– Thoughts on Strategy and Management

Lehman Brothers and its approach to look better


A couple of months ago I presented a fictitious interview with the former investment bank regarding its approach to manage liquidity risks. Everything seemed to be fine…but as we know from hindsight the annual report didn’t tell us the truth (otherwise the bank would not have fall into bankruptcy). Lehman Brother was collapsed under a burden of debts of 600 billion USD. Even if the previous post questions the external reporting of the investment bank, a new report informs about a shocking truth. Now a special investigator’s report confirms cheats regarding the balance. The investigator discloses a framework of lies and lets former auditing firm E&Y look bad.

Months before the actual collapse the US investment bank Lehman Brothers faced serious problems. With cheating its balance the bank covered their problems and misled investors, business partners and authorities. This is the final outcome of a 2,200 page investigation report. The table of contents alone consists of 45 pages. The report has been authorized for release by the relevant court for insolvency. The blog in the Wall Street Journal has published a copy of the Court Examiner’s Report on this website.

The court-appointed investigator Anton Valukas (from Jenner and Block) summarizes that the investment bankers made expert bookings to erase risks from their balance. As the result the bank was able to present itself as a healthy institution to external parties. With some tricks was able to create an outward impression to reduce its debts in 2008. In fact the bank had to manage a 600 billion USD debt burden.




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