Lehman Alleges Massive Fraud in Japan

Lehman Brothers(LEH Quote) is alleging it was the victim of fraud in Japan that cost it as much as $350 million, according to published media reports.

The investment bank plans to sue Japanese trading company Marubeni in an effort to recoup its losses, according to an Associated Press report, which cited anonymous officials at Lehman.

The alleged fraud is related to $350 million in loans Lehman made to a unit of LTT Bio-Pharma that filed for bankruptcy March 19, the report said.

A Lehman spokesman said Marubeni secured the loans and should repay them, the report said. But the trading company says it didn't secure the loans and alleges that documents saying as much are fraudulent, the report also said.

Marubeni says it too was a victim of the alleged fraud and that it fired two of its employees in relation to the incident, the report said.

The news couldn't come at a worse time for Lehman. The investment bank has seen its stock price plummet in recent weeks on speculation it could be the next big Wall Street firm to succumb to the current credit crisis, which toppled Bear Stearns(BSC Quote).

Lehman's shares closed Friday down 84 cents, or 2.2%, at $37.87.