Dodd Calls For Probe Into Lehman Accounting

In a letter to Attorney General Eric Holder, Sen. Chris Dodd (D - Conn.), the chairman of the Senate Banking Committee, called for an investigation into the accounting activities used by Lehman Brothers during the financial crisis.

Last week, Lehman's bankruptcy examiner issued a scathing report that detailed the firm's use of "Repo 105" transactions to keep debts from being reflected on their balance sheet. The deals were essentially loans that were improperly classified as revenue on Lehman's books. The effect was to remove $50 billion from Lehman's balance sheet -- an act that then CEO Richard Fuld, was "at least grossly negligent" in allowing, the examiner said.

Based on Dodd's letter, it seems that NPR was correct in saying that it's a "safe bet" criminal trials are not far off. Here's Dodd's letter:

Dear Attorney General Holder:

I am deeply concerned about the facts that have come to light regarding the demise of Lehman Brothers and the accounting manipulation that contributed to it. I respectfully ask you to commission a task force to investigate the Lehman situation as well as other companies that may have engaged in similar accounting manipulation with a view to prosecution of employees or agents who contributed to any violations of the law.

According to the Report of the U.S. Trustee-appointed Examiner Anton R. Valukas, Lehman presented a misleading picture of its financial condition to the public by using extensive repurchase agreements known as Repo 105 transactions. The Examiner found that "Lehman did not disclose its use - or the significant magnitude of its use - of Repo 105 to the Government, to the rating agencies, to its investors, or to its own Board of Directors." The result was to conceal its holdings of bad assets and to temporarily remove approximately $50 billion of assets from its balance sheet at the end of the first and second quarters of 2008. The Examiner found that Lehman used Repo 105 transactions for no other articulated purpose than to shrink its balance sheet at the quarter-end, in a manner that deceived investors and creditors about its true financial state and misleading others.

We must work tirelessly to reduce the incidence of financial fraud in order to restore trust and confidence in the financial markets. A task force investigation and taking appropriate Federal actions in these matters will contribute to these goals.

Sincerely,



Christopher J. Dodd
Chairman

Comments

[munki]

09:49 PM on 03/21/2010

I was pointed out... here in Tokyo, a prime land/building...

"Caused by Lehman shock" = Lehman hostile take over and abandoned...

"American Wall Street" did it - what should I say?

other than... "Greed and Abuse of Wall Street did it and do not represent America"...

[ColdSnowMan]

09:46 PM on 03/21/2010

There is a terrific article on this issue by Michael Lewis in the London Times here:
http://www.timesonline.co.uk/tol/news/world/article7069617.ece

Briefly quoting one section:

"The world’s most powerful and most highly paid financiers had been entirely discredited; without government intervention every single one of them would have lost his job; and yet those same financiers were now using the government to enrich themselves.

"“I can understand why Goldman Sachs would want to be included in the conversation about what to do about Wall Street,” Eisman told me. “What I can’t understand is why anyone would listen to them.” "

[bayviking]

05:51 PM on 03/21/2010

We've already had a full blown investigation. It took one year. Results have been published. This company engaged in the same control fraud as Enron & S&L owners. Now its time to prosecute.No additional probing is required.

[magibrotherhood]

08:10 PM on 03/21/2010

they will have to arrest the Secretary of the Treasury....he`s up to his eyebrows in this mess....among others.

[outnow]

11:14 AM on 03/21/2010

Production was outsourched and offshored. The financial industry was going to replace our precision tool sector. Then the investment bankers issued their toxic assets and derivatives, destroying the credibility of the Wall Street financial sector and destroying America's position of world leadership. America is on its way to becoming a thrid-world country.

Who brokered our future into third-world status? Both parties through deregulation and globalization. Reserve banking and fiat money baked by derivatives. We have been betrayed by a profit incentive and campaign contributions. We sold ourselves back into slavery for the free market fundamentalism taught at universities funded by foundations and created by private think tanks.

[PhilipTaylor]

09:15 PM on 03/20/2010

50,000 Trained FBI and Specialist Agents Could Solve WALL STREET CRIME WAVE!

Just like 50,000 Police Officers reduced the CRIME WAVE under Clinton!

IT IS WAY PAST TIME FOR PROSECUTION OF CR1MINALS RUNNING WALL STREET!

Dodd calls for an investigation into the accounting activities used by Lehman Brothers during the financial crisis. Of course!

Easy Pickens in WEAK attempt to Cover up D0DD’S OWN D1RT - Including staffers!

Lehman's bankruptcy examiner scathing report details firm's SLIGHT OF HAND with $50 Billion! FULD - Loans DO NOT EQUAL Sales as if you did NOT know!

Accounting manipulation - Bush did that with 2 Wars, a Pharma Bill, and two Tax Cuts!

Why a TASK FORCE? SWEEP IT UNDER THE RUG! That is PURE BS! INDICT THEM YOU HAVE THE EVIDENCE! LIKE IS DONE IT THE “REAL AMERICA” where Prosecution for Crime is NORMAL!

In last 100 years NOT ONE TOP WALL STREET CEO has been PROSECUTED! NOT ONE!

IT IS WAY PAST TIME FOR PROSECUTION OF CR1MINALS RUNNING WALL STREET!

[PhilipTaylor]

09:18 PM on 03/20/2010

Cost: ONLY $6 Billion / Year!

Compared to $600 Trillion at STAKE!

[martin2]

12:46 PM on 03/21/2010

Thank you Philip for your good info, I fanned you a long time ago.
Wish we could send you to represent us and Kick some a---s.

My neighbor had the IRS after him for $1500, another with a small business they spend 3 days in his office.
Here the banks cheat on billions. Don;t they check these crooks every 3 months?
We need the money. Investigate every big bank. GO IRS GO American Taxpayers will love you.

[PhilipTaylor]

09:13 PM on 03/20/2010

CLARIFICATION OF CAUSE OF CRISIS: K1LL THE FALSE PROPAGANDA!

CONSERVATIVE THEORY ON CAUSE OF HOUSING CRISIS: Liberal theory Forced Banks to make bad loans to people who couldn’t afford them.

FACTS CONTRADICTING THIS THEORY:

1. 80% of subprime loans- made Wall Street Subsidiaries or Private Brokers fed to Wall Street

2. Loans made by Gov. (CRA) regulated entities performed better than private Companies

3. Gov. (CRA) loans followed Loan guidelines followed higher standards.

4. In short private unregulated WS Subsidiaries were responsible for Massive Failed Loans!

6. Bush forced Fannie/Freddie to buy JUNK of Private Cos in 2002 “OWNERSHIP SOCIETY”

http://blogs.princeton.edu/14points/2009/02/the_politics_of_the_mortgage_crisis_evidence_again.html

[Thanks to CarolAB]

[Voting citizen]

08:00 PM on 03/20/2010

"prudent and appropriate." ....I think the citizens should be prudent and appropriate all over these greedy b*st*rds...with a baseball bat. Why are our elected officials so soft on these people....they should all be in jail with a bunch of other people we all know that belong there. Maybe we should vote in some representatives that know how to represent. People that don't count their election coffers first.

[mfyourmomscalling]

06:57 PM on 03/20/2010

HEY DODD ITS NOT JUST Lehman Brothers YOU DOPE !!! ITS ALL OF THEM

[magibrotherhood]

07:34 PM on 03/20/2010

AIG pulled a huge scam to re-coup the losses from the ni.ne-el.even insurance payouts....

[booki]

04:47 PM on 03/20/2010

please.....
this should have been :"called for" months ago.
yet another facade.

[McDoc]

04:00 PM on 03/20/2010

You have to start somewhere and that is with Dick Fuld and Lehman Brothers, whatever you think about Senator Dodd. As I have stated this guy is the poster child of what is wrong on Wall Street. He took more than half a Billion dollars in bonuses while running this criminal enterprise.
You all may want Goldman Sachs accountable too, but you got start somewhere, and if it takes a lame duck senator to bring it to America's attention, then so be it. Don't dimiss or diminish what Lehman Bros and Dick Fuld pulled.

[MyTake]

03:19 PM on 03/20/2010

What a effin JOKE!

A lame duck Senator is just now getting around to sending a letter to a HIGHLY incompetent Attorney General saying OH, LEHMAN MAY HAVE COOKED THEIR BOOKS, COULD YOU LOOK INTO THAT, PLEASE SIR!

Yet DODD sat there in that position while GOLDMAN dispatched those TOXIC ENVELOPES OF DERIVATIVES to the CENTRAL BANKS around the GLOBE and didn't even get a LETTER off to the AG. Nor when GOLDMAN cooked the books for the Greek government did DODD wonder what other CRIMES they may be committing like MAYBE THEY COORDINATED THE SHORTING OF LEHMAN STOCKS causing their collapse and putting them OUT-OF-BUSINESS.

And to let this NICE LETTER be released to the media, how nice!

I hope the AG puts his letter of response out in the media also and says to Dodd, THIS MATTER IS BEST LEFT TO THE SHAREHOLDERS, have a nice day you LAME DUCK you!

And, Mr. Prez, your USE of the BULLY PULPIT to encourage the Heads of your Administration to take action on THE CRIMES OF WALL STREET have been absolutely SCINTILLATING.

[Billl]

03:06 PM on 03/20/2010

I would like to see DOJ investigate Dodd with a little help from Eliot Spitzer.

[lohu]

03:19 PM on 03/20/2010

That is one of their poster politicians who is corrupt, and is being used for curbing corruption. So they won't go after him.

[thinking4]

02:02 PM on 03/20/2010

jrutle, I hope this finds it way to you as the reply link is gone. Thank you for the reference. I am going to do some old fashioned library digging. I do not care for the looks of this. I am not a conspiracy person but this bears some more research.

[nThenwhat]

01:09 PM on 03/20/2010

Sure ... investigate Lehman and jail all found cupable of wrongdoing.

But also investigate Dodd's spectacular failure as Chairman of the Senate Banking Committee ... to include his assorted sweetheart side-deals from the likes of Countrywide. Dodd was AWOL during the run-up to the financial crisis ... choosing to selfishly pursue his wild fantasy of becoming President.

And, when he did return to his day job in the Senate, he was involved in some of the most questionable of the key meetings of principal players that resulted in the staggering abuse of the public trust, now widely characterized as a coup d e'tat on the Treasury.

Dodd is cut of the very same cloth as Fuld, Blankfein, Paulson, Bernanke, Geithner and Greenspan et al.
Jail them all.

[Bude]

12:52 PM on 03/20/2010

Jail is designed for the poor. It is not intended for the wealthy. Like everything else in their lives, special provisions are available to the rich.

The rest of us, it's survival of the fittest, and the constant threat of violence.

Start locking these clowns up with the general population and they'll change their tune.