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When In Doubt, What Else? Cover It Up..
The collapse of Enron and Worldcom was supposed to
teach both Wall Street and Main Street what the consequences of moving
bad things off the books would lead to, the collapse of the firm. Yet,
in the case of Lehman Brothers, it seems that no one was paying attention.
Enron was known for moving an empty barge down
the river and counting it as two barges. They were also known for
moving losses off of the main books into limited partnerships that
operated as separate entities. In both cases there was plenty of flim-flam
involved. Yet, Lehman Brothers may take the cake and make Enron look
amateurish.
According to The Wall Street Journal: "A scathing report by a U.S. bankruptcy-court
examiner investigating the collapse of Lehman Brothers Holdings Inc. blames senior
executives and auditor Ernst & Young for serious lapses that led to the largest
bankruptcy in U.S. history and the worst financial crisis since the Great Depression.
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In the works for more than a year,
and at a cost of $38 million, the report by court-appointed
examiner Anton Valukas paints the most complete picture
yet of the free-wheeling culture inside the 158 year-old
firm, whose chief executive Richard S. Fuld Jr. prided
himself on his ability to manage market risk."
Among other things, the report alleges "it alleges that Lehman executives manipulated
its balance sheet, withheld information from the board, and inflated the value
of toxic real estate assets." The report notes that warnings of "accounting irregularities" were
ignored by the board on at least one occasion.
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