Saturday, April 24, 2010


"Matthew Lee, a Lehman Brothers Holdings senior vice president, warned in a May 2008 letter that he believed 'senior management' may have violated Lehman's internal code of ethics by misleading investors and regulators about the true value of the firm's assets. ... A full version of the letter was reviewed Friday by the [WSJ]. Ms. Callan didn't return a phone call seeking comment. ... Mr. Lee, a 14-year veteran who headed the firm's global balance-sheet and legal-entity accounting, said Lehman had 'tens of billions of dollars of unsubstantiated balances, which may or may not be "bad," or non-performing assets.' ... At the time, India investment was drawing scrutiny from Lehman critics, including David Einhorn of hedge fund Greenlight Capital Inc. ... Lehman said in the spring of 2008 that it booked the gains because an investor had invested in the venture at a higher valuation than Lehman's investment. ... Mr. Lee's lawyer, Erwin Shustak, of San Diego, said his client had complained orally for several months to his boss, Martin Kelly, Lehman's former global financial controller, about many of the same issues he raised 'formally' in his letter. ... Mr. Shustak said his client was demoted about two months before he wrote the letter, which was drafted with help from the attorney. Mr. Lee was terminated a few days after he wrote the letter. ... In a statement, Ernst & Young said Lehman management determined that Mr. Lee's 'allegations were unfounded.' ... Mr. Lee and Lehamn ultimately negotiated a severance agreement which his lawyer said precluded him from filing a lawsuit or a whistle-blower complaint under the Sarbanes-Oxley Act", my emphasis, Michael Corkery at the WSJ, 20 March 2010, link:

Since when can a contract abrogate a law? The lawyers who drafted the severance agreement should be disabarred. Now. All lawyers who practice in front of the SEC should get a latter from the SEC stating that any lawyer involved in drafting such an agreement in the future will have his entire firm barred from practice in front of the SEC. Immediately. Aren't you impressed with E&Y's work? It asked Lehman management if Lee was right. Amazing. Tens of billions? What did E&Y look at?


Anonymous said...

Ahhh the banks write their own laws.

Break up the megabanks.

Free America.

OldSouth said...

Amazing, indeed, to good people like yourself who live with the assumption that truth matters.

To those who believe that the acquisition of wealth and power are the ultimate aim of existence, not amazing at all. Their only chagrin is that they got caught, no thought of the destruction created in their wake.

I don't know the details of the proposals before Congress in the 'reform bill', or whether those measures will be effective, but I do know that unless we take care to only deal with people and firms where some sense of conscience is evident, not much will change.

Even now, I hear radio ads targeted at a minority community here in Tennessee, with a financial manager promising returns that can only be achieved with Ponzi techniques. And the ads play on a gospel music station...

Evidently, not much has been learned.

Thanks for a good post.

Independent Accountant said...

It's good to hear from you. We have television stations here in Houston which show "Health and Wealth" evangelists. They claim that if you "sow a seed" into their ministry it will return to you 100-fold. What nonsense.


Independent Accountant said...

You are 162 years late. Read my 30 March 2008 post: