Jonathan Weil:Lehman`s deals leave public in dark

One step to avoid would be any action that might create needless public uncertainty about your company's finances, because investors' greatest fear is of the unknown.

So what does Lehman do? It sells billions of dollars of assets to a newly formed hedge fund that:

1. Counts Lehman as a significant investor;

2. Is run by seven recently departed Lehman executives;

3. Is operating out of Lehman's office space, three floors down from the office of Lehman's corporate secretary.

You don't need to know much more about Lehman's transactions with the fund, R3 Capital Partners, to see the problem.

There's no way for outsiders to ascertain whether Lehman's dealings with R3 were at arm's length, as Lehman and R3 say they were. And the last thing Lehman needs is for sceptical investors to be worrying about whether it is engaging in any opaque related-party transactions. Lehman isn't providing much information about its dealings with R3, and hasn't mentioned the fund in its Securities and Exchange Commission filings. Some details about their relationship have been trickling out in news reports, including a June 18 article by Bloomberg News reporter Yalman Onaran.

Here are the basic facts I was able to gather:

Unidentified Investor

As of June 12, one fund managed by R3 had raised $1.08 billion from a single unidentified investor and was seeking to raise $4 billion more from others, according to a Form D disclosure that R3 filed with the SEC.

Lehman has invested about $1 billion in R3, said Thor Valdmanis, a spokesman at R3's public relations firm, FD. (After he told me this, Valdmanis asked me not to use the information, saying he wasn't authorised to divulge it.)

Later, in a written response to my questions, R3 said it "is a wholly independent fund and has raised money from a variety of outside investors'' and that Lehman "is one of several passive, minority investors in the fund''.

A Lehman spokeswoman, Catherine Jones, declined to say whether Lehman was the unidentified investor cited in R3's SEC filing. Jones said Lehman "has sold approximately $4.5 billion of assets to R3 since its inception in May 2008,'' all of which "were previously managed by R3 Capital team members when they worked at Lehman".