Lehman Bros. guilty of Fraud

Lehman Bros. using fraud to hide losses.

Lehman Bros. used accounting trick amid financial crisis – and earlier

Failed investment bank Lehman Bros. used an accounting trick ( Fraud, G ) at the end of each quarter to make its finances appear less shaky than they really were, says a report from an examiner.

Repo 105, a type of repurchase agreement (or "repo" deal) that temporarily removed securities from Lehman's balance sheet. Unlike typical agreements for a repurchase, a Repo 105 deal would be characterized by Lehman as an outright sale of securities. This, according to the examiner's report, created "a materially misleading picture of the firm’s financial condition in late 2007 and 2008."

And it used the ploy well before then.

"Lehman first introduced its Repo 105 program in approximately 2001," the report says. "Unable to find a United States law firm that would provide it with an opinion letter permitting the true sale accounting treatment under United States law, Lehman conducted its Repo 105 program under the aegis of an opinion letter [by a British law firm] ... under English law."

"Bad data lead to bad decisions," says William Black, a financial expert at the University of Missouri in Kansas City. Despite the crisis, the US government isn't putting enough resources into pursuing accounting fraud, argues Mr. Black, who led prosecutions during the 1980s savings-and-loan crisis.

SOURCE: CSM

Will Lehman chief executive officer Richard Fuld, three former Lehman chief financial officers (Christopher O'Meara, Erin Callan, and Ian Lowitt), and the firm's external auditor (Ernst & Young) be charged for criminal fraud?

Or is cooking the books legal now?

Gerald

series 3 & 7

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