Ernst and Young Is in Trouble as Well
Finally Movement on Federal Reserve Appointments

Criminal Prosecutors, Start Your Engines...

Tyler Durden:

The "Repo 105" Scam: How Lehman Fooled Everyone (Including Allegedly Dick Fuld) And How Other Banks Are Likely Doing This Right Now | zero hedge: Stunningly, nobody at the SEC was aware of Lehman's Repo 105 program. And guess what: NEITHER DID DICK FULD. This is unbelievable - the criminality reaches to the very top, yet the very top denies all knowledge.

Richard Fuld, Lehman’s former Chief Executive Officer denied any recollection of Lehman’s use of Repo 105 transactions. Fuld said he had no knowledge that Lehman treated any kind of repo transaction as a true sale or that Lehman ever removed from its balance sheet assets transferred in a repo transaction. In addition, Fuld did not recall having seen any reports referencing the amount of the firm’s Repo 105 activity. Fuld further stated that he did not know that Lehman removed approximately $49 and $50 billion in inventory off its balance sheet at quarter-end through the use of Repo 105 transactions in first quarter 2008 and second quarter 2008, respectively. Fuld said, however, that if he had learned that Lehman was temporarily cleansing its balance sheet of assets at quarter-end through Repo 105 transactions, it would have concerned him...

Evidence, however, suggests that Fuld is blatantly lying:

Fuld’s denial of recollection must be weighed by a trier of fact against other evidence. Fuld recalled having many conversations with his executives about reducing net leverage and emphasized to the Examiner how important it was for Lehman to reduce its net leverage. The night before the March 28, 2008 Executive Committee meeting, Fuld received materials for the meeting, including an agenda of topics including “Repo 105/108” and “Delever v Derisk” and a presentation that referenced Lehman’s quarter-end Repo 105 usage for first quarter 2008 – $49.1 billion.  The materials also were forwarded by Fuld’s assistant to other Lehman executives. It appears that Fuld did not attend the March 28 meeting, but Bart McDade recalled having specific discussions with Fuld about Lehman’s Repo 105 usage in June 2008. Sometime that month, McDade spoke to Fuld about reducing Lehman’s use of Repo 105 transactions. McDade walked Fuld through the Balance Sheet and Key Disclosures document (reproduced in part below) and discussed with Fuld Lehman’s quarter-end Repo 105 usage – $38.6 billion at year-end 2007; $49.1 billion at first quarter 2008; and $50.3 billion at second quarter 2008...

And FT Alphaville quotes:

The Examiner concludes that there is sufficient evidence to support a colorable claim that: (1) certain of Lehman’s officers breached their fiduciary duties by exposing Lehman to potential liability for filing materially misleading periodic reports and (2) Ernst & Young, the firm’s outside auditor, was professionally negligent in allowing those reports to go unchallenged. The Examiner concludes that colorable claims of breach of fiduciary duty exist against [former CEO/CFOs] Richard Fuld, Chris O’Meara, Erin Callan, and Ian Lowitt, and that a colorable claim of professional malpractice exists against Ernst & Young...

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