August 21, 2014

Lehman Brothers' Unsecured Creditors to Get $4.6B Payout

Pension funds, former employees, investment firms, and banks with unsecured claims against Lehman Brothers Holdings are finally getting an initial payout of $4.6 billion. That’s about 71% of the unsecured claims against the broker-dealer to be recovered. These creditors of the firm have waited years to get their money back, ever since investment bank went into bankruptcy in 2008 with $613 billion in liabilities.

Lehman’s collapse helped instigate the global financial crisis and it was Barclays (BARC) that bought the brokerage business. It’s trustee, James W. Giddens has already paid back brokerage customers the over $10 billion they were owed.

In total, the Lehman parent company and its units have paid $57.1 billion to unsecured creditors. The majority of creditors are expected to get back up to 35 cents on the dollar.

Giddens says that additional payments for the brokerage’s unsecured creditors are likely. While $20.4 billion claims have been allowed against the firm, about $6.8 billion remain unresolved.

Meantime, the Lehman estate continues to wind down. Remaining holdings will continue to be sold off over the next several years. The brokerage firm is being unwound separately under the Securities Investor Protection Act.

Recently, Lehman’s brokerage unit asked the Second U.S. Circuit Court of Appeals to reconsider its decision affirming that Barclays is entitled to billions of dollars in assets under dispute. They want the court to set up a new hearing.

Giddens noted that the ruling increases Barclay’s gain from when it purchased the brokerage during the bankruptcy court sale. He said this change would reduce how much creditors would get back.

When U.S. Bankruptcy Judge James Peck approved the sale in 2008, he said that “no cash” would go to Barclays from the brokerage firm, including exchange-traded derivatives and the money linked to them. In 2009, Lehman sued Barclays, accusing the British bank of working out a secret discount when it purchased the brokerage. Peck, however, ruled that Barclays did not get an improper “windfall.” He said that the brokerage was entitled to the approximately $4 billion that was held to secure exchange-traded derivatives, while Barclays should get $1.9 billion in clearance box assets.

The two sides appealed. The district court ruled in Barclays favor, saying it had the right to both assets groups. Giddens appealed to the Second Circuit, which affirmed the ruling from the district court. Now, Giddens wants a rehearing.

Lehman continues to face litigation from derivative counterparties and former affiliates.

If you are an institutional investor that has suffered losses because of the negligence of a brokerage firm or another entity, you will want to speak with our securities lawyers right away. Contact The SSEK Partners Group today. Your initial case consultation is free.

Lehman Brokerage Creditors to Get $4.6 Billion, The Wall Street Journal, August 15, 2014

Lehman Bros Creditors Are About To Get $4.6 Billion, Business Insider/Reuters, August 15, 2014

In re: Lehman Brothers Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-01420, Justia


More Blog Posts:
Lehman Makes Deal with SAP Founder, Frees Up Another $1.8B for Creditors, Institutional Investor Securities Blog, February 27, 2014

Detroit Becomes Largest US City to File Bankruptcy Protection, Institutional Investor Securities Blog, July 18, 2013

Lehman Brothers’ “Structured Products” Investigated by Stockbroker Fraud Law Firm Shepherd Smith Edwards & Kantas LTD LL, Stockbroker Fraud Blog, September 30, 2008

February 27, 2014

Lehman Makes Deal with SAP Founder, Frees Up Another $1.8B for Creditors

Lehman Brothers Holdings Inc. has arrived at an agreement with Klaus Tschira, the founder of SAP AG (SAP). The German software company had been the only holdout to a multibillion-dollar settlement with the firm’s former Swiss derivatives unit Lehman Brothers Finance AG. The deal should free up another $1.8 billion that can now go to the firm’s creditors.

When Lehman failed in September 2008, this became the largest bankruptcy in our nation’s history. Markets became troubled and the global financial crisis was started. Barclays PLC (BCS) bought Lehman’s main business.

Tschira had been in a dispute with the subsidiary for years over derivatives contracts that were canceled after Lehman collapsed in 2008. The disagreement was over the way the unit calculated dames related to the termination of certain forward contracts. While two entities, a nonprofit that Tschira controls and an investment vehicle that manages his money, accused the derivatives unit of owing them $798.7 million, the unit said that the entities were the ones that owed it money.

Now that Tschira is dropping his appeal in the matter, another $1.8 billion can go to Lehman’s creditors. Per the deal, Lehman Brothers Finance will transfer over $1 billion to the holding company in New York. $1.8 billion will be distributed to creditors.

This latest securities settlement comes following other settlements reached between Lehman and Freddie Mac (FMCC0, Fannie Mae (FNMA), and its own foreign subsidiaries. This should hopefully speed up the timing of when creditors can get paid.

Already, Lehman has issued over $60 billion of the more than $70 billion that creditors are expecting. The next distribution is scheduled for April and more are likely to happen over the next several years.

The SSEK Partners Group is a securities law firm that represents institutional and high net worth investors. Please contact our securities fraud lawyers today.

SAP Founder Drops Lehman Appeal, The Wall Street Journal, February 27, 2014

Lehman Settles Court Fight With SAP Founder, Frees Up Cash, Bloomberg, February 27, 2014


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Lehman Brothers Holdings’ $767M Mortgage Settlement to Freddie Mac is Approved by Judge, Institutional Investor Securities Blog, February 19, 2014
Ex-Lehman Brothers Holdings Chief Executive Defends Request that Insurance Fund Pay Legal Bills, Stockbroker Fraud Blog, October 19, 2011

Hedge Funds Interested in Upcoming Puerto Rico Bond Offering Want The Territory to Borrow Money To Last Two Years, Stockbroker Fraud Blog, February 17, 2014

February 19, 2014

Lehman Brothers Holdings’ $767M Mortgage Settlement to Freddie Mac is Approved by Judge

A judge in US bankruptcy court has approved the $767 million mortgage securities settlement reached between Lehman Brothers Holdings Inc. and Freddie Mac (FMCC). The deal involves a $1.2 billion claim over two loans made by the mortgage giant to Lehman prior to its collapse in 2008.

As part of the accord, Freddie will provide loan data to the failed investment bank so that Lehman can go after mortgage originators over alleged misrepresentations. Lehman will pay the $767 million in a one-time transaction.

Its bankruptcy was a main trigger to the 2008 global economic crisis. According to Matthew Cantor, chief general counsel of the unwinding estate, the bank has already paid creditors $60 billion, with more payouts.

This settlement comes less than a month after Lehman settled with Fannie Mae (FNMA) over that mortgage firm’s $18.9 billion mortgage-backed securities claim, also related to MBS and mortgage loans that the bank sold to the mortgage giant before the 2008 crisis. Under that deal, Fannie Mae is to get general unsecured claim of $2.15 billion against the estate of the holding company.

Per the terms of Lehman’s Chapter 11 payment plan, Fannie is also getting $537.5 million. This should free up around $5 billion for creditors. Also, Lehman will be able to pay another $400 million as part of among its distribution to creditors. The settlement resolves its dispute with Fannie, which has held Lehman accountable for the loans.

Please contact our securities lawyers at The SSEK Partners Group today if you are an institutional investor or high net worth investor that suspects you may have been the victim of mortgage fraud.

Lehman settles with Freddie Mac over $1.2 billion claim, Reuters, February 13, 2014

Lehman Reaches Deal With Fannie Mae Over Mortgages, The Wall Street Journal, January 23, 2014


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Hedge Funds Interested in Upcoming Puerto Rico Bond Offering Want The Territory to Borrow Money To Last Two Years, Stockbroker Fraud Blog, February 17, 2014


September 10, 2013

Five Years After Lehman’s Bankruptcy, How is the US Financial System Doing Now?

It was nearly five years ago on September 15, 2008 when the public learned that Lehman Brothers had gone bankrupt, resulting in billions of dollars of losses on a financial system already struggling with a housing market that was failing, as well as a growing credit crisis. Also, Merrill Lynch (MER) would be forced to join with Bank of America (BAC), the US car industry was in trouble, and insurer AIG stood on the brink of collapse. Now, while there has the economy has somewhat recovered, many Americans can’t help but worry that such a financial meltdown could happen again.

Back then, Wachovia (WB) was also in peril of going down and Washington Mutual (WAMUQ) was failing miserably—to become the biggest US banking failure to date—and government and financial industry leaders scrambled to save what they could. Bailouts were issued and emergency measures taken including: a federal takeover of housing finance giants Freddie Mac and Fannie Mae, which kept the housing market going by allaying worries that the two entities would default on bonds,the guaranteeing of money market mutual funds that the then-trillion dollar industry depended on for the business short-term funding as well as retirement, and the setting up of the Troubled Asset Relief Program (allowing the Treasury to help put back confidence in banks via the buying of equities of securities in many of these banks and recapitalizing the system.

In a USA Today article, ex-US senator Christopher Dodd said that he believes there will be another crisis; only this one could also involve China, Brazil, and India—not just the US and the European continent. Meantime, while US Chamber of Commerce's Center for Capital Markets Competitiveness CEO and President David Hirschmann said that a crisis as big as the one in 2008 is not as likely, he predicts there will still be failures. He also said that it is unclear whether we’ve established a better system for identifying problems and risks.

In August, US President Obama delineated a proposal to rework the country’s housing finance-system, which would phase out Freddie and Fannie. While putting them under government control a few years back provided some reprieve, this was never meant to be permanent solution to the problems that happened.

Also in the article, ex-US Treasury Secretary Henry Paulson said he wants broader industry reform and while he believes the Dodd-Frank Wall Street Reform and Consumer Act is a big move n the right direction, he expressed the need for a reworking of the federal financial regulatory agencies and a closer examination of their duties, which sometimes overlap. There also have been calls from government watchdogs for reforms to the biggest US banks because of concerns that their interrelatedness and complexities make them an ongoing risk to the financial system.

Shepherd Smith Edwards and Kantas, LTD LLP has helped many clients recoup their investments losses that they sustained during the 2008 economic crisis. Our securities fraud attorneys represent investors throughout the US.

2008 financial crisis: Could it happen again?, USA Today, September 9, 2013

Was Lehman failure really 'best and only outcome?', CNBC, September 11, 2013


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JPMorgan Found Liable in Billionaire’s Subprime Mortgage Lawsuit for Over $50M in Damages, Institutional Investor Securities Blog, August 28, 2013

April 23, 2013

Lehman Brothers Australia Wants Federal Court to Approve $248M Settlement Payment Plan to Creditors

The liquidators of Lehman Brothers Australia want the Federal Court there to approve their plan that would allow the bank to pay $248M in securities losses that were sustained by 72 local charities, councils, private investors, and churches. Although the court held Lehman liable, no compensation has been issued because the financial firm went bankrupt.

Per that ruling, the Federal Court found that Lehman’s Australian arm misled customers during the sale of synthetic collateralized debt obligations. The court also said that Lehman Brothers subsidiary Grange Securities was in breach of its fiduciary duty and took part in deceptive and misleading behavior when it put the very complex CDOs in the councils’ portfolio. (Lehman had acquired Grange Securities and Grange Asset Management in early 2007, thereby also taking charge of managing current and past relationships, including the asset management and transactional services for the councils.) The court determined that the council clients’ “commercial naivety” in getting into these complex transactions were to Grange’s advantage.

Via the liquidators’ plan, creditors would get a portion of a $211 million payout. This is much more than the $43 million that Lehman had offered to pay. The payout would include $45 million from American professional indemnity insurers to Lehman, which would then disburse the funds to those it owes.

If the Federal Court approves the settlement, IMF will dismiss a class action securities case against Lehman.

Securities Fraud
Brokerage firms are not supposed to get unsophisticated or conservative investors involved in high risk, complex investments, even if the customers are institutions and not individuals. When doing so results in investment losses, there may be grounds for an institutional investment fraud case.

Lehman Seeks Australian Court Approval for Vote on Settlement, Bloomberg, April 14, 2013

Understanding the Federal Court’s landmark ruling against Lehman Brothers, The Conversation, September 24, 2012


More Blog Posts:
FINRA Orders UBS Financial Services to Pay $8.25M for Misleading Investors About Security of Lehman Brothers Principal Protected Notes, Stockbroker Fraud Blog, April 15, 2011

Lehman Brothers Australia Found Liable in CDO Losses of 72 Councils, Charities, and Churches, Institutional Investor Securities Blog, September 25, 2012

September 25, 2012

Lehman Brothers Australia Found Liable in CDO Losses of 72 Councils, Charities, and Churches

Lehman Brothers subsidiary Lehman Brothers Australia has been found liable for collateralized debt obligation losses sustained by 72 councils, churches, and charities during the global economic crisis. The class action securities lawsuit was led by three Australian counsels—Wingecarribee, Parkes and Swan City. A fixed settlement amount, however, has not yet been reached. The parties will have to meet to figure out the damages, and their submissions will then be presented to the Federal Court later this year. (Because the defendant, previously known as Grange Securities, is in liquidation, it cannot make any payments right now). The three lead plaintiffs had sought up to $209M (US dollars), which is how much they say was lost from the CDOs.

The majority of the CDOs that caused the investors losses had been purchased from Grange Securities before Lehman Brothers Australia acquired the firm in 2007, which is the year when the bond world started to fall apart as the global economic crisis began to unfold. The plaintiffs are claiming alleged breach of fiduciary duty, misconduct, and negligence for how the defendant marketed the synthetic derivative investments.

Federal Court Justice Steven Rares, who issued the ruling, said the CDOs were presented as if they were liquid like cash and safe investments even though they were, in fact, a risky, “sophisticated bet.” He said the plaintiffs were told that they would get their money back if they held on to the CDO’s until maturity and that high credit ratings placed the securities in the same arena as the AAA-rated Australian government’s debts. They also presented the investments that it recommended or made for the plaintiffs as suitable for investors that had conservative goals.

The judge noted that although that each of the three councils that were the lead plaintiffs had different complaints, in relation to two councils, the defendant was negligent in the advice and recommendation it offered them. Also, as financial advisor to two of the councils, the financial firm breached its fiduciary duty and took part in deceptive and misleading behavior when it pushed the CDOs as suitable for them.

Court finds Lehman Brothers Australia liable in crash, AFP, September 21, 2012

Court orders Lehman Brothers Australia liable
, Channel News Asia, September 21, 2012



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Lehman Brothers’ “Structured Products” Investigated by Stockbroker Fraud Law Firm Shepherd Smith Edwards & Kantas LTD LLPn, Stockbroker Fraud Blog, September 30, 2008

Continue reading "Lehman Brothers Australia Found Liable in CDO Losses of 72 Councils, Charities, and Churches " »

June 26, 2012

Federal Judge Approves $40M Residential Mortgage-Backed Securities Settlement In Class Action Against Former Lehman Brothers Holdings Executives

The U.S. District Court in Manhattan's Judge Lewis A. Kaplan has approved a $40 million class action settlement in the residential mortgage-backed securities lawsuit against three individuals who used to be affiliated with Lehman Brothers Holdings Inc. (LEHMQ). The plaintiffs are pension and union groups, including Locals 302 and 612 of the International Union of Operating Engineers – Employers Construction Trust Fund, Boilermakers-Blacksmith National Pension Trust, and New Jersey Carpenters Health Fund. The deadline for class members to file their settlement claims is August 20, 2012.

The defendants, Samir Tabet, James J. Sullivan, and Mark L. Zusy, had previously worked for Lehman affiliate Structured Asset Securities Corp. They are accused of filing misleading Offering Documents about the credit quality of mortgage pass-through certificates that were worth billions of dollars. The certificates were issued in 2006 and 2007.

The plaintiffs had submitted their original institutional securities lawsuit prior to Lehman’s filing for bankruptcy in September 2008. This case is one of a number of class action complaints accusing the financial firm and its ex-executives of wrongdoing and negligence.

Per the terms of the RMBS settlement, the Lehman Brothers Estate is responsible for paying $8.3 million. Dow Jones News Services reports that an insurance policy for the financial firm’s ex-directors and former officers will pay the remaining $31.7 million.

When Lehman filed for Chapter 11 bankruptcy, this was considered a major catalyst for the global financial crisis that ensued. The firm, which emerged from bankruptcy protection this March, is now a liquidating company that is expected to spend the next years repaying its investors and creditors that have asserted over $300 billion in claims. Depending on the type of debt owed, a creditor may receive 21 cents/28 cents on the dollar. Also, Lehman is still a defendant in several securities lawsuits related to its bankruptcy and there are other claims against it that need to be resolved.

Last month, Judge Kaplan approved the use of $90 million in insurance to settle another lawsuit against Fuld, ex-finance chief Erin Callan, ex-president Joseph Gregory, former CFO Ian Lowitt, ex-chief risk officer Christopher O’Meara, and several former Lehman directors. The plaintiffs include pension funds, companies, and individuals located abroad. The investors had purchased $30 billion in Lehman debt and equity prior to the firm’s bankruptcy filing and their investments later failed.

Kaplan had initially refused to let the plaintiffs’ insurers pay the $90 million because he wanted to determine whether the securities settlement was a fair one. Now that the federal judge has signed off on it, the plaintiffs will not have to pay for the settlement out of pocket and they are released from the investors’ securities claims.

Judge Approves $40M Settlement with Ex-Lehman Execs, American Banker, June 22, 2012

The Lehman Settlement

Ex-Lehman Executives’ $90 Million Settlement Approved, Bloomberg, May 24, 2012


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Continue reading "Federal Judge Approves $40M Residential Mortgage-Backed Securities Settlement In Class Action Against Former Lehman Brothers Holdings Executives" »

April 12, 2011

UBS Financial Services Fined $2.5M and Ordered to Pay $8.25M Over Lehman Brothers-Issued 100% Principal-Protection Notes

The Financial Industry Regulatory Authority is fining UBS Financial Services, Inc. $2.5 million and ordering it to pay $8.25 million in restitution for allegedly misleading investors about the "principal protection" feature of 100% Principal-Protection Notes. Lehman Brothers Holdings Inc. issued the PPNs Holdings Inc. before it filed for bankruptcy in 2008.

FINRA contends that even as the credit crisis was getting worse, between March and June 2008 UBS advertised and described the notes as investments that were principal-protected while failing to make sure clients knew that they PPNs were unsecured obligations of Lehman and that the principal protection feature was subject to issuer credit risk. UBS also allegedly failed to:

• Properly notify its financial advisers of the impact the widening of credit default swaps was having on Lehman’s financial strength
• Sufficiently analyze how appropriate the Lehman-issued PPNs were for certain clients
• Set up a proper supervisory system for the sale of the Lehman-issued PPNs
• Provide proper training or appropriate written supervisory procedures and policies
• Provide adequate suitability procedures for determining who should invest

FINRA also says that UBS developed and used advertising collateral about the PPNs that misled certain clients, such as the suggestion that a return of principal was certain as long as clients held the product until it matured. FINRA claims that the reason that some UBS financial advisers gave incorrect information to customers was because they themselves didn’t fully understand the product.

FINRA says that because UBS’s suitability procedures were inadequate and certain PPN’s lacked risk profile requirements, the product was sold to investors who were not willing or shouldn’t have been allowed to take on the risks involved. More often than not it was these investors who were likely to depend on the Lehman PPNs’ "100% principal protection" feature that were “risk averse.”

By agreeing to settle, UBS is not denying or admitting to the charges.

Related Web Resources:
FINRA Fines UBS Financial Services $2.5 Million; Orders UBS to Pay Restitution of $8.25 Million for Omissions That Effectively Misled Investors in Sales of Lehman-Issued 100% Principal-Protection Notes, FINRA, April 11, 2011

UBS to shell out $10.75M to settle Lehman-related row, Investment News, April 11, 2011


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Continue reading "UBS Financial Services Fined $2.5M and Ordered to Pay $8.25M Over Lehman Brothers-Issued 100% Principal-Protection Notes" »

February 10, 2011

CalPERS Files Securities Fraud Lawsuit Against Lehman Brothers

The California Public Employees' Retirement System is suing Lehman Brothers Holdings Inc., its ex-executives, and a number of bond underwriters for fraud and of making materially false statements about mortgage-backed securities losses. CalPERS, a $229 billion public pension fund, owned about $700 million Lehman bonds and 3.9 million shares of Lehman bonds when Lehman filed for bankruptcy in September 2008. Because of the economic crisis, CalPERS funds lost $100 billion in value from September 2008 and March 2009.

In its securities fraud complaint, CalPERS accused Lehman of “dramatically” borrowing to fund its real estate investments from 2004 to 2007—high-risk activity that investors were not told about. Other defendants include ex-Lehman Chief Executive Richard S. Fuld Jr., ex-Lehman Chief Financial Officers Erin Callan and Christopher O'Meara, 9 Lehman directors, and 33 others firms, including Wells Fargo Securities, Citigroup Global Markets Inc., and Mellon Financial Markets. The defendants allegedly failed to disclose not just Lehman’s exposure to Alt-A lending and subprime, but also its mortgage-related assets' true value.

This securities complaint is CalPERS second action against members of Wall Street that sold mortgage-backed securities. In July 2009, CAlPERS sued Standard & Poor’s, Moody’s Investors Services Inc., and Fitch Inc. The complaint accused the financial rating companies of giving top grades to bonds that ended up sustaining huge financial losses when the subprime mortgage securities market collapsed.

Also, CalPERS has a shareholder lawsuit against Bank of America Corp. (BAC) over its Merrill Lynch acquisition. The pension fund also has a case against BofA’s Countrywide Financial.

Related Web Resources:
Calpers Alleges Top Lehman Execs Misled On Exposures, Financials, The Wall Street Journal, February 8, 2011

CalPERS suit accuses Lehman Bros. of fraud, Los Angeles Times, February 9, 2011

CalPERS


Related Blog Posts About Pension Funds:
Quadrangle Cofounder and CalPERS Partner Steven Rattner Settles NY Pension Fund Corruption Probe for $10M, Institutional Investors Securities Blog, January 4, 2011

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In Securities Fraud Case Against Morgan Stanley Pension Fund Doesn’t Have Standing to Bring Certain Claims, Says Court, Institutional Investors Securities Blog, October 4, 2010

Continue reading "CalPERS Files Securities Fraud Lawsuit Against Lehman Brothers" »

January 6, 2011

School Districts Files Securities Fraud Lawsuit San Mateo County Over Lehman Brothers-Related Investment Losses

12 San Mateo County school districts have filed a $20 million securities fraud lawsuit against the county and its former treasure Lee Buffington. The securities complaint says that the plaintiffs lost approximately that amount in school district funds when Lehman Brothers filed for bankruptcy in 2008. The school districts contend that Buffington should have made smarter investments to protect their money. Instead, they claim that San Mateo County put too much of its pulled investment funds in the Lehman Holdings. The county lost approximately $155 million in the funds.

According to county schools Superintendent Anne Campbell, who is also a plaintiff of the securities case, the intention is to recover the $20 million, which has exacerbated the districts’ financial problems, and make the county change its investment policy so that it gets “specific” about the terms of the portfolio’s diversification. The plaintiffs are accusing Buffington and other county investment managers of negligent management and breach of fiduciary duty.

Meantime, Stuart Gasner, the county’s attorney, has called his client a “victim of Lehman Brothers' nondisclosures.” He contends that the county did not do anything wrong. Also, not only is he accusing the school districts of failing to follow proper procedures when filing their securities complaint, but he also says that the complaint is not beneficial to taxpayers because it won’t “bring in any new money” while costing funds for the county's defense.

School districts who are plaintiffs of the securities lawsuit against San Mateo County include Woodside Elementary School District, Belmont-Redwood Shores Elementary School District, San Mateo Union High School District, Burlingame Elementary School District, San Carlos Elementary School District, Cabrillo Unified School District, San Bruno Park Elementary School District, Jefferson Elementary School District, Ravenswood City Elementary School District, Las Lomitas Elementary School District, Portola Valley Elementary School District, and Menlo Park City Elementary School District.

Related Web Resources:
School Districts Sue San Mateo County For $20 Million, KTVU, January 5, 2011

Schools sue San Mateo County, The Daily Journal, January 5, 2011

School Districts, San Mateo County

San Mateo County

Lehman Brothers, Stockbroker Fraud Blog

Continue reading "School Districts Files Securities Fraud Lawsuit San Mateo County Over Lehman Brothers-Related Investment Losses " »

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