For a bank that went belly-up just shy of a dozen years ago, the mummified remains of Lehman Brothers have proven remarkably adept at continuing to make money. Lots of money. Billions upon billions of dollars.

And one of Lehman’s most lucrative business lines over the past few years has been litigation: $1.74 billion in collateral seized by Citi came home. $3.74 billion was freed up in one case, upwards of £8 billion in another. But the people who run the desiccated corpse of Lehman like a marionette don’t win them all, especially when the people who ran it when it was a living, breathing operation—who the current puppetmasters do not think very much of at all, quite frankly—did things like put clauses subordinating the bank’s interests in its highly disastrous synthetic CDOs in case of bankruptcy, which, unfortunately for Lehman’s remaining adepts and its creditors, they were very much allowed to do.

The defunct investment bank can’t recoup the money from insurers, banks and hedge funds that invested in 44 synthetic CDOs written before the financial crisis, according to the ruling issued Tuesday by the U.S. Court of Appeals for the Second Circuit in New York…. Two years after Lehman’s chapter 11, its bankruptcy administrators filed litigation claiming the flip clauses were unenforceable under U.S. bankruptcy law…. Lehman said it was “in the money” on the swaps when they were unwound. But the flip clauses funneled proceeds from the collateral first to noteholders, leaving nothing for the bank on termination payments it said it was owed.

Still, you can hardly blame the administrators for trying.

Senior unsecured creditors have received nearly 46 cents on the dollar, more than double what they were projected to collect when the liquidation plan went into effect in 2012.

Lehman Loses Effort to Recover $1 Billion From Investors [WSJ]

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