Lehman warned of accounting gimmicks
By Stevenson Jacobs |
March 22, 2010, Monday
|
Print Edition
Print Edition
A Lehman Brothers whistleblower warned his bosses that accounting gimmicks the bank used before its collapse may have been illegal, his lawyer has said.
Matthew Lee, a former Lehman senior vice president, was fired days after questioning the accounting tricks in a letter to his superiors, attorney Erwin Shustak said last Friday. Shustak gave a copy of the letter to The Associated Press.
Lehman Brothers Holdings Inc imploded in September 2008, becoming the biggest corporate bankruptcy in United States history. The collapse sent financial markets across the globe into a free-fall and prompted a massive bailout of the US banking system.
An examiner appointed by the bankruptcy court has said in a 2,200-page report that Lehman hid its debt and perilous financial condition by using an accounting gimmick called Repo 105. The report revealed Lee's warnings to the bank, though his letter makes public the first internal assessment of the legality of Lehman's bookkeeping.
In a letter dated May 18, 2008, Lee wrote that he discovered the bank had been under-reporting its debt by about US$5 billion at the end of each month. Lee, a 14-year Lehman veteran, wrote that he felt compelled to report the "discrepancies" under the firm's code of ethics, saying he believed they "possibly constitute unethical or unlawful conduct."
"I believe the manner in which the firm is reporting these assets is potentially misleading to the public and various governmental agencies," Lee wrote. "If so, I believe the firm may be in violation of the code."
Days after sending the letter, the firm told Lee he was being terminated as part of a general layoff, Shustak said.
After his firing, Shustak wrote a letter to the bank saying that Lee "believes he has been the victim of retaliation for bringing what he believed, in good faith, to have been ethical and securities law violations by Lehman."
Matthew Lee, a former Lehman senior vice president, was fired days after questioning the accounting tricks in a letter to his superiors, attorney Erwin Shustak said last Friday. Shustak gave a copy of the letter to The Associated Press.
Lehman Brothers Holdings Inc imploded in September 2008, becoming the biggest corporate bankruptcy in United States history. The collapse sent financial markets across the globe into a free-fall and prompted a massive bailout of the US banking system.
An examiner appointed by the bankruptcy court has said in a 2,200-page report that Lehman hid its debt and perilous financial condition by using an accounting gimmick called Repo 105. The report revealed Lee's warnings to the bank, though his letter makes public the first internal assessment of the legality of Lehman's bookkeeping.
In a letter dated May 18, 2008, Lee wrote that he discovered the bank had been under-reporting its debt by about US$5 billion at the end of each month. Lee, a 14-year Lehman veteran, wrote that he felt compelled to report the "discrepancies" under the firm's code of ethics, saying he believed they "possibly constitute unethical or unlawful conduct."
"I believe the manner in which the firm is reporting these assets is potentially misleading to the public and various governmental agencies," Lee wrote. "If so, I believe the firm may be in violation of the code."
Days after sending the letter, the firm told Lee he was being terminated as part of a general layoff, Shustak said.
After his firing, Shustak wrote a letter to the bank saying that Lee "believes he has been the victim of retaliation for bringing what he believed, in good faith, to have been ethical and securities law violations by Lehman."
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