Lehman, E&Y, and Repo 105

  • Lehman Brothers reduced its reported leverage by illegally characterizing short-term financing cash inflows as operating cash inflows (Repo 105)
  • Lehman did not disclose its improper accounting treatment of Repo 105
  • Lehman’s external auditor, E&Y, was aware of Repo 105 but did not notify the audit committee or Lehman’s investors
  • From an objective point of view, the NYT and WSJ reporting on Repo 105 was inaccurate and incoherent

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