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March 12, 2010

Lehman report criticises executives and auditors

by Gill Montia

Story link: Lehman report criticises executives and auditors

The collapse of Lehman Brothers is the subject of a newly released report that severely criticises senior executives at the bank along with its auditor, Ernst & Young.

The report was ordered by a US court and it author, bankruptcy specialist Anton Valkulas, concludes that for several weeks before filing for bankruptcy protection, Lehman Brothers was insolvent.

Mr Valkulas’ year-long study also revealed that senior executives allowed the bank’s balance sheet to be manipulated by employing devices known within Lehman as “Repo 105” and “Repo 108” transactions.

The “Repos” created a misleading picture of the firm’s financial condition in late 2007 and 2008, the report claims.

Ernst & Young, which could face legal action as a result of the findings, apparently failed to challenge the transactions but has defended its position by saying its final audit of the bank was “fairly presented” according to Generally Accepted Accounting Principles.

In November 2008, San Mateo County Investment Pool, a Californian local government fund, named Ernst & Young and various Lehman Brothers’ executives in a lawsuit aimed at recouping a $150 million loss relating to the bank’s collapse.

 

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