Lehman Execs Strike $2M Settlement With American Eagle, Tribe

Shopping mall staple American Eagle Outfitters Inc. and a California Indian tribe are set to reap more than $2 million from settlement deals struck with several former Lehman Brothers Holdings Inc. executives, including ex-Chief Executive Dick Fuld.

Lehman, on behalf of its former executives, is seeking bankruptcy court permission to make settlement payments to the retailer and Tule River Tribe with funds from a directors and officers’ insurance policy.

According to court papers, the settlements stem from allegations that the executives violated securities law in connection with American Eagle’s and the tribe’s respective investments in auction-rate securities.

Auction-rate securities were a popular debt instrument until the market for them froze in late 2008. Since then Lehman and other investment banks have squared off with auction rate securities investors who are stuck in what’s become an illiquid market.

The charges leveled by American Eagle and the tribe are currently pending in arbitration before the Financial Industry Regulatory Authority, Wall Street’s self policing body.

Under the settlement deal, the Tule River tribe would be paid $1.5 million and American Eagle would take $560,000 in exchange for dropping the pursuit of their claims and providing releases to Lehman and the executives.

A hearing to determine if Lehman can tap the insurance fund to pay the settlements is set for March 23 at the Manhattan bankruptcy court.