ProPublica

Journalism in the Public Interest

Cancel

Did Lehman Bros. Lie to Investors?

Richard Fuld Jr. (Mandel Ngan/AFP/Getty Images)We’ve written before—somewhat skeptically—about the FBI’s apparent investigations into Lehman Brothers, AIG and other once-high-flying firms. Well, it turns out the Feds might just be onto something with Lehman Bros.

According to the Wall Street Journal, in the run-up to its collapse, Lehman Bros “went to great lengths to conceal how fast it was careening toward the financial precipice.” (Unfortunately, the story is behind a pay-wall.)

Lehman’s chief executive, Richard Fuld Jr., will be testifying this morning at a congressional hearing, and there’s no shortage of potentially juicy lines of inquiry. 

In the weeks leading up to Lehman declaring bankruptcy, the firm’s execs repeatedly assured investors that the company was in fine shape. “Our balance sheet is better than ever,” an exec in Lehman’s European division, Christian Lawless, recalls telling clients. (Yes, that is his real last name.)

On Sept. 10, Lehman hosted a conference call for investors. The night before, top execs had discussed the need to raise $3 billion to $5 billion. But on the call, says the Journal, “Lehman executives didn’t say anything about needing to raise capital.” Lehman’s chief financial officer asserted during the call, “Our capital position at the moment is strong.”

Of course, it’s understandable that Lehman’s brass was trying to shore up confidence in the company. “It’s a dance all these executives do when your company is built on trust and you can’t show weakness,” Peter Henning, a former SEC lawyer and DOJ prosecutor, told the Journal. At the same time, Henning said, similar statements were used by criminal prosecutors against top execs at Enron.

Boosterism is one thing. Fudging the books is another. According to the Journal, two Wall Street execs “who reviewed Lehman real-estate documents” concluded that the “firm’s real-estate valuations are roughly 35 percent higher than they should be.”

In a “document reviewed by the Journal,” Lehman had valued some of its real estate investments at near 98 cents on the dollar, even though the firm listed similar U.S. assets as being worth near half of that. As the Journal notes, “While the European market for such securities has been slightly better than the U.S. market, it has also been hammered by the credit crisis.”

In his prepared statement (PDF) for the hearing today, former Lehman CEO Fuld blamed a “litany of destabilizing factors” for the firm’s downfall. “In the end, despite all our efforts, we were overwhelmed.” We might just be getting a better picture of exactly what those factors were.

If you’re interested in watching Fuld’s testimony, here’s a live Webcast.

 

Since I had a colonoscopy this morning, 10/6/08, I’ll skip the video clip.  I was anestheticized[sp?] for the procedure but the recovery is uncomfortable. Watching Mr Fuld testify would be like having a colonoscopy without an anesthetic.
I would, however, enjoy it if Mr Fuld appeared before a grand jury, was indicted, tried, found guilty & sent to jail.  Yes, I’d like to Mr Fuld doing a perp walk too.

OBAMA PLAN WILL HELP THE FANNIE MAE CROOKS TO AVOID PRISON TIME. 

THE BAIL OUT CRISIS WAS CAUSED BY A HANDFUL OF CORRUPT CONGRESSMEN & FANNIE MAE OFFICIALS. THEY BOUGHT UP 4 TRILLION DOLLARS IN BAD DEBT IN ORDER TO PAD THE BOOKS AT FANNIE MAE AND COLLECT HUNDREDS OF MILLIONS OF DOLLARS IN SALARY BONUSES FOR THEMSELVES.

HERE ARE THREE VIDEOS THOSE CORRUPT FANNIE MAE OFFICIALS & AT LEAST FIVE CORRUPT CONGRESSMEN DON’T WANT THE AMERICAN PEOPLE TO SEE:

http://www.youtube.com/user/TheMouthPeace 

 
http://www.youtube.com/watch?v=_MGT_cSi7Rs   
 
 
http://www.youtube.com/watch?v=q2WKtp01yOw   
   
 
One Of The Crooks Will Probably Be The Next Attorney General Under Obama.  If That Happens, NONE of them will ever be brought to justice. 

http://www.wnd.com/index.php?pageId=67068