Lehman Brothers former CEO Richard Fuld spent an uncomfortable afternoon on Capitol Hill being accused of various accounting improprieties by lawmakers, regulators, a bankruptcy examiner and a former employee.
Fuld tried to defend his role during testimony before the House Financial Services Committee, while claiming he knew nothing about the by now infamous Repo 105 transactions, in which the bank temporarily shifted $50 billion off its balance sheet at the end of the first and second quarters of 2008. As CEO, I ran more of a what do I really need to be focused on? mentality, he explained, according to The Guardian. Whether the balance sheet was up or down $50 billion or $100 billion of government [bonds], I would say to you, sir, was not my focus.
However, bankruptcy examiner Anton Valukas testified that Fuld must have been aware of the dubious transactions. A fact-finder concluded that he in fact did know and acted upon information he knew or should have known, Valukas said, according to The New York Times. There was at least one witness who testified that he discussed Repo 105 transactions with him and that there were documents sent to him by e-mail and otherwise, which reflected the Repo 105 transactions.
Matthew Lee, an accountant and former senior vice president at Lehman who tried to blow the whistle on the dubious transactions, was fired by the bank before its collapse. He provided emotional testimony as Fuld sat in the room. I think the public were misled as to the true leverage of Lehman, he said.
Lehmans practices were also blasted by former banking regulator William Black, who commented, Lehman was the leading purveyor of liars loans in the world, he said, according to the Huffington Post.
The Financial Accounting Standards Board has sent a letter to the House committee saying it would work closely with the Securities and Exchange Commission on any changes to the accounting rules governing repo transactions, according to Reuters. Those changes now seem like a virtual certainty in light of the outcry over Lehman and its forgetful ex-CEO.