March 29, 2008 / 8:11 AM / 10 years ago

UPDATE 1-Lehman hit by deal backed by fake Marubeni papers

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TOKYO, March 29 (Reuters) - U.S. investment bank Lehman Brothers was defrauded of around $242 million after it and other investors were caught in a scam in Japan, a newspaper reported on Satuday, with Japanese trading house Marubeni confirming some of its staff were involved.

Another daily, Asahi Shimbun, said Goldman Sachs (GS.N) was also among the investors, citing sources familiar with the issue. The full scale of the scam is not immediately known.

Lehman LEH.N has some 24 billion yen ($242.1 million) outstanding as a result of the deal, which involved fake documents said to be from Japan’s fifth-largest trading firm Marubeni Corp (8002.T), the Nihon Keizai Shimbun reported its morning edition on Saturday.

“Lehman is highly confident that it will recover all of its exposure,” a Lehman Brothers source who asked not to be named told Reuters, but declined to comment on the amount.

Lehman’s Japanese affiliate issued loans to a fund operated by medical consulting firm Asclepius Ltd, a unit of Japanese biotechnology company LTT Bio-Pharma Co 4566.T.

The money was meant to go to hospitals and other institutions for equipment purchases, the newspaper said.

The U.S. investment bank grew concerned when funds were not repaid at the end of February, the Nihon Keizai said, without citing sources.

“Lehman Brothers Japan Inc. today confirmed that it is working closely with the authorities to seek full recovery of funds it believes to have been fraudulently misappropriated from transactions in which an affiliate provided financing,” Lehman said in a statement on Saturday.

Lehman said it has informed the police and is taking legal action against Marubeni.

The potential loss comes at a time of uncertainty for the U.S. investment bank. Last week market speculation that Lehman could suffer a fate similar to the near collapse of Bear Stearns BSC.N pushed Lehman’s shares down almost 9 percent in New York on Thursday. Lehman called the rumours “totally unfounded.”

“Earlier this month, we fired two contract employees for their involvement in using false documents with Marubeni’s name on them to illegally collect money from investors, and we have verbally reported the case to the police,” a Marubeni spokesman said.

In addition to the two Marubeni contract employees, a former LTT senior executive and a former Asclepius official were also believed to have been involved, the Nihon Keizai said. ($1=99.12 Yen) (Reporting by Chikako Mogi; editing by Louise Heavens)

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