Lehman Brothers bosses could face court over accounting 'gimmicks'

[seafan]

Source: Guardian (UK)

A court-appointed US bankruptcy examiner has concluded that there are grounds for legal claims against top Lehman Brothers bosses and auditor Ernst & Young for signing off misleading accounting statements in the run-up to the collapse of the Wall Street bank in 2008 which sparked the worst financial crisis since the Great Depression.

.....

The exhaustive account reveals that Barclays, which bought Lehman's US businesses out of bankruptcy, got certain equipment and assets it was not entitled to. And it reveals that during Lehman's final few hours, chief executive Dick Fuld tried to get Gordon Brown involved to over-rule Britain's Financial Services Authority when it refused to fast-track a rescue by Barclays.

.....

During the bank's final hours in September 2008, Fuld tried desperately to strike a rescue deal with Barclays but the FSA would not allow the British bank an exemption from seeking time-consuming shareholder approval. The chancellor, Alistair Darling, declined to intervene and Fuld appealed to the US treasury secretary, Henry Paulson, to contact the prime minister.
"Fuld asked Paulson to call prime minister Gordon Brown, but Paulson said he could not do that," says the examiner's report. "Fuld asked Paulson to ask president Bush to call Brown, but Paulson said he was working on other ideas."

In a "brainstorming" session, Fuld then suggested getting the president's brother, Jeb Bush, who was a Lehman adviser, to get the White House to lean on Downing Street.

.....

Read more: http://www.guardian.co.uk/business/2010/mar/12/lehman-brothers-gimmicks-legal-claims

---

It's time for some subpoenas for Jeb Bush and Henry Paulson.


There are many probing questions to be answered.

[tabatha]

1. At least he did one thing right

Fuld asked Paulson to call prime minister Gordon Brown, but Paulson said he could not do that

[closeupready]

5. While I agree that Paulson did the right thing,

remember that Paulson is a Goldman Sachs alum. Paulson would not do something like that for Lehman, but if it had been Goldman calling, I'd bet he would have tried.

[seafan]

2. Ernst & Young has some explaining to do.

More details:

.....

The examiner's report found evidence to support "colorable claims", meaning plausible claims, against Fuld and three successive chief financial officers - Chris O'Meara, Erin Callan and Ian Lowitt.

Valukis said the bank tried to lower its leverage ratio, a key measure for credit rating agencies, through a device dubbed "repo 105" through which it temporarily sold assets, with an obligation to re-purchase them days later, at the end of financial quarters in order to get a temporary influx of cash. Lehman's own financial staff described this as an "accounting gimmick" and a "lazy way" to meet balance sheet targets.

A senior Lehman vice-president, Matthew Lee, tried to blow the whistle by alerting top management and Ernst & Young. But the auditing firm "took virtually no action to investigate".

.....

Barclays eventually bought the remnants of Lehman's Wall Street operation from receivership for $1.75bn - a sum that has enraged certain bankruptcy creditors who believe it was a windfall for the British bank.

The examiner's report finds grounds for claims against Barclays for taking assets it was not entitled to, including office equipment and client records belonging to a Lehman affiliate, although it says these were not of material value to the deal - the equipment was worth less than $10m.

.....

Keep digging.

[Bozita]

6. Will Ernst & Young Survive The Lehman Fiasco?

http://www.businessinsider.com/will-ernst-and-young-survive-the-lehman-fiasco-2010-3

Will Ernst & Young Survive The Lehman Fiasco?
John Carney | Mar. 12, 2010, 2:22 PM | 1,520 | 23
Tags: Wall Street, Litigation, Lehman Brothers, Accounting, Bankruptcy

Ernst & Young is standing behind the work it did for Lehman Brothers.

But the example of what happened to Enron accountants Arthur Andersen should have E&Y very worried.

In both its public statement released today and in interviews with the bankruptcy examiner, E&Y says it agreed to the
Repo 105 transactions only in theory. It apparently never blessed or even evaluated any particular transaction, much
less audited them or assessed the impact of them on the balance sheet.

The examiner says that the firm may nonetheless have committed professional
malpractice.

-snip-

“Enron brought down Arthur Andersen,” Felix Salmon notes. “Will Lehman do the same for E&Y?”

-snip-

more...

[ShockediSay]

3. And the Repugs wanted to repeal Sarbanes–Oxley because it would put us at

a disadvantage in the World Market

FOR WHAT?!?! Ripping off the American public? Causing another Great Recession? DEPRESSION?

[Demeter]

4. Oh I Sincerely HOPE So

[cmd]

7. OH GOP Gov. candidate John "Lehman Bros." Kasich offers this excuse

• The current economic mess, according to Ohio Democratic Party spokesman Seth Bringman, "was created by the Wall Street greed that John Kasich was a part of as a managing director of Lehman Brothers."

Kasich's response: "Blaming me for Lehman Brothers is like blaming a car dealer in Zanesville for the collapse of General Motors."

http://www.dispatch.com/live/content/editorials/stories/2010/01/10/halcol10.ART_ART_01-10-10_G5_M5G8C6L.html?sid=101