2200 page report against Lehman Brothers

The report was filed by Bankruptcy Examiner, Anton Valukas in the federal court of Manhattan on March 11.

Lehman Brothers bankruptcy was the biggest in U.S. history, thus triggering financial crisis, affecting ecomomies world over.

Details of Valuka’s report
According to the report, Lehman manipulated the balance sheet transaction and betrayed its shareholders.

Valuka called Richard Fuld, Lehman’s former chief, as “grossly negligent” in submitting misleading reports. But Patricia Hynes, Fuld’s lawyer, said that he was not aware of the accounting process.

Valukas called it a “deliberate process” and “bad business judgement”.

As per the reports statement mentioned in Business Week, Lehman’s executives engaged in conduct ranging from “non- culpable errors of business judgment” to “actionable balance sheet manipulation,” as they used “accounting gimmicks” to move assets off the balance sheet without disclosing that to the government, rating-agencies, investors or Lehman’s board.

Auditor Ernst and Young
As per the report, Lehman removed up to $50 billion of debts from its balance sheet despite accounts being checked Ernst and Young.

Ernst and Young was termed as “professionally negligent” for hiding the details. But they claim that they were unaware of the fact. They earned $31 million for auditing Lehman Bros accounts in 2007.

Valuka said that Repo 105 helped the bank hide its financial details.

Collapse of Lehman Brothers
The Lehman Brothers collapsed on Sept. 15, 2008, leading to numerous job losses and unbalancing the economy.

Mathew Lee, the senior vice president at Lehman, knew the bank was going to collapse. He had spent 14 years at the bank.

Lee specified in a memo that the unsubstantiated balances in the bank amounted to tens of billions of dollars. These balances may be either nonperforming assets or real liabilities.

William Schlich, a former lead partner on E&Y’s Lehman team, wrote in a June 5, 2008, email to a colleague, “We are also dealing with a whistle-blower letter, that is on its face pretty ugly and will take us a significant amount of time to get through.”