Lehman Brothers was created in 1850 and over its 108 year lifespan, was the fourth biggest investment bank in the United States. As highlighted in films such as “The Big Short” the housing market crash of 2008 significantly impacted Lehman Brothers and caused them to file bankruptcy soon after. However one topic that’s oftentimes swept under the rug is the financial fraud committed just prior to its bankruptcy.
Following a poor financial showing in the later half of 2007 and the beginning of 2008, Lehman Brothers manipulated its financial statements in order to misinform investors. This manipulation occurred three times, each time hiding overall losses. In total, Lehman Brothers hid 138.1 million dollars in debt by temporarily making sales of toxic assets to Banks in the Cayman Islands with the promise of buying them back. However; rather than classifying these as the loans they clearly were, the accountants recorded them as overall sales and therefore were able to manipulate the overall losses.
This fraud is only possible with the help of many regulators whose job is to prevent this as well as accountants willing to break the law. If it wasn’t for the lone person who brought this fraud to the public, do you think they would have gotten away with this fraud?
http://www.forbes.com/2010/03/19/lehman-brothers-markets-streettalk-dick-fuld.html
Lezner, Robert. “Lehman Lies But Nobody’s In Jail.” Forbes. Forbes Magazine, 19 Mar. 2010. Web. 05 Feb. 2017.