SEC may issue public rebuke to Lehman
Published 04/06/2011 | 05:00
US Securities and Exchange Commission investigators may issue a public rebuke of Lehman Brothers and its former executives instead of suing them for actions that led to the firm's 2008 failure.
SEC enforcement lawyers are concerned that a legal attack on Lehman's accounting practices would likely fail.
Instead, the enforcement staff may recommend that the agency take the rare step of publishing a so-called report of investigation, also known as a 21(a) report.
The commission would have to vote on whether to issue a report and it is still possible that the SEC may decide to bring legal claims in court, the people said.
The 21(a) reports, which lay out allegations of misconduct without imposing penalties, have only been issued six times in the past decade, according to the SEC's website.
"The SEC can claim that this is decisive action and that they're on record as to the wrongdoing.
"It doesn't meet the inevitable resistance that civil action meets -- the possibility of failure," said Robert Hillman, a professor at the University of California, Davis, School of Law.
Kimberly Macleod, a spokesman for Lehman, declined to comment. Patricia Hynes, an attorney at Allen & Overy for Lehman's ex-chief executive officer Richard Fuld, and Robert Cleary, a lawyer at Proskauer Rose for former finance chief Erin Callan, didn't respond to calls. Florence Harmon, an SEC spokesman, declined to comment.
Lehman, which filed the biggest bankruptcy in US history in September 2008, was faulted along with its former executives in a report by Anton Valukas, the court-appointed examiner, who said they misled investors with "accounting gimmicks." (Bloomberg)