Lehman report points finger at top managers

Mar 13 2010 by Iain Laing, The Journal

A REPORT into the collapse of US investment bank Lehman Brothers has found “credible evidence” that senior managers approved misleading financial statements in the run-up to the group’s demise.

Lehman’s auditor Ernst & Young has also been heavily criticised for its “failure to question and challenge improper or inadequate disclosures” in the report by court-appointed examiner Anton Valukas, which follows a year-long probe.

The long-awaited report accuses senior management, including the former chief executive Dick Fuld, of using “accounting gimmicks” and of “balance sheet manipulation” that hid the dire state of the bank’s balance sheet.

Lehman was in fact insolvent for weeks before filing for bankruptcy in 2008, according to the report, which states there could be grounds for legal action against former executives.

It alleges that £33bn of assets were temporarily removed from Lehman’s balance sheet in both the first and second quarters of 2008, using an accounting mechanism known as Repo 105, to lower the level of leverage – or debt – on its balance sheet.