(Bloomberg News) Final details of the distribution of billions of dollars of assets as part of Barclays Plc's purchase of Lehman Brothers Holdings Inc.'s brokerage unit were never approved, the judge in the bankruptcy case said.

"Let me be clear about one thing, Mr. Boies," U.S. Bankruptcy Judge James Peck told Barclays' lawyer David Boies yesterday. "I never approved the clarification letter," one of about 12,000 documents filed in the case.

Peck had interrupted Boies as he began closing arguments in the $11 billion trial in Manhattan. The lawyer said the judge had no legal basis for reopening his own sale order because all details of the deal were known at the time. That included a so- called clarification letter allocating extra assets to Barclays.

Lehman, which accuses Barclays of making an $11 billion "windfall" when it bought the brokerage in the 2008 financial crisis, is trying to convince Peck that he has grounds for overturning his own order approving the sale. Peck didn't indicate what effect his statement would have on the details of the brokerage sale.

Peck's remarks may indicate he sees an "opening" to revise the deal more in Lehman's favor, said Stephen Lubben, a bankruptcy law professor at Seton Hall University School of Law in Newark, New Jersey.

"Peck is confirming that he never saw nor approved of the clarification letter," Lubben said. "Now, if he finds it material, Barclay's has a problem." Barclays may feel pressure to settle the case if they interpret Peck's remarks as favoring Lehman, Lubben said.

Kimberly Macleod, a Lehman spokeswoman, and Michael O'Looney, a Barclays spokesman, declined to comment.

Lehman Shares

Lehman rose as much as 4 cents, or 76 percent, to 9.35 cents, before closing yesterday at 7.5 cents, up 42 percent in over-the-counter trading. Lehman volume was more than 10 times the three-month average.

Lehman's $2.5 billion of 6.875 percent 10-year bonds due in May 2018 were unchanged at 23.25 cents on the dollar as of 3:15 p.m. yesterday in New York, according to Trace, the bond-pricing reporting system of the Financial Industry Regulatory Authority. Earlier the bond fell as much as 0.688 cents on the dollar. The bond has risen from 16 cents in October 2009.

Barclays American depositary receipts dropped 54 cents, or 2.9 percent, to $17.88 yesterday in New York Stock Exchange composite trading. They fell as much as 3.6 percent during the session. Each ADR represents four ordinary shares.

Peck may require Barclays to return to Lehman any assets that were included in the deal as part of the clarification letter because the letter wasn't approved by the court, said Chip Bowles, a bankruptcy lawyer at Greenebaum Doll & McDonald PLLC in Louisville, Kentucky. Barclays also may lose its bid to get additional assets, he said.

Not Final

"Judge Peck has made it clear that the clarification order was never approved by the court and in fact never was heard by the court and that means it probably does not have any of the protection the rest of the sale order would have," Bowles said.

Peck could rule "the clarification has no effect whatsoever," Bowles said. "That what's he signaling -- that this is not sacrosanct, this is not a final order of the court."

Peck may make a final ruling in January or February, lawyers in the case have said.

The battle pits bankrupt Lehman, which examiner Anton Valukas said hid billions of dollars in risks before it failed, against Barclays, the sole bidder for the brokerage.

Earlier, Robert Gaffey of Jones Day, Lehman's litigator, said the law is on Lehman's side. Grounds for Peck to revise his own sale order include mistakes or misrepresentation that may be innocent, he told the judge.

Three Lawsuits

Peck is presiding over three lawsuits against Barclays, including one by the Lehman brokerage's trustee, James Giddens, and one by creditors.

Any money Peck awards Lehman would help its creditors, who stand to get 15.8 cents on the dollar on average, and hurt shareholders of Barclays, which reported net income of 2.4 billion pounds ($3.8 billion) in the first half.

Peck, a 65-year-old native New Yorker, was the Manhattan court's second most-junior bankruptcy judge in September 2008 when he was randomly assigned the $639 billion Lehman bankruptcy, the biggest in U.S. history.

SEC Encouragement

His Sept. 19, 2008, order approving the brokerage sale was signed four days after the 158-year-old bank collapsed. The order was encouraged by the U.S. Securities and Exchange Commission and the Federal Reserve Bank of New York, which were seeking to calm global securities markets spooked by the bankruptcy, according to court testimony.

Peck's order allowed Lehman's and Barclays' lawyers to change any documents he had approved, or add documents that weren't finished yet, though he said the changes shouldn't "have a material adverse effect on the debtors' estates" and should be approved by Lehman, its creditors and Barclays.

In the trial, which has been going on since April, Lehman accuses Barclays of taking a $5 billion "secret" profit on a portfolio of securities it acquired with the brokerage, and of making another $6 billion by writing up business assets, skimping on promised payments and "grabbing" more financial assets belonging to Lehman.

Disputed Assets

Some of the disputed assets were assigned to Barclays in the clarification letter filed in court on Sept. 22, 2008, two days after Peck approved the sale.

Barclays says it wants $3 billion of assets that were never delivered. Lehman has no legal right to challenge the transaction now because its advisers knew and documented all the details when the deal was struck, and defended it in a higher court when it was challenged, according to Barclays.

Peck will be reluctant to overturn his entire sale order for "bankruptcy policy reasons," said Bowles. So-called 363 sales, which helped the former General Motors Corp. and Chrysler LLC to reorganize in bankruptcy and created jobs for 10,000 Lehman employees at Barclays, normally are considered final in the courts, he said.

Under Peck, the two-year case has cost Lehman creditors $1 billion in fees to managers and advisers, the most expensive bankruptcy ever. Briefs summarizing each side's evidence are due in late November.

The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).