Creditors could have claim case against Lehmans
THERE could be a case for claims against four top former executives of failed investment bank Lehman Brothers, and against its auditors Ernst & Young, according to a major report into the collapse of the bank.
The report said Lehman's top bosses used accounting gimmicks to disguise its debts and the bank had been insolvent for weeks before it filed for bankruptcy in September 2008.
But the 2,200-page report by examiner Anton Valukas said there was no evidence of general improper behaviour by Lehman management.
While some of its decisions "can be questioned in retrospect" and the firm's valuation procedures for its assets "may have been wanting," those responsible had used their business judgment and were largely not liable for the firm's collapse.
However, he said that Lehman's creditors could have claims against former Lehman chief executive Dick Fuld and chief financial officers Chris O'Meara, Erin Callan and Ian Lowitt for negligence or breach of fiduciary duty.
Mr Valukas said there was also sufficient evidence to support a possible claim that the firm's auditor, Ernst & Young, had been "negligent" and that Lehman, now being liquidated on behalf of creditors, could pursue claims against the firm for "professional malpractice".
Ernst & Young's Irish arm was the auditor to Anglo-Irish Bank, and has strongly defended its handling of the bank's accounts. It has since been appointed by NAMA to provide "loan and associated valuation services".
The examiner also suggested Lehman may be able to pursue claims against banks like JPMorgan and Citigroup for taking some $16bn (€12bn) in collateral out of Lehman's coffers as it struggled to stay afloat.
Ernst & Young said in a statement: "Our last audit of the company was for the fiscal year ending November 30, 2007. Our opinion indicated that Lehman's financial statements for that year were fairly presented, and we remain of that view."