Bloomberg's story SEC Staff Ends Probe of Lehman Without Finding Fraud speaks for itself.
U.S. Securities and Exchange Commission investigators have concluded their probe of possible financial fraud at Lehman Brothers Holdings Inc. without recommending enforcement action against the firm or its former executives, according to an excerpt of an internal agency memo.
Lawmakers and investors have pressed the agency for more than three years to determine whether Lehman misrepresented its financial health before filing the biggest bankruptcy in U.S. history in September 2008.
Under a heading reading “Activity in Last Four Weeks,” the undated document reads, “The staff has concluded its investigation and determined that charges will likely not be recommended.”
SEC officials didn’t dispute the authenticity of the memo or its contents.
Pressure on the agency to punish any wrongdoing related to Lehman’s collapse escalated after Anton Valukas, the court- appointed bankruptcy examiner, found the firm misled investors with “accounting gimmicks” that disguised its leverage.
Senior SEC officials have been reluctant to formally close the matter even though investigators found a lack of evidence of wrongdoing, according to people with direct knowledge of the matter. The officials have weighed issuing a public report on their findings that would stop short of an enforcement action while highlighting the firm’s questionable conduct...
‘Grossly Negligent’
According to Valukas, Lehman’s former Chief Executive Officer Richard Fuld [image, top] was “at least grossly negligent” for letting Lehman file financial reports that distorted the firm’s risks.
Fuld didn’t structure or negotiate the Repo 105s, nor was he aware of the accounting treatment, his lawyer, Patricia Hynes of Allen & Overy LP, said in a statement after Valukas’s report was released. Hynes didn’t immediately respond to an e-mail seeking comment.
[My note: See the Bloomberg story if you want to know about the Repo 105s.]
According to the internal memo, SEC staff investigated whether Lehman and its officers misrepresented the firm’s financial health, capital situation, liquidity and its commercial real estate portfolio.
In its final year, Lehman overvalued real-estate holdings, including a stake in U.S. apartment developer Archstone-Smith Trust, Valukas said. Lehman and Tishman Speyer Properties LP completed a joint acquisition of Archstone for $22 billion, including debt, in October 2007.
Lehman presented “unreasonable” valuations of its Archstone stake in the first three quarters of 2008, overvaluing the holding by as much as $450 million in the second quarter, Valukas said.
At the Daily Ticker, Aaron Task asks where's the outrage?
Speaking for myself, I used to be outraged. That was nearly four years ago. But if I were to get outraged about every single outrageous thing people do, and particularly all the outrageous things which have been perpetrated in the United States over these last 30 years, I would have no time left over for anything else.
This story comes on the heels of the multi-billion dollar gambling loss at JP Morgan Chase. A trader known as "the London whale" was betting on European debt. Right now we don't know exactly how many billions the bank lost. This story reminded all right-thinking people that we need Glass-Steagall to be reinstated so banks like JP Morgan Chase can't gamble with depositor and tax-payer money. Glass-Steagall calls for the strict separation of commercial and investment banking. As things stand, banks like Chase are free to act like hedge funds with your money. But of course it is no longer your money. It is their money.
Is this outrageous? You bet it is. Do you feel outraged? Maybe you do, but I don't. As with Lehman, rest assured that nothing is going to be done about this outrage either.
However, there is one useful reference in the Daily Ticker story, which opens up an opportunity for some comic relief, which is the only kind of relief there is.
The entire financial system is untenable.
- have a nice weekend, enjoy the time off.
Posted by: Ben | 05/27/2012 at 11:47 AM