Telegraph: Lehman collapse: the drama of a mad 48 hours that will never fade


Lehman had acquired the site in 2005 for $100m alongside its development partner SunCal, the largest land developer in California and a name now infamous among the bank's former staff. The plan was to build 900 homes on the site.

Goats R Us thought it had been hired by SunCal. It was swiftly disillusioned. A year on it is still trying to recover some of the $53,000 it is owed.

"It was a lot of money to us," says Terri Oyarzùn. "And we had no idea Lehman was the bottom line. We were dealing with SunCal." Has she got anything back? "Not a dime," she says.

As it turned out, the SunCal business in question was a limited liability company. When Lehman keeled over, the unit filed for bankruptcy protection.

"If I set up my business this way. If I promised to do 100 acres and only did 15, I wouldn't get away with it. It's wrong," says Ms Oyarzùn. No kidding.

Cookie has now been retired, but it will be little comfort to him or Ms Oyarzùn that this particular SunCal project was just a wrinkle in Lehman's involvement with the Californian property company. Their flagship project stood 120 miles north-east of Los Angeles on the dusty flatlands of Bakersfield.

Here, across 2,000 acres, SunCal planned to develop 6,000 homes built around a golf course and boating lake. Lehman, as both lender and equity participant, initially invested $150m in 2005. They called it McAllister Ranch.

It turned out to be a property developer's pipedream. By June 2008, the ranch had become a major casualty of California's overheated real estate market. The boating lake had turned to weeds and dust. So too had Lehman's investment. Worse, by then its loan on this project had spiralled to $350m. Even worse, insiders were putting Lehman's total exposure to SunCal at close to $2bn.

Oak Knoll. McAllister Ranch. Each was a microcosm of the real story. Lehman's commercial property book was out of control. It had become an $80bn sub-prime liability based on fantasy real estate projects or lending to a class of borrower popularly known as a Ninjas – no income, no job, no assets.