CalPERS sued Lehman Brothers Holdings executives and underwriters over claims they hid Lehman's exposure to subprime loans when they sold the pension fund about $700 million in bonds.
The California Public Employees' Retirement System, Sacramento, said in a complaint filed Monday in U.S. District Court in San Francisco that the executives and about 34 investment banks made false statements in offering documents for bonds issued from June 2007 to September 2008.
The $226.5 billion system is among a group of Lehman creditors that filed a competing reorganization plan in December for the company after objecting to Lehman's original plan to emerge from court protection. Lehman filed a revised plan to exit Chapter 11 bankruptcy protection on Jan. 25, offering bondholders more money.
CalPERS, hedge fund Paulson & Co. and other sponsors of the rival plan together hold about $16 billion of senior Lehman bonds.
Defendants named in Monday's lawsuit include former Lehman CEO Richard Fuld and Citigroup Global Markets. Patricia Hynes, Mr. Fuld's attorney, and Alexander Samuelson, a Citigroup spokesman, didn't immediately return voice-mail messages left after regular business hours Monday.
Lehman, once the fourth-largest investment bank, filed the biggest bankruptcy in U.S. history in September 2008, listing $613 billion in debt.