Lehman report points finger at top managers

Mar 13 2010 by Iain Laing, The Journal

“Lehman’s failure to disclose the use of an accounting device to significantly and temporarily lower leverage, at the same time that it affirmatively represented those “low” leverage numbers to investors as positive news, created a misleading portrayal of Lehman’s true financial health,” the report said.

Ernst & Young said Lehman’s last set of financial statements were “fairly presented in accordance with generally accepted accounting principles, and we remain of that view“.

Lehman went into administration on September 15, 2008, beginning a sequence of events that tipped the banking sector – and then the global economy – into its biggest crisis in living memory.

The bank’s administration is still rumbling on and is expected to last for many years as administrators seek to recover money for the many thousands of creditors left out of pocket. But it is thought the Lehman report could allow the Lehman estate to seek legal action and possibly pave the way for class action lawsuits by investors who bought shares in the bank before its collapse.

PricewaterhouseCoopers, which is handling Lehman’s administration in the UK and Europe, said: “We are reviewing the examiner’s report for its applicability to the Lehman European estates, but its principal scope concerns events and issues arising at the Lehman Brothers Holding Inc level.”

Mr Valukas did not find that Lehman’s bosses had explicitly violated their fiduciary duty.

His report suggested banks, including JPMorgan and Citigroup, may have compounded Lehman’s woes by taking around £10.6bn in collateral from the bank in its final days.