Lawyers for Lehman Brothers Holdings Inc. yesterday disputed an argument made by New York State Comptroller Thomas DiNapoli in November that the judge overseeing Lehman's bankruptcy proceedings should appoint a trustee to oversee the company's estate.

But the lawyers did agree that it would be "appropriate" for the court to appoint an examiner with power to investigate various claims, including those of financial transfers between Lehman affiliated companies before the Sept. 15 bankruptcy filing.

DiNapoli's proposed motion to appoint a trustee was based upon "unsubstantiated hyperbole of media reports and unfounded rumors," according to the response filed yesterday in the U.S. Bankruptcy Court for the Southern District of New York. It said Lehman's chief executive officer, Bryan Marsal of restructuring firm Alvarez & Marsal, and the company's board of directors are more than qualified to direct the administration of the estate and that appointing a trustee would not be in the interest of the creditors.

"In lieu of credible evidence, the comptroller has resorted to unfounded accusations, rumors, and gross speculation to accuse the debtors' management, and in particular, the chairman and former chief executive officer, Richard S. Fuld, with gargantuan misconduct, incompetence and mismanagement without a single shred of substantive supporting proof," the filing said. "The comptroller fails to recognize that Lehman was a victim of a financial tsunami that was beyond its control."

A motion filed for DiNapoli - acting in his role as head of the New York State and Local Retirement Systems - argued that Lehman Brothers' board of directors and Fuld are "wholly inappropriate parties to supervise" the company through its bankruptcy. The motion was filed before Fuld stepped down as chief executive officer at the end of 2008.

A hearing on the issue is scheduled for Jan. 14.

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