A week ago the Court-Appointed Lehman Examiner Unveiled His Report. I haven't since too much written about it since the initial stuff. Probably because it's over 2000 pages long. There were a lot of articles on Repo 105, the accounting technique that Lehman used to move $50 billion in toxic assets off their balance sheet before quarterly reports. Like CDSs it seems to be a useful technique that was abused in this case. This is perhaps bad news for Lehman's accountants Ernst & Young, though they claim their last audit of Lehman was for the fiscal year ending November 2007. Lehman's CEO claims he didn't know about the use of Repo 105, but "Tyler Durden" says "Evidence, however, suggests that Fuld is blatantly lying".
Still, the report says "The examiner concludes that the conduct of Lehman’s officers, while subject to question in retrospect, falls within the business judgment rule and does not give rise to colorable claims. The examiner concludes that Lehman’s directors did not breach their duty to monitor Lehman’s risks." I wonder how many more 2000 page reports we'll see?
Meanwhile it seems Alan Greenspan has written a 66 page paper on The Crisis [pdf] and Greg Mankiw comments on it.
2 comments:
For a slightly different perspective on whether Lehman's activities did, in fact, constitute fraud, please see the excerpt below from a piece by Lawrence McDonald (see Huffington Post for the complete article - Lehman Brother; The Bank with Integrity and Shameless Fraud - March 20).
The key point is that in and of itelf use of Repo 105 is not illegal. However, use of Repo 105 for the purpose of deception is fraud. Please enjoy.
"In recent days, I have spoken to several of the whistle blowers who helped the examiner and the Feds; I received some amazing information, there are fireworks ahead.
From what I am hearing, the SEC, the Justice Dept, US Attorney Southern District New York, US Attorney Eastern District New York, NY AG Andrew Cuomo's Office, the FBI and the New Jersey Securities Bureau are all hot on the trail.
I think they are all working together and have been working closely with the examiner. I think this effort is is much more robust than most people realize.
I believe in my gut there with be both criminal and civil legal action. I'm hearing the key on the criminal side the Feds are working on is "proving a pattern of deception."
Repo 105 is not illegal but a "pattern of Repo 105 use for deceptive purposes" is!
What they are looking at; Repo105 (accounting fraud), QSPEs (from page 161 on our book),
Lehman's Q4 2007, Q1 2008, Q2 2008, Valuations on Archstone and Suncal Commercial Real Estate Positions, Ernst and Young (conflicts of interest) and Lehman Hedge Funds (accounting fraud).
The examiner's report is creating very positive momentum for my book, "A Colossal Failure of Common Sense - The Inside Story of the Collapse of Lehman Brothers." I am so proud of the recent feed back; people keep writing, emailing and saying to me; "you nailed it."
I think the next focus of the investigation which may come to light publicly will be focused on Lehman's use of Qualified Special Purpose Entities (QSPEs)."
TT
I saw Vicky Ward interviewed on the Today Show and her book, The Devil's Casino looks interesting too.
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