Leaman brother - Research Paper Example

Lehman Brothers Accounting Fraud The Lehman Brothers was once one of the biggest banks and was involved in a very huge accounting scam called the Repo 105 (Hallman 1). What the bank did was that it sold its assets to a company at a discount with the promise of purchasing it back. The bank sold these assets to a company and obtained finance from the company in order to pay off its debts. The bank was then involved in buying back the sold assets and in order to purchase those assets it again had to borrow money.

What the bank did was it performed these transactions just before it had to publish its financial statement so when the financial statements were released to the public, the financial statements may depict that the bank had money and was paying its debtors (Hallman 1). Once a period of seven or less days had passed and the account statements were published, the bank repurchased sold assets. Anton Valukas was assigned the duty of look into the matter of Lehman Brother and unearth the reasons for its fall down.

Valukas states that the Repo 105 transaction was first reported by Mathew Lee who was an employee of Lehman. Lee started by reporting the transactions to the management of Lehman and later reported the findings to the organization’s auditing firm, Ernst & Young and no actions were taken (Hallman 1). Once the firm could no longer indulge in Repo 105, it had to start depicting that it was highly leveraged and did not have money to pay off its debt and ultimately the bank filed for bankruptcy.

Due to this several stakeholders had to experience material as well as emotional losses. The main stakeholders who were negatively impacted included the companies that had lent money to the bank, the shareholders of the bank and its employees. When the company went bankrupt there were more than 25000 employees working for them and a major percentage of them had to experience unemployment and social and psychological associated with it (Corelli 326). Furthermore, the shareholders had to lose their money since the company was not performing well and it has been recorded that due to the fall down of the company around $10 trillion funds were injected out of the equity markets (Corelli 326).

It is believed but not yet proven that the CPA firm called Ernst & Young (E&Y) was involved in the financial fraud conducted by Lehman Brother. They are said to have been involved in the cover-up of this fraud. Due to these allegations against the CPA firm several civil lawsuits were filed against the firm after the collapse of Lehman Brothers. These lawsuits have been filed in the Supreme Court of New York and E&Y is fighting against these lawsuits. One of the law suits that were filed included the reimbursement of $150 million which was paid by Lehman to E&Y in shape of fees for their services (McKenna 1).

This case has been ruled in favor of the CPA firm. Works CitedCorelli, Angelo. Understanding Financial Risk Management. Hoboken: Taylor and Francis, 2014. Internet resource.Hallman, Ben. The End Of Lehman, Part 3. Center for Public Integrity. N.p., 2010. Web. 3 Feb. 2015.< http://www.publicintegrity.org/2010/09/17/2511/end-lehman-part-3> McKenna, Francine. Lehman Troubles Not Over For Ernst &Amp; Young. Forbes. N.p., 2012. Web. 3 Feb. 2015.