There could be grounds for legal claims against senior executives at Lehman Brothers, auditor Ernst & Young, and other Wall Street Banks, for their role in the collapse of Lehman in 2008.
This is the conclusion of a report on the collapse of the bank, by court-appointed bankruptcy examiner Anton Valkulas. It found that Lehman was insolvent for weeks before filing for bankruptcy, criticises accounting "gimmicks" used by the bank to buy time, and accuses senior management of "actionable balance sheet manipulation".
Although the report said that there had been no systematic wrong-doing, Valkulas said that Lehman, which is now being liquidated, could have claims for negligence of breach of fiduciary duty against former chief executive Dick Fuld, and chief financial officers Chris O'Meara, Erin Callan and Ian Lowitt.
The 2,200-page report, which took a year to prepare, accuses senior management of using an accounting trick called "repo 105", which temporarily boosted the bank's balance sheet by as much as $50bn (£33bn).
"Lehman never publicly disclosed its use of repo 105," says the report, although it was raised with both Callan and Lowitt.
A claim for negiligence and professional malpractice could also be pursued against the firm's auditor, Ernst & Young, he said.
Ernst & Young said in a statement that its last audit of Lehman was "fairly presented" according to accounting rules.
Valkulas said that Wall Street had a large role in causing an acute liquidity crisis at Lehman in the days before it collapsed, and said that the bank could also pursue claims against other banks, including JPMorgan and Citigroup.
The two Wall Street banks demanded significant amounts of capital and extra guarantees as Lehman struggled to stay afloat, with JP Morgan Chase requesting $5bn (£3.3bn) just three days before it filed for bankruptcy.
The report, which was completed in February, was made public yesterday after a judge agreed that it should be unsealed. He said that it read "like a best seller".
