$50bn is not a trivial sum to hide from investors, creditors, rating agencies and the US government.
Which is why the assertion by a US court-appointed examiner that Lehman used an accounting ruse to keep from public view some $50bn of loans and investments – and thus appear to be taking fewer risks than was really the case – is a serious charge.
To be clear, the examiner does not say that this device was responsible for Lehman’s collapse. Its demise stemmed from its excessive investments in the US commercial property market and its dangerous reliance on short-term finance that could and was withdrawn.
However Lehman might well have collapsed earlier if the full extent of its loans and investments had been in the public domain.
Which is why it is at the very least highly embarrassing for Ernst & Young that the examiner says that global accounting firm is liable to claims for damages because of its alleged “failure to question and challenge improper disclosures” by Lehman.
And the examiner also says claims can be made against Dick Fuld, Lehman’s erstwhile chairman, and a trio of its former chief financial officers.
[More]
Notes:
This is no longer an accounting matter in my mind. It’s a criminal conspiracy and the FBI should be all over it.