Damning insight into corporate culture sheds light on fall of a Wall Street giant
By Francesco Guerrera, Henny Sender, Patrick Jenkins , in New York, in London 2010-03-16

September 15 2008 is etched on the financial world’s collective memory. The day Lehman Brothers collapsed into bankruptcy was a pivotal moment in the most devastating financial crisis in generations, causing panic in capital markets and a virtual freeze in global trade.

Scores of books and magazine articles have chronicled Lehman’s rapid and ruinous fall from global investment banking powerhouse to the largest corporate failure in US industry.

But it took a year of painstaking research and a door-stopper report by a Chicago-based lawyer to lift the lid on the management failures, destructive internal culture and reckless risk-taking that sent Lehman to its grim fate.

The 2,200-page tome Anton Valukas – the examiner hired by a US court to probe who was responsible for the bank’s failure – released on Thursday could have far-reaching implications for former Lehman executives, including its former chief, Dick Fuld, and its auditors Ernst & Young.

But it also sheds a damning light on the inner workings of Wall Street – or at least that part of Wall Street that was hell-bent on juicing profits and hiding losses during the boom that led to the crisis.

The report singles out Lehman as one of the last Wall Street institutions to engage in “repo” deals aimed at moving assets off its balance sheet. But the fact that it was able to find willing counterparties in the US and Europe that would, albeit unwittingly, help Lehman misrepresent its financial position will dishearten many observers, even if regulatory reforms now under way aim to clean up the most egregious pre-crisis -practices.

“I almost threw up when I read the report,” a senior Wall Street executive said yesterday. “It makes me sick of this industry.”

The Lehman portrayed by Mr Valukas is not the successful upstart presided over by an aggressive but inspirational Mr Fuld that had become part of industry lore. The company that comes out of the examiner’s nine volumes is an organisation prepared to take short cuts and huge risks to boost earnings, where control and accounting procedures were found to be sorely lacking.

Mr Valukas begins his story at a high point in Lehman’s 158-year history. On January 29 2008 the firm reported record yearly earnings of $4bn for the previous year.

Within eight months, those profits – and the rest of the firm – had turned to dust.

“There are many reasons why Lehman failed and the responsibility is shared,” writes Mr Valukas, before adding that its plight “was exacerbated by Lehman executives whose conduct ranged from serious but non-culpable errors of judgment to actionable balance-sheet manipulation”.

The examiner concludes that, based on different metrics, Lehman and some affiliates were already insolvent at various times in the months of 2008 leading up to its bankruptcy filing.

The crux of the report, which is based on the review of 34m pages of documents out of the 350bn pages obtained by Mr Valukas, is its portrayal of Lehman’s insatiable risk appetite and its alleged efforts to cover up the extent of its financial woes.

At the end of 2006, senior officials at Lehman decided to increase the ceiling on the firm’s risk limits, or how much Lehman stood to lose from its trading and investment activities, Mr Valukas recounts.

The decision came just as the firm moved to expand its commitment to real estate investing, even though the US mortgage market was already starting to implode. Indeed, Lehman would increase its firm-wide risk appetite limit three times over the following year.

Madelyn Antoncic, then Lehman’s chief risk officer, resisted an increase in the limit from $2.3bn to $3.3bn but was overruled, according to the probe. By the end of 2007, it was $4bn.

The report also provides a scathing picture of just how weak Lehman’s risk-management practices ultimately became – and how they contributed to Lehman’s implosion.

For example, the firm, like its peers, was required to stress-test its trading positions and investments. But Lehman excluded its principal investments in real estate, its private equity investments and its leveraged loans backing buyout deals, thereby leaving out its most risky assets from -calculations.

A $2.3bn bridge loan for the buyout of Archstone-Smith Real Estate Investment Trust in May 2007 was never included in its risk usage calculation, although that single transaction would have put Lehman over its already enlarged risk limit, the examiner notes.

Lehman’s practices meant that the firm did not have a true picture of just how vulnerable it was to swings in capital markets and, more importantly, in the markets for the illiquid assets in which it had invested. The issue was all the more crucial to Lehman because the firm, with only $25bn in capital, had far less of a balance sheet buffer than rivals such as Goldman Sachs.

In the aftermath of the near-collapse of Bear Stearns in March 2008, Lehman found itself unable to sell some of its most illiquid assets. With ratings agencies and investors demanding a reduction in Lehman’s balance sheet, the company ramped the use of an “accounting gimmick” it had been resorting to since 2001, according to the report.

Known internally as “Repo 105” – but never disclosed externally – the mechanism enabled Lehman to move up to $50bn in assets off its balance sheet for just enough days to get through the end of the quarter.

That, in turn, helped the firm to reduce its leverage ratio (the level of indebtedness on its balance sheet), avoid a rating downgrade and appear healthier than it actually was.

“The examiner has investigated Lehman’s use of Repo 105 transactions and has concluded that the balance sheet manipulation was intentional, for deceptive appearances, had a material impact on Lehman’s net leverage ratio and, because Lehman did not disclose the accounting treatment of these transactions, rendered Lehman’s [financial statements] deceptive and misleading,” the report says.

The device was so rare that Lehman could not find a US law firm to give a legal opinion on it, using instead UK-based Linklaters, says the report.

Linklaters said yesterday it was “not aware of any facts or circumstances which would justify any criticism” of its opinions.

Lehman’s many counterparties in the trades also never appeared to have questioned them or the fact that they were receiving better terms than in traditional repo transactions.

As with other corporate scandals, internal e-mails offer a revealing glimpse of how the rank-and-file saw the practice. In one e-mail in February 2008, a senior trader tells a colleague: “We have a desperate situation and I need another $2bn [balance sheet reduction] from you either through Repo 105 or outright sales.”

A few months later, the same trader urges a colleague: “Let’s max out on the Repo 105 for your stuff.”

A few managers were not so sure. Bart McDade, a Lehman executive who was worried about Repo 105, described it as “a drug”.

Another executive ordered traders to “wean themselves off” Repo 105. One even pointed to the risks of covering up the practice, warning: “The more people that know the truth, the more dodgy it can be.”

Mammoth task

Investigate why Lehman Brothers failed, whose fault it was and what legal claims could be pursued as a result. That was the daunting task handed to Anton Valukas, a Chicago lawyer, by a US bankruptcy court in January 2009.

His highly anticipated findings – filed with the court earlier this year but sealed until this week – were considered the ultimate tell-all on the largest bankruptcy in US history.

Only a brief portion of the 2,200 pages has been redacted.

Mr Valukas, 66, has already earned praise for a report described as “riveting” for its narrative-style account of the negotiations surrounding the bank’s demise, and overwhelming in its detailed and thorough exploration of the complex behind-the-scenes transactions.

Before being appointed examiner he was far less well known in New York circles than in the political and financial world of Chicago, where he has been a fixture for three decades.

Mr Valukas has been a partner with law firm Jenner & Block since 1976, with the exception of a stint as the US attorney for the northern district of Illinois from 1985 to 1989.

He specialises in civil and white-collar criminal litigation. Among the thorny issues he has tackled are Chicago’s healthcare system as a special counsel to the city and vendor and pension fraud at the city’s housing authority.

His Lehman report was a mammoth task involving e-mails, reports, data sets and interviews. The internal Lehman correspondence alone amounted to 350bn pages of documentation spread across some 2,600 systems.

By using a sophisticated set of databases and search techniques, Mr Valukas and his team narrowed the focus but still examined some 34m pages of documents. Those efforts were supplemented by interviews with more than 250 people.

Executives in the spotlight

Dick Fuld

Spent almost 40 years at Lehman Brothers and was chief executive from 1994 until the investment bank’s collapse in 2008. His hard charging style has been credited for the broker- dealer’s success in the 1990s and blamed for its eventual demise. Since the Lehman bankruptcy filing he has become a public bete noire, taking flak for everything from excessive pay to excessive hubris

Erin Callan

Joined Lehman Brothers in 1995. In December 2007 she became chief financial officer but was removed after only a few months following the bank’s $2.8bn loss in the second quarter of 2008

Chris O’Meara

Joined Lehman in 1994 and served as both global controller and chief financial officer of investment banking before becoming chief financial officer from December 2004. In December 2007 Mr O’Meara became global head of risk management, an area that has come in for particular scrutiny in the wake of Lehman’s disastrous investments and its bankruptcy filing

Ian Lowitt

Joined Lehman from McKinsey in 1994 and

in June 2008 replaced Erin Callan as chief financial officer, just in time for the company’s bankruptcy filing on 15 September 2008

英国《金融时报》 弗朗西斯科•格雷拉 汉妮•桑德尔 帕特里克•詹金斯 , 纽约, 伦敦报道 2010-03-16

2008年9月15日被铭刻在了金融界的集体记忆中。这一天,雷曼兄弟(Lehman Brothers)破产了。在那场数十年来最具破坏性的金融危机中,这是一个关键时刻,它引起了资本市场的恐慌,全球交易几乎冻结了。



受美国一法庭委托、负责调查谁应为雷曼破产负责的安东•沃卢克斯(Anton Valukas),于上周四发布了一份长达2200页的报告。对雷曼前首席执行官迪克•富尔德(Dick Fuld)等前高管和审计机构安永(Ernst & Young)来说,这份报告可能产生深远影响。














调查发现,雷曼当时的首席风险官马德林•安东西奇(Madelyn Antoncic)曾反对把风险承受上限从23亿美元提高到33亿美元,但她的意见遭到否决。到2007年底,雷曼的风险承受上限已达到40亿美元。




雷曼这些做法意味着,该公司并不真正清楚,假如金融市场出现动荡,特别是如果自己所投资的非流动资产市场出现动荡,自己多么容易受到冲击。这个问题对雷曼来说尤为关键,因为该公司的资本金只有250亿美元,所拥有的资产负债表缓冲远小于高盛(Goldman Sachs)等竞争对手。

在2008年3月贝尔斯登(Bear Stearns)几近破产后,雷曼发现自己一些流动性最差的资产无法脱手。报告称,在评级机构和投资者要求雷曼缩减资产负债表的情况下,该公司开始大肆使用其自2001年起采用的一种“会计花招”。











一些管理人员对回购105并不是这么肯定。雷曼高管巴特•迈克达德(Bart McDade)就很担心,形容它是“一种毒品”。








沃卢克斯从1976年起一直是Jenner & Block律师事务所的合伙人,除了在1985-1989年曾担任美国伊利诺斯州北方区检察官以外。





迪克•富尔德(Dick Fuld)


艾琳•卡兰(Erin Callan)


克里斯•奥米拉(Chris O’Meara)


伊恩•洛维特(Ian Lowitt)