Lehman Brothers trustee sues Citibank for 1.3 bil.

NEW YORK — The trustee overseeing the bankruptcy of Lehman Brothers' brokerage unit is suing Citibank for more than $1.3 billion.

Trustee James Giddens said in a lawsuit filed Friday in Manhattan that he seeks to recover a $1 billion deposit for foreign exchange settlement services and more than $300 million in deposits that Citibank froze after the investment bank filed for bankruptcy protection in September 2008.

Citigroup Inc. said in a statement received Saturday that the suit was "without merit" and that it will "vigorously defend its right to recover its losses."

The bank said it required the $1 billion deposit from the brokerage unit to "specifically" cover any losses it may incur related to Lehman's settlement of foreign exchange trades. Citigroup said it suffered more than $1 billion in losses to settle those trades.

Lehman Brothers Holdings Inc.'s bankruptcy was the largest in U.S. history when it filed for Chapter 11 and listed $613 billion in debts. In January, the investment bank offered a revised plan to exit bankruptcy to its creditors. They will vote on the proposal later this year.