(June 29, 2011) — Lehman Brothers Holdings, once the fourth-largest US investment bank, has reached an agreement on a $65 billion liquidation plan with bondholders, Bloomberg has reported.

The deal gives more money to holders of guaranteed claims, ending the fight between Lehman bondholders, led by Paulson and the California Public Employees’ Retirement System (CalPERS), and its derivatives creditors including Goldman Sachs Group and Morgan Stanley, according to the news service.

Lehman Brothers had fought the Paulson group and the rival group of derivatives creditors for months over control of its liquidation plan. In a filing in US Bankruptcy Court in New York, Lehman said that amendments to the plan may “materially” change recoveries for creditors. If approved, the plan could enable Lehman to emerge from Chapter 11 protection and begin repaying creditors. In the largest bankruptcy in US history, the bank filed for Chapter 11 protection on September 15, 2008, marking the beginning of the global financial crisis.

Lehman has been criticized by its bondholders for mistreating pensions and retirees who own Lehman bonds. In April, CalPERS criticized Goldman Sachs and other creditors of Lehman Brothers Holdings Inc. (LBHI) for treating pensions and retirees who own Lehman bonds “unfairly.”

“This plan treats members of pension funds, including retirees who hold LBHI bonds through their pension plans, unfairly,” said Joseph Dear, CalPERS’ chief investment officer, in a statement. “We’re disappointed that Goldman Sachs and other big banks are proposing to reward themselves at the expense of bondholders. We want a fair outcome for all stakeholders, which is why the Ad Hoc Group of Lehman Brothers Creditors filed its competing plan in December 2010.”

Earlier this year, the largest US public pension fund sued former Lehman executives and underwriters, alleging that they concealed Lehman’s exposure to subprime loans.

CalPERS said in a complaint filed in San Francisco federal court that the executives of 34 investment banks — including Citigroup, Wells Fargo Securities and Bank of New York Mellon — made misleading statements in offering documents for bonds issued from June 2007 to September 2008.

“Lehman’s executives…made materially false statements about its financial condition causing Lehman’s stock and bond prices to be artificially inflated,” the suit stated. “When Lehman’s losses and exposure came to light, the revelations led to severe declines in Lehman’s stock price and ultimately to its bankruptcy. Lehman also had engaged in manipulative quarter-end transactions called ‘REPO 105’ transactions that hid billions of dollars of Lehman’s debt from the public,” the lawsuit asserted, referring to the accounting practice that allegedly allowed Lehman to hide the extent of its use of borrowed money, or leverage.