Report on Lehman collapse hits Wall Street

The report talks about how Lehman ended due to a number of causes; bad mortgage holdings and competition by rivals like JPMorgan Chase and Citigroup being a couple of them.

Examiner of the report Anton R. Valukas said the accounting gimmicks were “materially misleading,” and the report shows that Lehman shuffled $50 billion of troubled assets under the knowledge of their accountant Ernst & Young.

Charles Perkins, a spokesman for Ernst & Young, said, “Our last audit of the company was for the fiscal year ending Nov. 30, 2007. Our opinion indicated that Lehman’s financial statements for that year were fairly presented in accordance with Generally Accepted Accounting Principles (GAAP), and we remain of that view.”

The report
However, the report does not give any evidence as to whether the Lehman executives violated securities laws.

“Unbeknownst to the investing public, rating agencies, government regulators, and Lehman’s board of directors, Lehman reverse engineered the firm’s net leverage ratio for public consumption,” said Valukas.

Headquartered in New York City, Lehman Brothers was regarded as one of the top financial firms of the world. But the company faced huge losses due to the sub-prime mortgage crisis and declared itself bankrupt on Sept. 15, 2008.

Top Lehman executive and former Chief Executive Richard Fuld, who is known to have full knowledge of the transactions, denied allegations through his lawyer Patricia Hynes.

Hynes said, “Mr. Fuld did not know what those transactions were. He didn't structure or negotiate them, nor was he aware of their accounting treatment.”

However, Valukas disagreed and said that the fate of the company was sealed by all Lehman executives.

The executives “conduct ranged from serious but non-culpable errors of business judgment to actionable balance-sheet manipulation; by the investment bank business model, which rewarded excessive risk taking and leverage; and by government agencies, who by their own admission might better have anticipated or mitigated the outcome,” said Valukas.

More on Lehman Brothers
Headquartered in New York City, Lehman Brothers was regarded as one of the top financial firms of the world. But the company faced huge losses due to the sub-prime mortgage crisis and declared itself bankrupt on Sept. 15, 2008.

The company’s bankruptcy shook the entire financial world and caused various failures in the financial system.

After the bankruptcy, British bank Barclays announced its agreement to purchase Lehman, following which Nomura Holdings acquired Lehman’s Asia Pacific business.