More accounting shenanigans at Lehman Brothers have come to light, with new revelations that the defunct investment bank created an entity called Hudson Castle to help conceal billions of dollars of risky assets.
While Hudson Castle was nominally an independent company, Lehman controlled its board, owned a quarter of the firm, and the firm was staffed with plenty of ex-Lehman employees, according to
While Lehman went under in 2008, helping precipitate the financial crisis, Hudson Castle continues to operate, having managed to channel its efforts toward more stable financial partners.
However, the existence of entities like Hudson Castle is apparently not altogether uncommon on Wall Street, making the concept of risk management almost laughable. It will certainly be one area that the SEC will want to focus on, and accountants too should be aware that such interlocking and related-party transactions practically cry out for disclosure.
