barclays, collectively finance the Lehman shortfall, Paulson said. The group included Lloyd Blankfein of Goldman Sachs Group Inc., John Mack of Morgan Stanley, Jamie Dimon of JPMorgan Chase, Vikram Pandit of Citigroup Inc., Brady Dougan of Credit Suisse Group AG, and Robert Kelly of Bank of New York Mellon Corp. They agreed to backstop the deal even though under mark-to-market accounting rules, they would have to immediately recognize a $10 billion loss on the Lehman assets, he wrote.

The U.K. government, however, refused to waive a requirement that Barclays submit the deal to a shareholder vote, in spite of a personal plea by Paulson to Chancellor of the Exchequer Alistair Darling. Darling, Paulson wrote, was concerned that if Lehman’s bad assets hurt Barclays, it might affect the entire U.K. banking system.

“The British screwed us,” Paulson, a former chairman of Goldman Sachs, said he told the U.S. bankers the next day.

Accounts Frozen

The former Treasury secretary said he, Geithner, and Fed Chairman Ben S. Bernanke were well aware the bankruptcy of Lehman would cause havoc in financial markets, although the consequences were much worse than they had anticipated. That was in part because Lehman’s U.K. bankruptcy receiver, PricewaterhouseCoopers, froze all of the firm’s accounts in that country, refusing to transfer collateral back to Lehman creditors, Paulson said.

Panicked investors then tried to withdraw funds from other financial institutions, including Morgan Stanley and Goldman Sachs, and credit markets froze. Concerned that publicly admitting the government couldn’t help them would lead to a run that would bankrupt those firms, Paulson said he maintained at the time the government wouldn’t help because it would contribute to moral hazard, a belief the government would always bail out investors.

‘Strict Line’

“In retrospect I’ve come to see that I should have been more careful with my words,” Paulson wrote. “Some interpreted that to mean that we were drawing a strict line in the sand about moral hazard, and that we just didn’t care about a Lehman collapse or its consequences. Nothing could have been further from the truth.”

Paulson wrote that he personally liked Lehman chief executive Richard Fuld, and had made more than 50 phone calls to Fuld, discussing ways to save Lehman, in the months between the Bear Stearns rescue and Lehman’s bankruptcy.

Fuld “was direct and personable, a strong leader who inspired and demanded loyalty,” Paulson said. “But like many ‘founders’ his ego was entwined with the firm” and Fuld waited too long before making a serious effort to sell the company, Paulson wrote.

Bear Stearns savior Jamie Dimon is described in the book as “technically proficient and deeply self-assured.” Other bank executives, however, were convinced Dimon was working against them in an effort to put them out of business, Paulson wrote.

He praises Bernanke as “easily one of the most brilliant people I’ve known,” and Geithner, the current Treasury secretary, for his “keen analytical mind and a great sense of calm.”

‘Scary Smart’

Democratic Representative Barney Frank of Massachusetts, chairman of the House Financial Services Committee, is “scary smart, ready with a quip and usually a pleasure to work with.” During the crisis, however, Senate Finance Committee Chairman Christopher Dodd, a Connecticut Democrat, was “distracted by his unsuccessful campaign” for president, Paulson said.

Much of the crisis played out during the 2008 presidential campaign, and Paulson said he spoke often with Democratic candidate Barack Obama. “I was impressed with him,” he wrote. “He was well informed, well briefed, and self-confident,” Paulson said. “The day after the election, Obama abruptly stopped talking to me.”

Sarah Palin

He spoke less frequently with Republican candidate Senator John McCain of Arizona, and he did not get along with vice presidential candidate Sarah Palin, then the governor of Alaska, according to the book.

“Right away she started calling me Hank” during the first briefing he gave her, Paulson said. While almost everyone addressed him by his nickname, “for some reason, the way she said it over the phone like that, even though we’d never met, rubbed me the wrong way.”

Paulson also wrote that Chinese officials were very helpful during the crisis. He spoke often with Wang Qishan, vice premier of China’s financial and economic affairs, who pledged his country wouldn’t sell its large holdings of U.S. Treasury and agency bonds.

Russia, however, tried to take advantage of the turmoil in U.S. markets, he wrote. While he was attending the Summer Olympic Games in Beijing in early August 2008, he learned that “top-level” Russian officials suggested to the Chinese that the two countries sell a large amount of the Fannie Mae and Freddie Mac bonds they owned in order to force the U.S. to bail out those firms.

The Chinese refused, Paulson said.

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Anheuser-Busch InBev said Thursday that it plans to fire 10 percent of its work force in Belgium, home to its international headquarters.

The world’s biggest beermaker blamed the cuts on Belgians drinking less beer. A total of 263 jobs out of about 2,700 will be lost. Cuts include 73 executives.

The company also planned to close a brewery in Luxembourg, moving production of beers like Diekirch and Mousel to other facilities. Job losses also come from changing distribution patterns.

One industry analyst said the layoffs reflect A-B InBev’s relentless focus on cutting costs, a pressure that would exist even without the $17 billion debt remaining from the $54.8 billion acquisition of Anheuser-Busch by InBev in 2008.

"These guys are just obsessive about constantly cutting costs. It’s just an obsession," Trevor Stirling, senior research analyst at Sanford Bernstein in London, told the Post-Dispatch on Thursday no teletrack payday loans.

The job cuts in Belgium show that A-B InBev does not expect to find all of its cost-savings by slashing jobs in St. Louis, home to the company’s North American headquarters.

But the company has wielded a heavy ax in St. Louis, slashing 1,000 employees from a work force that once numbered 6,000.

In Belgium, the job cuts were met with displeasure by a union official.

"InBev promised us that they will try to avoid forced layoffs through early retirement," Carlo Rombauts with the ABVV union told Bloomberg News, "but we’re contemplating actions right now."

Last March, A-B InBev said it hoped to ferret out $2.25 billion in cost-savings over the next three years.

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Sheikh Mohammed bin Rashid Al Maktoum wanted to turn Dubai into a global hub for finance and tourism, the next London or Hong Kong. To help execute his vision, the ruler relied heavily on Dubai World, the web of state-owned companies that includes everything from DP World, which operates 49 ports across the globe, to property developer Nakheel to investment arm Istithmar World.

Unlike Abu Dhabi, the wealthy emirate to the southwest, Dubai had little oil production to fuel its efforts. Instead, lenders poured more than $100 billion into Dubai, at least $34 billion of which went to Dubai World. Now, Dubai World is at the center of the mess in the emirate, Bloomberg BusinessWeek reported in its Dec. 14 issue. Executives at the holding company are scrambling to renegotiate $26 billion in debt, which the government said it may not back.

The clock is ticking: Roughly $3.5 billion of the debt comes due on Dec. 14. “Dubai World is an example of too big to fail but also too big to guarantee,” says Rachel Ziemba, a senior analyst at Roubini Global Economics, a research firm. Dubai World declined to comment.

Regardless of the outcome, Dubai World may have to temper its global ambitions. Already, advisers are assessing the portfolio to figure out what holdings can be sold to raise cash. The conglomerate likely will retain control of its infrastructure assets such as the ports, which are the emirate’s crown jewels. But its global real estate and retail holdings may be auctioned off to the highest bidder. Abu Dhabi may go after some pieces in exchange for bailout money, say analysts.

‘Sovereign Halo’

The blurry lines between Dubai World, the corporate entity, and Dubai, the sovereign state, only make the restructuring process more unpredictable than that of a typical private company. In the end, the fate of Dubai World may be determined by the families that have governed the region for over a century, rather than investment bankers on Wall Street.

“This may just come down to one sheikh calling another,” says a senior adviser, who’s currently working with Dubai World.

Dubai World’s debt might never have hit such unsustainable levels if bankers had peeked behind the curtain. But most figured the emirate, or its neighbor Abu Dhabi, would bail out the businesses if they ran into financial trouble. The belief was so strong that both lenders and Dubai World executives referred to the “sovereign halo” around the enterprise.

“Lenders weren’t looking too hard into what entity was actually backing the debt,” says Eckart Woertz, an economist at the Gulf Research Center in Dubai. “There was an implicit sovereign guarantee, which the government didn’t discourage.”

‘Bowl of Spaghetti’

Internal documents only underscored that notion. Dealmakers that worked with creditors relied on a highly complicated, labyrinthine chart detailing Dubai World and all its related entities.

“It’s a bowl of spaghetti in terms of their corporate structure,” says a top U.S. executive with extensive dealings in the region. “There are so many different companies and companies within companies.”

But the document pointed to one reassuring thing: The Dubai government owned 100% of Dubai World. Lenders that did try to dig into the organization got a fuzzy picture. Dubai World didn’t typically disclose its complete portfolio or provide financials to any of its creditors.

“The banks understood that regular, fully audited reports from Dubai World were simply not available and not to be asked for,” says Chris Turner, a former director of risk and asset management at Istithmar World.

‘Jelly to a Wall’

He estimates that Western banks gave Dubai World at least $15 billion in 2006 and 2007 without looking at the numbers. Turner, who was found guilty in absentia of embezzlement last month, maintains his innocence in the matter: “I fully intend to litigate and defend my actions in a court of good standing” outside of Dubai.

Even Dubai World didn’t know exactly what it owned, according to Turner. In 2007 he started to build a list of all the real estate holdings at Istithmar World, including their current value. His team spent almost a year on the project, a task that Turner said should have taken a few months. Some loan documents and sale agreements were found in a file cabinet in an office that had been empty for months.

“Being a risk officer there was like nailing jelly to a wall,” he says paydayloans.

RBS, HSBC Loans

In a recent report on the debt restructuring published by Moody’s Investors Service, the credit rating company refers to the “limited availability of information regarding the consolidated finances and debt burdens of state-owned enterprises.”

Despite the lack of transparency, Dubai World had no problem borrowing money. British financial firms, including Royal Bank of Scotland and HSBC, arranged about $4.4 billion of the conglomerate’s loans, according to a report by Bank of America Merrill Lynch. HSBC and Royal Bank of Scotland declined to comment.

Dubai World used the cash to fund a flurry of purchases. But dealmakers did so at the height of the credit boom, paying a premium for their global aspirations. The company shelled out $665 million for two New York hotels, the W Union Square and the Mandarin Oriental, whose sale prices each broke a local record of $1 million per guest room, according to Real Capital Analytics. It also has a 50% stake in CityCenter, a resort and casino development on the Las Vegas Strip that’s opening this month.

“They defined the peak of the real estate bubble,” says Dan Fasulo, managing director of Real Capital Analytics.

‘Burning Through Cash’

Now pieces of the portfolio may be sold to pay off creditors. A group of outside advisers is working with Dubai World to assess the damage and figure out the next steps. For example, AlixPartners, a New York restructuring firm, is dealing with the various businesses owned by Dubai World on potential divestitures and layoffs.

“The advisers will review Dubai World’s portfolio, focusing on assets where there is still equity that can be sold as well as those that are burning through cash,” says Fasulo.

In a statement, the conglomerate said Port & Free Zone World (the parent of DP World), Infinity World Holding, and Istithmar World would be excluded from the debt restructuring because of the units’ “stable financial footing.”

CityCenter, the largest-ever privately financed construction project in the U.S., may be one of the easiest assets for Dubai World to sell. The $8.5 billion project has a relatively small debt load. That could make it more appealing to prospective buyers than other assets in the conglomerate’s portfolio.

Vultures Circle

Some properties may be wrested from Dubai World’s control. Troubled loans backed by the W Union Square will be auctioned this month. The winner could use them to gain control of the luxury hotel, according to Real Capital Analytics.

The Mandarin, which is suffering from the slump in travel, may not have enough money to cover debt payments, say analysts. If the hotel does fall behind, pieces of the debt may be up for grabs, too.

Already, opportunists are circling. Private equity firms, such as Los Angeles’ Colony Capital and Starwood Capital in Greenwich, Conn., are checking out real estate, according to people familiar with the matter. Hedge fund Perry Capital, which owns debt backed by Barneys New York, has been approached by investors, including Toronto department store Holt Renfrew, about a takeover of the retailer.

Dubai World will have to be cautious not to unload assets too quickly in the current environment.

Cherry-Picking Assets

“Any desperate fire sale would further limit the amount of cash they can raise,” says Ziemba of Roubini Global Economics.

Regardless, Dubai World faces some steep losses on any sales. The company paid $1 billion for Barneys in 2007. Earlier this year bankers valued the retailer at less than half that.

Abu Dhabi likely will keep close watch on the process. The emirate, which has agreed to provide as much as $15 billion in financial support to Dubai, may offer additional funds to its profligate neighbor.

There may be strings attached this time. Some analysts think the capital of the United Arab Emirates may ask for equity in some assets, cherry-picking those that fit within its own regional dreams. That could include parts of the infrastructure assets, including the ports.

“Abu Dhabi is standing by Dubai, but it won’t be giving a blank check,” says Philipp Lotter, a senior vice-president at Moody’s. “It has drawn a line in the sand.”

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Federal Labour Minister Rona Ambrose is urging the union representing striking Canadian National Railway locomotive engineers to accept binding arbitration as management tried to keep the trains running Saturday.

Ambrose said in a statement she’s "disappointed" the Teamsters union and CN couldn’t reach an agreement before some 1,700 engineers across the country walked off the job Friday at midnight.

Despite sharing several railways in the GTA, CN representatives say GO Transit will not be affected by the engineers strike.

Ambrose said CN has already agreed to binding arbitration and the government is ready to appoint an arbitrator once the union gives its approval.

The Teamsters did not immediately respond Saturday to Ambrose’s statement.

The union has said a strike could have been postponed had the railway agreed to negotiate and not impose a 1.5 per cent wage increase and new mileage caps.

CN made contractual changes after three days of negotiations broke off Nov. 20 following 14 months of talks.

The Teamsters Canada Rail Conference (TCRC) responded by issuing a 72-hour strike notice, saying CN was effectively locking out employees by unilaterally changing the terms of the collective agreement.

TCRC president Daniel Shewchuk said in an interview Saturday that while the union made "substantial movement" during Friday’s talks, the railway wouldn’t budge.

The union has said raising the mileage cap – the maximum distance engineers can travel in one month – by 500 miles to 4,300 mileswould require some workers to work seven days a week, with no time off, and cause layoffs. CN says its locomotive engineers work on average 37 hours a week, and the new cap would increase that to 41 hours.

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Japanese Finance Minister Hirohisa Fujii said the government is watching currencies “very closely” after the yen advanced to a 14-year high against the dollar, threatening the country’s export-led recovery.

“If currencies make abnormal movements, we may need to take appropriate action,” Fujii told reporters in Tokyo today. “Now we’re at the stage where we need to closely monitor movements in currency markets.”

The comments suggest Japan is closer to stepping into currency markets for the first time in more than five years as the rising yen erodes exporters’ profits in the wake of the country’s worst postwar recession. The currency’s more than 8 percent advance over the past three months has also added to Japan’s deflationary pressure by driving import costs lower.

“The possibility of intervention has apparently increased,” said Masafumi Yamamoto, Tokyo-based chief foreign- exchange strategist at Barclays Bank Plc. “Stocks have been falling and the government declared Japan is in a deflationary state. In this environment, there’s no reason for it to tolerate a higher yen.”

The yen rose to 86.91 per dollar at 9:16 a.m. in London, after climbing to 86.30, the highest since July 1995. The Nikkei 225 Stock Average slid 0.6 percent to a four-month low.

Fujii, 77, said yesterday that the dollar’s weakness is spurring the yen’s advance. Today he said “a strong U.S. dollar is in their national interest. There is no change in our support for that.”

‘Huge Risk’

Manufacturers are contemplating shifting operations abroad because the yen’s gains make it costlier to run factories at home. A stronger yen would be a “huge risk” to producing autos in Japan, Nissan Motor Co. Chief Operating Officer Toshiyuki Shiga said this month.

“There is no doubt that the yen’s strength, if it accelerates further, would affect” exporters’ profits and the economy, said Chief Cabinet Secretary Hirofumi Hirano told reporters. “We must carefully assess the impact. If that happens, the government would be asked to respond.”

Hirano said he spoke with Fujii about the currency’s surge today without discussing intervention.

Japanese authorities haven’t stepped into the currency market since the first three months of 2004, when it sold a record 14.8 trillion yen ($171 billion). Fujii had spurred some of the yen’s gains after he took office in September by saying he opposed “easy intervention.” He has since toned down his remarks by saying Japan will act if currency moves are “abnormal or disorderly.”

Fujii’s ‘Discretion’

Vice Finance Minister Yoshihiko Noda said the government isn’t considering stepping into the currency market now, Reuters reported earlier today. He later backed away from the remarks, saying at a news conference that yen policy “is under the minister’s discretion” and declining to comment on the possibility of government action.

“The chances of intervention would increase if the dollar-yen breaks below 85,” Tomoko Fujii, a foreign-exchange strategist at Bank of America-Merrill Lynch in Tokyo, wrote in a report published today. “Intervention backed by a monetary policy change is more effective than intervention without supportive monetary policy action.”

Fujii at Bank of America-Merrill Lynch said it’s unlikely that the U.S. would join Japan in stepping into foreign- exchange markets, barring a “meltdown caused by a dollar crisis.” Expectations for the Bank of Japan to add liquidity to the economy will grow should the yen’s gains “sharply” lower stock prices, hurt business sentiment and exacerbate deflation, she wrote.

Deflation’s Return

The government last week said Japan was in a “mild deflationary phase.” Price declines blighted Japan during its so-called lost decade of stagnation after an asset bubble burst in the early 1990s.

Meanwhile Finance Minister Fujii said yesterday that China’s currency is probably too weak, backing calls from the U.S. and Europe to let the yuan appreciate.

“It can’t be helped that people see the yuan as undervalued given the strength of the Chinese economy,” Fujii said in an interview in Tokyo. “The yuan is pegged to the dollar. I don’t think such a situation is necessarily good.”

The remarks are Fujii’s strongest on the Chinese currency since he took office in September, adding to concerns voiced by officials including European Central Bank President Jean-Claude Trichet this month about the yuan’s flexibility. The yuan’s peg to the dollar has sheltered China from the slide in the U.S. currency that’s making Japanese and European exports more expensive.

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Delta Air Lines Inc. has renewed its vendor contract with gategroup, parent company of food contractor Gate Gourmet.

The multi-year extension, valued at more than $1 billion in revenue over the life of the contract, also involves gategroup subsidiaries Gate Safe, eGate Solutions, Pourshins and deSter, the company said in a Wednesday news release.

“Delta is a leading customer for gategroup and its brand companies and has been for more than 50 years,” Guy Dubois, gategroup CEO, said in a statement. “We're delighted to call the world's largest airline one of our top customers. The scope of this business validates gategroup's strategy of building a brand portfolio that provides end-to-end solutions to the travel industry, and demonstrates the cross-selling power of the brands.”

The deal with Atlanta-based Delta (NYSE: DAL) covers 40 airports worldwide and expands catering service to airports in Amsterdam, Fort Lauderdale, Fla electronic check payday advance., Los Angeles and Newark, N.J.

Gate Safe, the catering screening and security subsidiary of Zurich-based gategroup, will expand to serve all Delta, Northwest and Delta Connection stations currently served by Gate Gourmet in the U.S.

The contact also extends agreements with eGate and Pourshins, the company’s in-flight catering management and food, beverage and equipment sourcing and logistics arms.

"Consistency of product delivery is a key component of Delta's brand experience for our customers," Joanne Smith, Delta senior vice president of in-flight services, said in the release. "The complete integration of catering solutions is another important step in bringing together the best of Delta and Northwest."

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AOL plans to cut one-third of its workforce, or about 2,500 jobs, in an effort to trim some $300 million in annual costs as part of the Internet company’s planned spin-off from Time Warner Inc.

The struggling Web pioneer, which is now focused primarily on advertising-supported content, said on Thursday that it would start with a volunteer buyout program and move on to involuntary layoffs if enough workers do not step up.

AOL said the layoffs would result in restructuring charges of up to $200 million, which it announced last week. It said that substantially all the charges would be incurred from the date of the spin-off through the first half of 2010.

Earlier this week, Time Warner said the spin off will take place on December 9, nine tumultuous years after one of the most disastrous corporate mergers in history.

When AOL’s plan to merge with Time Warner was announced in January 2000, the Internet company was valued at $163 billion.

The combination was meant to herald the future of content distribution via the Internet, but the promised benefits were never achieved.

The December spin-off is expected to effectively value AOL’s market capitalization at around $3 billion .

AOL said that Chief Executive Tim Armstrong told employees of the layoff plan via video and email, and said that he was going to forgo his own bonus for 2009.

Armstrong, formerly at Google Inc, was appointed in March to prepare AOL for becoming an independent entity.

The company, which has been examining its cost structure for the last four months, said the voluntary layoff program will begin on December 4 and run through to December 11, and gives people more choice than if they waited for final cost recommendations.

The layoffs start in the United States, where AOL employs about 4,500 people, and will extend to the company’s global operations, the company said.

Time Warner shares were down $1.12, or 3.4 percent, to $31.70 on the New York Stock Exchange. The overall Dow Jones Industrial Average is down 1.3 percent on the day.

(Reporting by Franklin Paul and Sinead Carew; Editing by Derek Caney)

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The European Ombudsman rebuked European Union regulators on Wednesday for procedural errors in their antitrust probe of Intel but the censure will not affect a 1.06 billion euro ($1.58 billion) fine against the U.S. chipmaker.

The European Commission levied the record fine in May for illegally shutting out rival AMD. The ombudsman’s decision is non-binding but it could help the world’s No. 1 chipmaker in its appeal against the ruling to Europe’s second-highest court.

While the European Ombudsman can only make recommendations, he is one of the few independent checks on the Commission’s antitrust agency, which critics say acts as judge, jury and prosecutor against companies. In his report, Ombudsman P. Nikiforos Diamandouros said he “found maladministration on the grounds that the Commission failed to make a proper note of a meeting with computer manufacturer Dell relating to the Intel investigation.”

He did not make any finding as to whether the EU executive had infringed Intel’s rights of defense.

The ombudsman also did not make a finding of maladministration over Intel’s second allegation that the Commission had encouraged Dell to enter into an information exchange agreement with AMD.

The Commission said it did not agree with the ombudsman’s finding that it should have prepared a formal note on the meeting and said it had given Intel the chance to comment on the non-confidential version of the internal note cash till payday.

“Such internal notes are normally not accessible since they also reflect the Commission’s investigative strategy which parties do not have a right to access,” the EU executive said in a statement.

“Intel’s rights of defense were fully respected throughout the procedure.”

Intel said the ombudsman’s decision validated its charges.

“Intel has consistently said that DG Comp ignored evidence that was potentially exculpatory for Intel and that it was selective in its use of other evidence,” the company said in a statement, referring to the Commission’s Directorate-General for Competition.

The ombudsman’s confidential decision was sent to the Commission and Intel in July this year, before Wednesday’s non-confidential decision was released following consultation with Intel, Dell and AMD, the ombudsman said.

($1=.6712 Euro)

(Reporting by Foo Yun Chee; editing by David Brunnstrom and David Cowell)

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Lehman Brothers Holdings Inc has filed a lawsuit against Barclays Capital Inc alleging the British bank took control of excess assets in collusion with Lehman executives when it bought its U.S. brokerage business a year ago, court documents show.

Lehman filed for bankruptcy on September 15, 2008, in the largest U.S. bankruptcy in history. Its flagship U.S. brokerage business was sold to Barclays less than a week later in a hurriedly assembled deal.

Lehman said in September this year that Barclays Capital got an $8.2 billion “windfall profit” due to the fire sale of its business for an undisclosed $5 billion discount off the book value of securities transferred to Barclays.

“The windfall to Barclays was not disclosed to the Court, the Lehman Boards or Lehman’s lawyers so as to allow the transfer to Barclays of billions of dollars in excess assets, without consideration, in a manner designed to avoid judicial, corporate and creditor oversight,” Lehman said in a Monday court filing.

The charges come after Lehman received approval in June to probe whether Barclays got “too good of a deal” when it bought Lehman’s brokerage business, as the British bank was able to quickly book a $4 direct lender payday loans.2 billion gain on its $1.75 billion purchase.

Barclays said at the time that it did not expect the probe to result in any additional claims.

In the lawsuit, Lehman requested the court to order Barclays to “disgorge to Lehman any ill-gotten gains it obtained” and pay punitive damages.

A Barclays Asia spokesman said in an email that all queries on the lawsuit should be directed to its New York office. Barclays’ New York officials were not immediately available for comment, outside of normal U.S. hours.

The case is In re: Lehman Brothers Holdings Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555. (Reporting by Supantha Mukherjee and Ajay Kamalakaran in Bangalore; Editing by Muralikumar Anantharaman)

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