By AP Business Writer
updated 3/31/2008 8:17:27 AM ET 2008-03-31T12:17:27

Lehman Brothers filed a lawsuit against major Japanese trading company Marubeni on Monday, demanding US$350 million in damages in an unfolding case of alleged massive fraud.

Lehman Brothers Holdings Inc. is seeking to recoup funding it provided last year to a Japanese health care company. The U.S. bank says employees of Marubeni Corp. helped arrange the deal.

A Lehman Brothers official, who spoke on condition of anonymity citing policy, said the lawsuit demands 35.2 billion yen ($350 million). Other details were not immediately available.

The Tokyo District Court confirmed the lawsuit had been filed.

Marubeni Corp., which has repeatedly denied wrongdoing, said it has not yet seen the lawsuit and could not comment. It reiterated it has no obligation to repay the money.

Marubeni shares tumbled 6.6 percent in Tokyo, on pessimism set off by the fraud allegations, which surfaced over the weekend.

Lehman Brothers spokesman Matthew Russell said in a statement that there will be no financial impact on Lehman because of the merits of the lawsuit, appropriate reserves in the first quarter and insurance coverage.

The alleged fraud is the latest challenge for Lehman amid the global credit crunch. The sudden collapse of Bear Stearns earlier added to the concerns that Lehman and other investment banks may also face liquidity problems.

Tokyo-based Marubeni said in a statement the documents related to the funding were forged, and the transactions were not Marubeni's.

Two former Marubeni employees were duped by the then president of Asclepius, the now bankrupt unit of LTT Bio-Pharma, a medical consulting company, the trading company said.

Marubeni fired the two employees earlier this month after finding they had used an office meeting room illicitly. They had acted as individuals, not as Marubeni employees, the company said.

Marubeni also said an internal investigation had found the two employees had not been directly involved in the document forgery.

Both Lehman and Marubeni say they are cooperating fully with an investigation by the Japanese police.

LTT Bio-Pharma denied involvement in fraud in a statement Monday. It said it fired the president of the unit linked with the alleged fraud earlier this month.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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