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Findings on Lehman Take Even Experts by Surprise
NY Times ^ | March 12, 2010 | MICHAEL J. de la MERCED

Posted on 03/13/2010 7:00:53 AM PST by americanophile

For the year that it took the court-appointed examiner to complete his report on the demise of Lehman Brothers, officials from Wall Street to Washington were anticipating it as the definitive account of the largest bankruptcy in American history.

And the report did just that when it was unveiled on Thursday, riveting readers with the exhaustive detail contained in its nine volumes and 2,200 pages. Yet almost immediately, it raised a host of new questions.

Now government regulators have what some lawyers call a road map for further inquiry into former Lehman executives like Richard S. Fuld Jr. and the auditing firm Ernst & Young.

Whether the Justice Department and the Securities and Exchange Commission will actually pursue their own legal actions is unclear. But legal experts said on Friday that the examiner, Anton R. Valukas, had provided plenty of material for civil regulatory action at the least with his findings of “materially misleading” accounting and “actionable balance sheet manipulation.”

(Excerpt) Read more at nytimes.com ...


TOPICS: Business/Economy; Crime/Corruption; Extended News; Government
KEYWORDS: bankruptcy; lehmanbrothers; regulation; repo105
For months we heard about how the American system failed, how the European model was better and had eliminatd this kind of free-wheeling capitalism that leads to 'boom and bust'...which is why I found this so interesting:

"the new discoveries by Mr. Valukas have taken even veteran observers by surprise. Chief among these was the revelation of a particularly aggressive accounting practice, known internally as Repo 105, that Mr. Valukas said helped the investment bank mask the true depths of its financial woes -snip- Over hundreds of pages, Mr. Valukas details the genesis of and the process behind Repo 105. Based on standard repurchase agreements — short-term loans commonly used by many firms for daily financing needs, in which borrowers temporarily exchange assets in return for cash up front — Lehman took a particularly aggressive accounting approach to these transactions.

Here, the investment bank used repos to temporarily park assets off its books to make its end-of-quarter debt levels look better than they did — while calling them sales instead of loans.

The accounting tactic, first used by Lehman in 2001, had one catch, according to Mr. Valukas: no American law firm would sign off on its use.

Enter Linklaters, a highly respected British law firm that gave Lehman the answer it wanted. So long as the repos were conducted in London through the bank’s European arm, and so long as the company took other cosmetic steps to make these transactions appear to be sales instead of financings, Linklaters determined that they would pass regulatory muster."

1 posted on 03/13/2010 7:00:53 AM PST by americanophile
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To: Toddsterpatriot; Mase; expat_panama

look


2 posted on 03/13/2010 7:02:38 AM PST by 1rudeboy
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To: americanophile
“actionable balance sheet manipulation.”

We shall se, shan't we?

I won't hold my breath.

3 posted on 03/13/2010 7:10:25 AM PST by Bloody Sam Roberts (An armed man is a citizen. An unarmed man is a subject.)
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To: americanophile
To be expected, and why not. Honor among most of the huge financial institution is a joke.
4 posted on 03/13/2010 7:11:15 AM PST by Logical me (Oh, well!!!)
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To: Bloody Sam Roberts

Geithner was ‘uniquely’ qualified....


5 posted on 03/13/2010 7:12:52 AM PST by Freddd (CNN is down to Three Hundred Thousand viewers. But they worked for it.)
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To: Logical me
It is pretty sad when you can't get the lawyers to sign-off on it.

The accounting tactic, first used by Lehman in 2001, had one catch, according to Mr. Valukas: no American law firm would sign off on its use.

6 posted on 03/13/2010 7:14:33 AM PST by 1rudeboy
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To: americanophile

I believe a court-appointed examiner is really just an attorney seeking cause to file suit. Not defending Lehman -just saying this may not be the most impartial of reports. It sounds like it’s an official government finding, but it’s not.


7 posted on 03/13/2010 7:15:30 AM PST by No Left Turn
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To: americanophile

Shocked. I am shocked.

Members of the 110th Congress who have received campaign contributions from Lehman Brothers, 1989-2008

Name Office State Party Grand Total Total from
PACs Total from
Individuals
Clinton, Hillary S NY D $409,980 $3,000 $406,980
Obama, Barack S IL D $395,574 $0 $395,574
Schumer, Charles E S NY D $181,450 $25,500 $155,950
Dodd, Christopher J S CT D $165,800 $25,400 $140,400


8 posted on 03/13/2010 7:20:14 AM PST by Moorka
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To: americanophile

This is being released to support more federal regulation of the banking industry and Wall Street.


9 posted on 03/13/2010 7:22:12 AM PST by kabar
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To: kabar

Naturall. We must kill the Golden Goose for justice’s sake.


10 posted on 03/13/2010 7:23:28 AM PST by americanophile
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To: kabar

>This is being released to support more federal regulation of the banking industry and Wall Street.

Except that “no American law firm” would sign off on it indicates that those regulations are unneeded.


11 posted on 03/13/2010 7:25:33 AM PST by OneWingedShark (Q: Why am I here? A: To do Justly, to love mercy, and to walk humbly with my God.)
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To: OneWingedShark

That won’t deter Dodd and company from ramming through the current bill to regulate further the financial industry. They will cite this report. You can’t rely on American law firms to achieve the Dems socialist agenda.


12 posted on 03/13/2010 7:29:21 AM PST by kabar
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To: americanophile

The Lehman “golden goose” was killed by corruption ,, packaging and selling securities that were designed from inception to fail spectacularly ,, collecting commissions on the sales while they bet huge amounts on the securities failing. They would have made a mint if they had the Geitner connection to force payment on their insurance/cds’s like GS did with the American taxpayers via AIG.


13 posted on 03/13/2010 7:46:33 AM PST by Neidermeyer
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To: Neidermeyer

and who got 90% of Lehman’s political contributions?


14 posted on 03/13/2010 7:49:03 AM PST by gthog61
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To: americanophile

I’ll believe Congress is sincere in wanting financial reform when they launch an investigation of Goldman Sachs. Oh, that’s right...GS is “too big to investigate” because so many government officials have come from that mother ship.


15 posted on 03/13/2010 7:49:11 AM PST by kittymyrib
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To: Neidermeyer

...and the Wall Street golden goose will be killed by regulation - regulation that will increasingly eliminate risk-taking and therefore profitability, and drive capital overseas.


16 posted on 03/13/2010 7:49:27 AM PST by americanophile
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To: americanophile
aggressive accounting

A PC word for "cooking the books".

17 posted on 03/13/2010 8:02:15 AM PST by Oatka ("A society of sheep must in time beget a government of wolves." –Bertrand de Jouvenel)
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To: OneWingedShark

Yet the biggest and most corrupt group, government (politicians) as is normal, escapes again. They (the greedy politicians) have created such a huge national debt our nation is on the road to bankruptcy and in more ways than just financial.


18 posted on 03/13/2010 8:10:00 AM PST by mulligan
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To: americanophile; gthog61

and who got 90% of Lehman’s political contributions?
*****************************************************
Like all the NYC libs the rats got the cash... paying for a LACK of REGULATION to allow the corruption to continue ... Clear rules enforced fairly do not stop risktaking and profitability,, they allow more players to compete ,, not just GS , MS and Lehman.


19 posted on 03/13/2010 8:14:01 AM PST by Neidermeyer
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To: Neidermeyer

The risk isn’t ‘clear rules’ it’s a congressional ‘fix’, sure to come, with unintended consequences that’s worse than the problem.


20 posted on 03/13/2010 8:17:58 AM PST by americanophile
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To: americanophile
..sort of like Arlen Spector's Magic Bullet theory?
21 posted on 03/13/2010 8:21:18 AM PST by norraad ("What light!">Blues Brothers)
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To: 1rudeboy

I’d bet the law firms wouldn’t sign off because of the effects of Enron.


22 posted on 03/13/2010 8:25:11 AM PST by EDINVA (Sarchasm (n): The gulf between the author of sarcastic wit and the person who doesn't get it.)
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To: norraad

...or Sarbanes-Oxley.


23 posted on 03/13/2010 8:25:22 AM PST by americanophile
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To: norraad
Nothing magic about the bullet.


24 posted on 03/13/2010 8:36:04 AM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: Toddsterpatriot

http://www.godlikeproductions.com/forum1/message899888/pg3


25 posted on 03/13/2010 9:24:11 AM PST by norraad ("What light!">Blues Brothers)
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To: norraad

What’s that?


26 posted on 03/13/2010 9:39:33 AM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: Toddsterpatriot

GLP is a fruitcake site.


27 posted on 03/13/2010 9:41:48 AM PST by Psycho_Bunny
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To: Psycho_Bunny

That’s what I figured, if the other poster is a member, that confirms it.


28 posted on 03/13/2010 9:43:27 AM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: Toddsterpatriot
..just something I found interesting.

Sometimes shenanigans exposed in one place make you think differently about trickery in others.

29 posted on 03/13/2010 9:49:35 AM PST by norraad ("What light!">Blues Brothers)
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To: Toddsterpatriot
"I would never join a club that would have me as a member"

Marx(Groucho)

30 posted on 03/13/2010 10:02:58 AM PST by norraad ("What light!">Blues Brothers)
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