Lehman warned on accounting gimmicks
NEW YORK — A Lehman Brothers whistle-blower warned his bosses that accounting gimmicks the bank used before its collapse may have been illegal, his lawyer said yesterday.
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. 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 US 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 said in a 2,200-page report last week that Lehman hid its debt and perilous financial condition by using an accounting gimmick called Repo 105.
In a letter dated May 18, 2008, Lee wrote that he discovered the bank had been underreporting its debt by about $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.’’
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.’’
Senate Banking Committee chairman Christopher Dodd yesterday called for Attorney General Eric Holder to investigate the circumstances that led to Lehman’s collapse.