Tony Lomas laughs. "From a very early age, you know, I always wanted to be an accountant. It's true. My mother worked for the tax office and she always said: 'If you want to be a businessman you should first train to be an accountant." And she suggested Price Waterhouse because she said she dealt with them more than any other firm."
Her boy went on to be an accountant alright. Today, Lomas is the lead partner for what is now PricewaterhouseCoopers on the mightiest financial collapse of all, the administration of Lehman Brothers. He's already got the debacles at Maxwell, Polly Peck, Enron and MG Rover to his bow but Lehman, which went down almost exactly a year ago, dwarfs them in terms of its detail and scale. "I'm 52 and I will work until I'm 60," says Lomas. "Will this case outlive me? Yes it will."
We're sitting in what used to be the Lehman European boardroom on the 30th floor of what was the Lehman tower at Canary Wharf. The place is nothing like it used to be. I remember going there for lunch with Lehman when we were treated to a meal that would have done Le Gavroche proud. That was after we'd admired the fine art on display and sipped the superb wine. That's all gone. The walls are completely bare and there is no sign of anything that could remotely smack of high living.
Lomas, too, is very different from those investment bankers. He's tall, lean, ascetic in appearance. He earns a handsome living from what he does but there's no danger of his buying a luxury yacht or a grand villa. Oh no. "I live in Loughton and I like to spend time with my family when I'm not working [he has two sons]. I've got an old Mercedes AMG that I like to drive round the country lanes. For holidays we go to a log cabin in Canada."
Even then, you just know, he's thinking about his work. "I can talk about it for hours," he says, chuckling. Its miserable nature, sweeping up the pieces of a shattered business, doesn't perturb him either -- "If somebody needs an undertaker it might as well be me," he says, laughing again.
On Monday, 15 September last year, he was appointed to sort out the bloated corpse that was Lehman Brothers International (LBI).
So how does it work, I say, do you suddenly drop everything, and the next decade of your life is sorted? He shakes his head, smiling. "There had been discussions with the Lehman board. In theory, there is competition for this type of work but Ernst & Young couldn't do it because they were the audit firm and any others that could conceivably do it also had material interests with Lehman around the world. We'd checked our relationships with Lehman and we were fine. I knew on the Friday it was likely to go down but I still didn't head home expecting a phone call. I was shocked to get it; shocked to hear the news there was no deal in New York."
Since then PwC has run up a bill that currently stands at a staggering £77 million. "We have 230 full-time PwC staff working on Lehman, plus 400 original Lehman employees still working with us. Then Linklaters have 50 to 75 lawyers at helping us."
Even so, isn't PwC milking the disaster? "No, it's costing so much because of the complexity of what we're dealing with. Lehman Brothers International deployed 4000-odd bankers. It covered the full range of investment banking activities."
PwC, says Lomas, "has just settled with a big investment bank [he won't identify the bank] which was a counter-party of Lehman, for it to pay more than $500 million (£307.9 million). That's half a billion from one party. Their team and ours had to look at 10,000 line items. That's 10,000 sets of calculations and valuations that took months to do. The other bank still operates -- it's got the infrastructure, the staff. It knows where to find things. We're not in the same position -- we don't have that advantage."
There were thousands of such counterparties and millions of transactions -- at the moment the plug was pulled, Lehman in London was involved in 2.5<26>million trades, in derivatives and other financial instruments, that were simply frozen. They all have to be unwound and appraised.
Often, says Lomas, PwC's progress is hindered by the other side not being specific as to which part of the Lehman empire it was dealing with. Incredibly, despite a year having passed, some investment banks are still unable to reconcile their books so that they can make a claim. And until they do, nothing can begin to be resolved. "One counterparty owes Lehman more than $1 billion but they're not at the stage where they've reconciled any possible claim against us," says Lomas, shrugging at the madness of it all.
Then there's the former parent in New York. Lomas and his colleagues are putting the finishing touches to lawsuits against the old Wall Street operation for $100 billion. The US bankruptcy court has set a deadline of 22 September for all creditors to file their claims.
More than 100 separate units of Lehman came under the London banner and now fall under Lomas's remit. Their obligations were guaranteed by New York, so "we are going to be filing claims in the many tens of billions. It will be close to $100 billion".
Lomas was knocked back in the English court last month when he tried to gain acceptance for a single scheme of arrangement under which LBI could repay its creditors. It would have speeded up the administration but the judge would not give approval.
"It was a setback," he admits. "We disagree with the judge on the legal aspects. We'll appeal it and we will also work on modifying the proposal."
Look, he says, "there are three types of creditor we're having to deal with. There's the guy who has got an asset inside Lehman and he wants it back. But we can't give it back until we're satisfied there isn't someone with a better right to it. Then there's the guy with an unsecured claim, who was a counterparty, for example on a derivatives trade. But we can't pay them until we know how many such claimants there are and how much they're claiming. Then there are the employees. LBI employed people in 15 foreign countries where the labour legislation may be different from here -- in Italy and France for example, an employee has greater rights and is able to make a claim against the estate".
He expects the bulk of the administration to be dealt with in the first two years of the bank's fall -- "although a lot rests on us achieving an alternative outcome from the court to our scheme of arrangement." But there will be cases that drag on and if past form is a guide, for longer than 10 years.
One way of avoiding something as convoluted as the Lehman fallout in future is to prevent banks becoming so large. But that is unlikely to happen. However, it would help, says Lomas, if there was a greater understanding of risk and a bank had a greater knowledge of its relationships across all its activities. "At Lehman, the risk officer wasn't on the main board, which says something about the culture of the place. And the bank had 1500 different operating platforms, many of which didn't take account of each other."
He was also involved in the Northern Rock crisis and saw at first hand what a loss of confidence can do to a bank and how suddenly it can drain away. There ought to be a method, he suggests, of accountants and lawyers going in at the first sign of trouble -- at Lehman that could have been six months prior to last September -- and working to ensure that if the end does arrive, everything is in some sort of order.
There was another solution to Lehman's woes, one which he is in no doubt would have been better for all concerned. "Lehman should have been taken over," he says. "Bank of America took over Merrill Lynch, JP Morgan took over Bear Stearns. Lehman should have been absorbed into another entity and the balance sheet unwound."
But there was no takeover and, to his obvious pleasure, Lomas got that phone call.
LIFE AND TIMES OF TONY LOMAS
--Born: 1957
--Education: St Michael's Comprehensive School, Stevenage; University College London (degree in geography)
--First job: trainee accountant, Price Waterhouse
--Key moves: auditor for six years; worked for firm's "intensive care unit", dealing with businesses in trouble; involved in cleaning up Maxwell, Polly Peck, Enron and MG Rover collapses; lead partner on Lehman administration
--Hobbies: Spending time with his family, cars
Source: The Evening Standard, London
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