60 Minutes: The Criminal Case Against Lehman Brothers
Lehman Bankruptcy trustee Anton Valukas on 60 Minutes. This story was first broadcast by CBS in April of this year and was re-broadcast in August. This is the first and only time Valukas has given an interview about the findings of his report.
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Read the Lehman Bankruptcy Report
Transcript
Four years after filing for bankruptcy, no one at Lehman has been held responsible. Steve Kroft investigates the collapse of Lehman Brothers: what the SEC did and didn't know about the firm's finances, the role of a top accounting firm in covering up the fraud, and why no one at Lehman has been prosecuted.
On Sept. 15, 2008, Lehman Brothers, the fourth largest investment bank in the world, declared bankruptcy -- sparking chaos in the financial markets and nearly bringing down the global economy. It was the largest bankruptcy in history -- larger than General Motors, Washington Mutual, Enron, and Worldcom combined. The federal bankruptcy court appointed Anton Valukas, a prominent Chicago lawyer and former United States attorney to conduct an investigation to determine what happened.
Included in the nine-volume, 2,200-page report was the finding that there was enough evidence for a prosecutor to bring a case against top Lehman officials and one of the nation's top accounting firms for misleading government regulators and investors. That was two years ago and there have been no prosecutions. Anton Valukas had never given an interview about his report until we broadcast this story in April of this year.
Steve Kroft: This is the largest bankruptcy in the world. What were the effects?
Anton Valukas: The effects were the financial disaster that we are living our way through right now.
Steve Kroft: And who got hurt?
Anton Valukas: Everybody got hurt. The entire economy has suffered from the fall of Lehman Brothers.
Steve Kroft: So the whole world.
Anton Valukas: Yes, the whole world.
When Lehman Brothers collapsed, 26,000 employees lost their jobs and millions of investors lost all or almost all of their money, triggering a chain reaction that produced the worst financial crisis and economic downturn in 70 years. Anton Valukas' job was to provide the bankruptcy court with accurate, reliable information that the judges could use to resolve the claims of creditors picking over Lehman's corpse.
Steve Kroft: Had you ever done anything like this before?
Anton Valukas: I've never done anything like Lehman Brothers. I don't think anybody else has ever done anything like Lehman Brothers.
Steve Kroft: So your job, I mean, in some ways, your job was to assess blame?
Anton Valukas: Our job is to determine what actually happened, put the cards face up on the table, and let everybody see what the facts truly are.
Valukas' team spent a year and a half interviewing hundreds of former employees, and pouring over 34 million documents. They told of how Lehman bought up huge amounts of real estate that it couldn't unload when the market went south -- how it had borrowed $44 for every one it had in the bank to finance the deals -- and how Lehman executives manipulated balance sheets and financial reports when investors began losing confidence and competitors closed in.
Steve Kroft: Did these quarterly reports represent to investors a fair, accurate picture of the company's financial condition?
Anton Valukas: In our opinion, they did not.
Steve Kroft: And isn't that against the law?
Anton Valukas: It certainly, in our opinion, was against civil law if you will. There were colorable claims that this was a fraud, yes.
By colorable claims Valukus means there is sufficient evidence for the Justice Department or the Securities and Exchange Commission to bring charges against top Lehman executives, including CEO Richard Fuld, for overseeing and certifying misleading financial statements, and against Lehman's accountant, Ernst and Young, for failing to challenge Lehman's numbers.
Continue reading transcript at CBS...
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Background:
Analysis: Screaming for Liquidity Inside Lehman
Dylan Ratigan on Lehman, Geithner, Fuld & The New York Fed
Sep 20, 2012 at 8:04 PM
Reader Comments (12)
http://dealbook.blogs.nytimes.com/2010/03/16/at-lehman-watchdogs-saw-it-all/
http://dailybail.com/home/lehman-accounting-fraud-attention-prosecutors-watch-this-vid.html
http://dealbook.nytimes.com/2010/03/11/lehman-directors-did-not-breach-duties-examiner-finds/#reports
More detail here.
1) "The Case Against Lehman Brothers" (April 22, 2012)
2) "Prosecuting Wall Street" (December 4, 2011)
3) "Inside the Collapse" (March 10, 2010)
4) "Wall Street's Shadow Market" (October 5, 2008)
5) "Financial Weapons of Mass Destruction" (October, 26, 2008)
6) "House of Cards" (January 27, 2008)
http://www.cbsnews.com/8334-504803_162-57418062-10391709/full-coverage-60-minutes-on-the-financial-crisis/?tag=back
60 Minutes V.O.: The only place Lehman CEO Richard Fuld has publicly answered questions about his firm’s bankruptcy has been in front of Congress.
Fuld (before Congress, reading): I have absolutely no recollection whatsoever of hearing anything about, or seeing documents relating to, Repo 105 transactions while I was the CEO of Lehman.
Valukas: He said the same thing to me face to face.
Q. Do you believe him?
A. There is evidence which would show that that’s not accurate. The president of Lehman Brothers told us that in fact he had conversations with Dick Fuld about this, and documents were shared with him which would reflect the Repo 105 transactions and how they were being used. Richard Fuld’s view on that was that he had no knowledge of it, [but there is] other evidence that he did. A JURY WOULD HAVE TO DECIDE who’s telling the truth.
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And yet last Thanksgiving (11/23/11) Valukas offered the following opinon on why there were no criminal prosecutions:
“I think the underlying factor is the complexity of many of these cases where you have the failure of a major corporation and you are now looking to identify individuals who are responsible. To a large extent what you find is that responsibility is diffused. So a chief executive is able to say, ‘I relied on my accountant,’ the accountants are able to say, “We relied on the lawyers,’ and if you’re not able to establish that an individual had criminal intent, then YOU CAN'T BRING THE PROSECUTIONS IN THE FIRST PLACE.”
http://www.nakedcapitalism.com/2011/11/we-speak-on-pbs-newshour-about-why-no-bank-executives-have-gone-to-jail.html (beginning at 1:30)
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In any event, DB, you do the public a great service by refusing to let stories like these die. The statute of limitations on fraud is typically five years, which definitely hasn't run yet.
Perhaps the most effective tactic of the criminal elite throughout the financial crisis has been to let stories die down before resuming crimes-as-usual.
“I think this is the last story I’ll do about nobody being held accountable because I really have sort of given up. I don’t think that the federal government—either the S.E.C. or the Justice Department—are going to believe in bringing cases against individuals. I just don’t think that they’re going to.”
http://www.cbsnews.com/8301-504803_162-57418034-10391709/kroft-why-have-no-banking-executives-been-prosecuted (5:18 mark)
snip
Shadow Banks
Shadow banks are almost three times the size of the formal banking sector, and they are less transparent and less regulated, even with heightened attention from the newly created Financial Stability Oversight Council. Lending through shadow banking channels such as securitization or repurchase agreements might not be covered by a taxpayer guarantee, but failures in these parts of the financial system during the crisis brought about government intervention all the same.
One need only look at the situation with money-market mutual funds, where one fund’s failure during the crisis put the entire economy at risk and required the government to intervene. This part of the shadow banking system has fended off badly needed reform. Far from ending too-big-to-fail, breaking up the banks would merely push business into even larger overseas banks or to financial firms with less oversight.
in full
http://www.bloomberg.com/news/2012-09-05/don-t-make-banks-too-small-to-succeed.html
Much More on that here
http://dailybail.com/home/busted-henry-paulson-declares-im-a-capitalist-while-respondi.html
Flashback
Fraud Files: Is Ernst & Young to Blame in Lehman Bros. Fraud?
snip
New York Attorney General Andrew Cuomo has slapped Big Four audit firm Ernst & Young with civil fraud charges for its alleged role in the collapse of Lehman Brothers. The theory is simple: Lehman Brothers committed a massive accounting fraud, and E&Y went along with it when they signed clean audit opinions.
The press release from the Attorney General's office puts it nicely, saying that E&Y helped " . . . Lehman Brothers Holding, Inc. ('Lehman') engage in an accounting fraud involving the surreptitious removal of tens of billions of dollars of fixed income securities from Lehman's balance sheet in order to deceive the public about Lehman's true liquidity condition."
more
http://www.dailyfinance.com/2010/12/23/fraud-files-is-ernst-and-young-to-blame-in-lehman-bros-fraud/
Repo 105: An Anatomy of Lehman's Accounting Fraud
http://www.fraudsharks.com/index.php?option=com_k2&view=item&id=33:repo-105-how-lehman-brothers-manipulated-their-balance-sheet-and-bankrupted-the-company-an-anatomy-of-an-accounting-fraud
Lehman was loaded with sub prime loans they talked charges against the GSE's
Former Fannie Mae Chief May Face S.E.C. Charges
http://dealbook.nytimes.com/2011/03/11/ex-fannie-mae-chief-may-face-s-e-c-charges/
But to date nothing that I know of was done to those in charge at Fannie/Freddie either and now the taxpayers are on the hook for trillions in debt for that too. Look at these excuses...
In Lehman’s Demise, a Dwindling Chance of Charges
http://dealbook.nytimes.com/2011/03/15/in-lehmans-collapse-a-dwindling-chance-of-charges/
btw the SEC was the office that was actually responsible for Lehman & had people inside when the whistle blower told them about this but did nothing. The SEC was also supposed to be responsible for MF Global and Sentinel and Peregrine.
At Lehman, Watchdogs Saw It All
http://www.nytimes.com/2010/03/16/business/16sorkin.html?_r=1&ref=business
Judicial Watch sues SEC, CFTC for Corzine, MF Global docs
http://washingtonexaminer.com/judicial-watch-sues-sec-cftc-for-corzine-mf-global-docs/article/2504235
And to top it all off Lehman's not dead
snip
Who was the biggest buyer of U.S. commercial real estate in the past 12 months?
It wasn't a big private equity firm or luxury developer. Rather, it was the estate of Lehman Brothers, which is still making deals nearly four years after its demise. In the past year, it paid $3 billion to take over Archstone from its creditors, and it is now preparing to take the firm public.
more
http://www.ibtimes.com/articles/373627/20120814/lehman-estate-real-creditors.htm
Watching the yves snith valukas clip now. Hadn't seen it before. I have no hope like Steve Kroft, but I fight on auto-pilot b/c I hate these bastards in my dna.
Not all the employees had it rough though, Ohio elected a former managing director from Lehman Brothers Governor last election and now he is over those pensions technically... He also had two NRA F's on his resume but was billed as a great conservative.
Hypocracy is a bitch.
Everybody might want to watch this little tidbit on QE, it is pretty good, Ben Swann is great.
http://www.wxix.com/story/19589990/reality-check-what-is-qe3-and-what-it-means-for-the-us-economy