It’s weird how at the moment all roads lead back to Lehman Brothers. In mid-March, Anton Valukas, appointed by a US court to examine Lehman’s failure, finally delivered his 2,200-page report. It revealed a crucial new piece of information: Lehman had used repo transactions (so-called Repo 105 transactions) involving some $50 billion of assets to shrink its balance sheet, and consequently its leverage ratios, at crucial quarter-end dates in 2008. This gives rise to accusations of balance-sheet manipulation, inadequate disclosure and signing off on misleading accounts. One commentator wailed: "All this should have been reported to and approved by the audit committee." It is not clear that this happened but in any event I would point out to Wailing Commentator that the Lehman board appeared to be friends of Fuld rather than supporters of shareholders. I was the first journalist to spot this peculiarity. I examined the Lehman board in May 2006 and hinted strongly that it was not fit for purpose. Half the board were septuagenarians and few had relevant experience. The group included a former theatrical producer and a retired female navy rear-admiral: both of whom sat on the firm’s finance and risk committee. Now everyone talks about the failure of the Lehman board. Isn’t it a little late for such pontificating? In future, please read the Abigail with attitude column diligently and take note of my musings.
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