"Many executives inside [LBHI] quietly fretted about the firm's accounting as the company headed to the brink in September 2008. Matthew Lee did something about it. In May 2008, the former Lehman senior vice president wrote a letter to senior management warning that the company may have been masking the true risks on its balance sheet. ... His warnings, disclosed for the first time in a report by a US bankruptcy-court examiner, could trigger legal consequences for Lehman's auditor [E&Y], as well as former senior officials. ... 'We are dealing with a whistle-blower letter, that is on its face pretty ugly and will take us a significant amount of time to get through,' William Schlich, a former lead partner on [E&Y's] Lehman team, wrote in a June 5, 2008, email to a colleague, which is included in the examiner's report. ... In a June 12, 2008 interview with [E&Y], Mr. Lee raised the issue that Lehman was moving as much as $50 billion off its balance sheet, using a practice the firm called 'Repo 105,' the report says", Michael Corkery at the WSJ, 13 March 2010, link: http://online.wsj.com/article/SB10001424052748703447104575118122594094284.html.
We know E&Y. Substance over form? From the Big 87654? You're joking! E&Y accepts the ".001 standard", my 5 March 2008 post: http://skepticaltexascpa.blogspot.com/2008/03/enron-accounting-redux.html. Did Uncle Sam know about LBHI's accounting chicanery? Probably. See my 6 February 2008 post: http://skepticaltexascpa.blogspot.com/2008/02/treasury-and-banks.html. Yves Smith has a related 11 March 2010 post at her Naked Capitalism: http://www.nakedcapitalism.com/2010/03/ny-fed-under-geithner-implicated-in-lehman-accounting-fraud.html.