Report Details How Lehman Hid Its Woes as It Collapsed

[babylonsister]

Report Details How Lehman Hid Its Woes as It Collapsed
By MICHAEL J. de la MERCED and ANDREW ROSS SORKIN
Published: March 11, 2010


It is the Wall Street equivalent of a coroner’s report — a 2,200-page document that lays out, in new and startling detail, how Lehman Brothers used accounting sleight of hand to conceal the bad investments that led to its undoing.

The report, compiled by an examiner for the bank, now bankrupt, hit Wall Street with a thud late Thursday. The 158-year-old company, it concluded, died from multiple causes. Among them were bad mortgage holdings and, less directly, demands by rivals like JPMorgan Chase and Citigroup, that the foundering bank post collateral against loans it desperately needed.

But the examiner, Anton R. Valukas, also for the first time, laid out what the report characterized as “materially misleading” accounting gimmicks that Lehman used to mask the perilous state of its finances. The bank’s bankruptcy, the largest in American history, shook the financial world. Fears that other banks might topple in a cascade of failures eventually led Washington to arrange a sweeping rescue for the nation’s financial system.

According to the report, Lehman used what amounted to financial engineering to temporarily shuffle $50 billion of troubled assets off its books in the months before its collapse in September 2008 to conceal its dependence on leverage, or borrowed money. Senior Lehman executives, as well as the bank’s accountants at Ernst & Young, were aware of the moves, according to Mr. Valukas, the chairman of the law firm Jenner & Block and a former federal prosecutor, who filed the report in connection with Lehman’s bankruptcy case.

Richard S. Fuld Jr., Lehman’s former chief executive, certified the misleading accounts, the report said.

more...

http://www.nytimes.com/2010/03/12/business/12lehman.html?hp

[era veteran]

1. Fuld should be in prison for naked short selling

In his time at Lehman he got almost a half billion dollars in compensation. Kudos to the man who knocked him out in the gym.

[exboyfil]

2. This sounds just like Enron

Why isn't anyone being indicted? I think Ernst & Young should go the way of Arthur Andersen - that is the only way this crap is going to stop.