Lehman Brothers Whistleblower Reveals Unethical Accounting Practices
Days before his termination in May 2008, Lehman Brothers senior vice president Matthew Lee sent a letter to the heads of the company highlighting accounting tricks that he believed were unethical. In his letter, Lee indicated that Lehman Brothers was underreporting its debt by approximately $5 billion at the end of each month.
According to Lee, a 14-year Lehman veteran, the bank used an accounting trick called Repo 105 to hide its debt and precarious financial situation from shareholders. Lee declared the firm’s code of ethics required him to report the bank’s potentially unethical actions, since he felt they were misleading to the public as well as governmental agencies.
The timing of Lee’s termination days after sending the letter is certainly suspicious. While Lehman Brothers claimed Lee was fired as part of a large company layoff, the former senior vice president believes his termination was related to his intention to reveal the company’s unethical securities violations.
Several months later in September 2008, Lehman Brothers declared bankruptcy, initiating a domino effect that sent the global economy into one of its worst recessions in decades.
Lee’s whistleblower letter was recently made public as part of a 2,200 page report published by the bankruptcy court. The report along with Lee’s letter could provide the basis for future legal claims against the Lehman Brothers executive team.
Written by Andrew Martin: professional blogger and guru of misfortune.