Examiner Shows Lehman Executives Mislead Investors and the Public Before Collapse
A U.S. bankruptcy-court examiner that is investigating the conditions of the largest bankruptcy in the nation's history is blaming senior executives and auditor Ernest & Young for serious lapses that led to the collapse of Lehman Brothers Holdings Inc., which was a major causality of the worst financial crisis since the Great Depression.
The report from the examiner runs thousands of pages and among the new allegations it alleges that Lehman executives altered its balance sheet, kept data from the firm's board, and inflated the value of volatile real estate assets.
The reports said that even among the stress on the real estate and credit markets, Lehamn and its executives chose to "disregard or overrule the firm's risk controls on a regular basis."
On instance from May 2008 stated in the report said that one Lehman senior vice president alerted executives to irregularities in the firm's accounting data. But the report says that the alert was ignored by Lehman auditors Ernest & Young and the issue was never brought to the company's board.
The allegations included in the report could be brought up against the firm and its executives in the pending criminal and civil investigations. The charges are stemming from investigations into whether Lehman executives misled investors or overvalued its real-estate assets.
The examiner said that Lehman executives stashed $50 billion in real estate assets away from its balance sheets in an effort to have less debt on its books and the amount of debt that the firm showed to investors.
"In this way, unbeknownst to the investing public, rating agencies, government regulators, and Lehman’s Board of Directors, Lehman reverse engineered the firm's net leverage ratio for public consumption," the report stated.
According to the examiner of the report, with regular updates from the Department of Justice and the Securities and Exchange Commission, there have been no prosecutions of executives at Lehman to date.
The report from the examiner runs thousands of pages and among the new allegations it alleges that Lehman executives altered its balance sheet, kept data from the firm's board, and inflated the value of volatile real estate assets.
The reports said that even among the stress on the real estate and credit markets, Lehamn and its executives chose to "disregard or overrule the firm's risk controls on a regular basis."
On instance from May 2008 stated in the report said that one Lehman senior vice president alerted executives to irregularities in the firm's accounting data. But the report says that the alert was ignored by Lehman auditors Ernest & Young and the issue was never brought to the company's board.
The allegations included in the report could be brought up against the firm and its executives in the pending criminal and civil investigations. The charges are stemming from investigations into whether Lehman executives misled investors or overvalued its real-estate assets.
The examiner said that Lehman executives stashed $50 billion in real estate assets away from its balance sheets in an effort to have less debt on its books and the amount of debt that the firm showed to investors.
"In this way, unbeknownst to the investing public, rating agencies, government regulators, and Lehman’s Board of Directors, Lehman reverse engineered the firm's net leverage ratio for public consumption," the report stated.
According to the examiner of the report, with regular updates from the Department of Justice and the Securities and Exchange Commission, there have been no prosecutions of executives at Lehman to date.
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