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

给雷曼兄弟“验尸”
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。

许多书刊都记载了雷曼骤然而至的灭顶之灾,这家昔日的全球投行巨擘,缔造了美国历史上最大的企业破产案。

然而,一位芝加哥律师花了整整一年时间,经过深入细致的调查研究,才完成了一份篇幅巨大的报告,揭示了致使雷曼走上悲惨命运的管理弊病、毁灭性的内部文化以及不计后果的冒险行为。

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。

但这份报告也赤裸裸地揭示了华尔街——起码是局部华尔街——内部的运作模式,正是他们在繁荣时期拼命追逐利润和隐瞒亏损的做法导致了这场危机。

报告指出,华尔街有些机构利用所谓“回购”交易,把资产转出资产负债表;雷曼就是其中之一。雷曼能够在美国和欧洲找到愿意与它进行这类交易的机构,让他们在不知情的情况下,帮助雷曼粉饰财务状况,这一点让许多观察家感到沮丧,尽管当局正在推行监管改革,整顿危机前种种异常出格的做法。

“它让我对这个行业感到恶心”

“我读到这份报告时,几乎作呕,”华尔街一位资深高管上周五表示,“它让我对这个行业感到恶心。”

沃卢克斯所形容的雷曼,并非如业内传说所称,是在咄咄逼人、但善于激发斗志的富尔德掌管下迅速崛起的成功企业。在这份总共九卷的调查报告中,雷曼是一个为了扩大盈利而随时准备走捷径和承担巨大风险的组织,其内控和会计程序极不完善。

沃卢克斯从雷曼在其158年历史中的一个巅峰时刻开始讲起。2008年1月29日,该公司公布,上年度实现40亿美元的创纪录利润。

不到8个月后,这些利润——连同该公司的其它老本——化为了尘土。

“雷曼垮掉有许多原因,责任是共同的,”沃卢克斯写道。他又补充说,“雷曼高管的行为,从严重但无可指摘的判断失误,到足以对其提起控告的操纵资产负责表”,都加重了该公司的困境。

沃卢克斯总结说,从各种不同标准衡量,进入2008年后,在申请破产前的几个月内,雷曼及其一些附属机构就已数度陷入资不抵债状态。

沃卢克斯总共收集了3500亿页材料,从中选取3400万页进行审阅,在此基础上撰写了上述报告,重点描述雷曼永不餍足的风险胃口,及其涉嫌企图掩盖自身财务困境的严重程度。

沃卢克斯指出,在2006年底,雷曼高管决定提高公司的风险承受上限,即雷曼准备承受的交易和投资亏损额度。

在错误的时机提高风险上限

作出上述决定之际,该公司正要扩大房地产投资,尽管当时美国抵押贷款市场正开始内爆。的确,雷曼当时打算在一年内将全公司的风险承受上限提高两倍。

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。

该报告还列举事实,尖锐地说明雷曼的风险管理做法最终变得多么薄弱,以及这些做法怎样加快了雷曼的内爆。

例如,与业内同行一样,雷曼按规定必须对所持的交易头寸和投资进行压力测试,但该公司把房地产自营投资、私人股本投资以及支持收购交易的杠杆贷款等风险最高的资产,都排除在了计算范围之外。

沃卢克斯指出,雷曼在2007年5月用于收购Archstone-Smith房地产投资信托基金的23亿美元过渡贷款,就从未纳入风险计算,尽管单是这笔交易就会使雷曼超出上调后的风险承受上限。

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”。

求助“回购105”

这种内部称为“回购105”——但从不对外透露——的安排,使雷曼得以在几天期间把最多500亿美元的资产转出资产负债表,从而安然度过季度结束的那几天。

借此,该公司降低了杠杆比率(资产负债表上债务所占比率),避免评级遭到下调,显得比实际情况更为健康。

“本调查员调查了雷曼使用回购105交易手法的情况,认为这种操纵资产负债表的行为是有意的,目的是制造假象,对雷曼净杠杆比率造成了实质影响,而且由于雷曼并未披露其对这些交易的会计处理方法,致使雷曼的(财务报表)带有欺骗性和误导性,”报告表示。

报告称,这种手法非常罕见,以致雷曼找不到一家美国律师事务所来发表相关法律意见,而只能委托英国的年利达(Linklaters)。

年利达上周五表示,“没有得知有任何事实或情况能为任何批评提供依据”。

雷曼的许多交易对手似乎也从不质疑这些交易,以及为什么自己能拿到比传统回购交易更优厚的条件。

“我们遇到了绝境”

与其它公司丑闻一样,内部电子邮件让人得以一窥雷曼普通员工如何看待这种手法。在2008年2月的一封电子邮件中,一位高级交易员告诉一位同事:“我们遇到了绝境,我需要从你这里再来20亿美元(资产负债表缩减额),不管是通过回购105,还是直接出售。”

几个月后,这名交易员催促一名同事说:“让我们尽量用回购105对付你那边的东西吧。”

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”。

有位高管命令手下交易员“逐渐停用”回购105。还有一人甚至指出了掩盖这种做法的风险,警告称:“越多人了解真相,它就越成问题。”

处理海量文件

调查雷曼为什么破产、谁的错以及有关方面可据此采取哪些法律行动,这就是美国一家破产法庭于2009年1月交给芝加哥律师安东•沃卢克斯的重任。

这项备受期待的调查结果,被认为是对美国有史以来最大破产案的终极版全面解析。该报告今年早些时候就提交至法庭,但直到上周才公开发布。

2200页材料中只有一小部分经过编辑。

现年66岁的沃卢克斯因为这份报告受到称赞:对于围绕该行破产的谈判,报告采用了叙事风格,有人形容“让人看得目不转睛”;对复杂的幕后交易,报告进行了详细而全面的分析,极具说服力。

在被委任为本案调查员之前,沃卢克斯在纽约远不如在芝加哥政经两界有名气,他在那里已经活跃了三十来年。

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。

他专长于民事和白领刑事诉讼案件。他处理过的棘手问题包括,芝加哥的医疗体制(作为市政府和卖主的特别律师),以及该市住房管理局的养老金欺诈事件。

撰写雷曼报告是一项任务量巨大的工作,涉及电子邮件、报告、数据库和面谈。仅雷曼内部信件就相当于3500亿页文件,分布在大约2600个系统内。

应用一系列高级的数据库及搜索方法,沃卢克斯和他的团队缩小了研究范围,但仍审阅了大约3400万页文件。除此之外,他们与250多人进行了面谈。

焦点中的高管们

迪克•富尔德(Dick Fuld)

在雷曼度过了近40年,1994年起担任首席执行官,直到2008年该行破产。他有一股子闯劲,这被认为既是雷曼在上世纪90年代获得成功的关键所在,也是该行最终覆没的原因。自从雷曼申请破产以来,他已成为公众眼中的罪人,饱受诟病,从薪酬过高到过于傲慢自大,骂名不一而足

艾琳•卡兰(Erin Callan)

1995年加入雷曼,2007年12月出任首席财务官,任期仅数月。在该行公布2008年次季亏损28亿美元后,她就被撤了职

克里斯•奥米拉(Chris O’Meara)

1994年加入雷曼,兼任全球控制官和投行业务首席财务官,2004年12月出任首席财务官,2007年12月任全球风险管理总监。自雷曼在投资上损失惨重进而申请破产后,风险管理领域受到了特别严密的关注

伊恩•洛维特(Ian Lowitt)

1994年从麦肯锡转入雷曼,2008年6月接替艾琳•卡兰担任首席财务官,正好赶上该行于2008年9月15日申请破产

译者/杨远

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