The Federal Home Loan Bank of Pittsburgh is suing Lehman Brothers Holdings Inc. for $41.5 million in cash that the bank says Lehman improperly shifted to its affiliates in the wake of its collapse and sale to Barclays PLC.

The home loan bank said in a lawsuit filed Wednesday that the cash, which is collateral posted by the bank and held by Lehman related to various swap transactions between the two firms, was transferred to various Lehman affiliates, including its own commercial banking units.

Lehman was the nation's fourth-largest investment bank prior to its Sept. 15, 2008, bankruptcy filing, which ranks as the largest ever. A few days following Lehman's collapse, the Federal Home Loan Bank of Pittsburgh terminated a derivatives agreement with Lehman Brothers Special Financing Inc.

Under the agreement, the Pittsburgh bank authorized the payment of $275 million of its collateral to the Lehman unit. The bank should have received the balance of its collateral, $41 million, plus interest, but didn't, according to the lawsuit.

The $316 million in collateral was supposed to be held in a segregated account at JPMorgan Chase & Co., according to home loan bank.

Last year the Pittsburgh bank sued JPMorgan and Lehman Brothers Special Financing to recover the $41.5 million it says it is owed. It later dropped its suit against JPMorgan, but the home loan bank said it learned that Lehman — instead of holding the collateral in a segregated account - regularly swept the cash from its subsidiaries' accounts and transferred it to other Lehman units.

The bank is one of 12 Federal Home Loan Banks around the country that provide funding to other financial institutions for home mortgages.

The Federal Home Loan Bank of Pittsburgh says Lehman "has wrongfully exercised control over FHLB's property without its consent."

The home loan bank is asking the bankruptcy judge overseeing Lehman's liquidation to rule that it is entitled to the $41.5 million, plus interest.

The lawsuit is the latest attempt by a Lehman derivative's creditor to seek the return of improperly transferred assets in the wake of the sale of Lehman to Barclays.

Lehman, which had a portfolio of more than 900,000 derivative contracts before its bankruptcy filing, is in the process of selling its "in-the-money" contracts.

Bryan Marsal, the head of the restructuring firm that is helping to wind down the failed investment bank's business, said earlier this year that Lehman has collected $2 billion from its huge portfolio of derivative contracts.

By selling those assets, as well as its broker-dealer business, Lehman's U.S. units are sitting on more than $6 billion, up from about $3 billion when it collapsed last September.

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