The Case Against Lehman Brothers | CBS 60 Minutes
On September 15, 2008, Lehman Brothers, the fourth largest investment bank in the world, declared bankruptcy — sparking chaos in the financial markets and nearly bringing down the global economy. It was the largest bankruptcy in history — larger than General Motors, Washington Mutual, Enron, and Worldcom combined. The federal bankruptcy court appointed Anton Valukas, a prominent Chicago lawyer and former United States attorney to conduct an investigation to determine what happened.
Included in the nine-volume, 2,200-page report was the finding that there was enough evidence for a prosecutor to bring a case against top Lehman officials and one of the nation’s top accounting firms for misleading government regulators and investors. That was two years ago and there have been no prosecutions. Anton Valukas has never given an interview about his report until now.
Steve Kroft: So your job, I mean, in some ways, your job was to assess blame?
Anton Valukas: Our job is to determine what actually happened, put the cards face up on the table, and let everybody see what the facts truly are.
Valukas’ team spent a year and a half interviewing hundreds of former employees, and pouring over 34 million documents. They told of how Lehman bought up huge amounts of real estate that it couldn’t unload when the market went south — how it had borrowed $44 for every one it had in the bank to finance the deals — and how Lehman executives manipulated balance sheets and financial reports when investors began losing confidence and competitors closed in.
Steve Kroft: Did these quarterly reports represent to investors a fair, accurate picture of the company’s financial condition?
Anton Valukas: In our opinion, they did not.
Steve Kroft: And isn’t that against the law?
Anton Valukas: It certainly, in our opinion, was against civil law if you will. There were colorable claims that this was a fraud, yes.
By colorable claims Valukus means there is sufficient evidence for the Justice Department or the Securities and Exchange Commission to bring charges against top Lehman executives, including CEO Richard Fuld, for overseeing and certifying misleading financial statements, and against Lehman’s accountant, Ernst and Young, for failing to challenge Lehman’s numbers.
Watch the whole thing (extras at the bottom):
Steve Kroft talks to the bank examiner whose investigation reveals the how and why of the spectacular financial collapse of Lehman Brothers, the bankruptcy that triggered the world financial crisis.
Lehman’s accounting trick (Web Extra)
Inside the SEC (Web Extra)
Kroft: When to give up on accountability (60 Minutes Overtime)
Full coverage: 60 Minutes on the financial crisis (60 Minutes Overtime)