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Lehman Mess: Bad Intent, or Just Bad GAAP?

Tammy Whitehouse | March 23, 2010

Lehman Brothers’ collapse into bankruptcy—finally exposed for all to see in a 2,200-page report released earlier this month—is quickly becoming the textbook tale of how mysterious and opaque the U.S. financial system and its accounting have become.

The report, compiled by Anton Valukas, chairman of law firm Jenner & Block and the court-appointed examiner in Lehman’s bankruptcy proceedings, says Lehman management essentially tossed good judgment to the wind two years ago in a desperate, trans-national accounting stunt designed to hide piles of mounting debt that were quickly crushing the legendary Wall Street bank. Lehman ultimately filed for bankruptcy in September 2008, triggering the financial crisis.

Lawmakers, regulators, plaintiff lawyers, and many others are now poring over the Valukas report to see whether Lehman executives or the firm’s external auditors, Ernst & Young, should face any legal action. Neither the Securities and Exchange Commission...

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