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Lehman’s huge NYC tax bill

June 29, 2009

New York City wants Lehman Brothers’ outstanding tax bill paid off now–or at least before any other creditor gets money in the bankruptcy case.

Earlier this month, the city tax office filed a $626,999,222 claim against Lehman’s bankruptcy estate. In the official notice, NYC says its claim should be “allowed and paid in full as a priority claim in advance of any distribution to creditors.”

The claim form also gives a Brooklyn, NY address for the NYC Dept. of Finance where a check can be mailed to.

Now, the city shouldn’t expect its check to arrive in the mail anytime soon. It’s been more than 9 months since Lehman collapsed in bankruptcy and the mega-case is nowhere nearing being completed. In fact, big creditor claims keep coming in every day.

So far, NYC’s tax bill ranks as the third largest claim filed in the bankruptcy. The largest claim against Lehman’s estate is a $2.1 billion filed by its former thrift, Lehman Brothers Bank, which was the hub-and-spoke for the former investment bank’s mortgage lending business. Expect a lot of creditor objections to that claim ever getting paid.

The largest claim filed by a former Lehman employee is a $233 million one from former COO Joseph Gregory. Last summer, Gregory was pushed out by ex-Lehman CEO Dick Fuld as the firm began ebbing towards its September collapse. Gregory’s claim represents deferred compensation and “equity awards” outstanding at the time of the bankruptcy filing.

Lehman’s collapse caused a lot of hurt to Gregory’s lifestyle. In December, The New York Observer reported that the former Wall Street executive put his $32.5 billion Long Island mansion up for rent. And that was after he sold his 610 Park Avenue apartment for $4.4 million. Poor guy.

Meanwhile, expect the pace of claims filings to pick-up as we approach the one-year anniversary of Lehman’s bankruptcy filing. The bankruptcy judge hasn’t set a deadline for filing claims. But there’s a sense the judge may be getting ready to do that as the one-year anniversary approaches.

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