Richard Fuld, the former CEO of Lehman Brothers, will be testifying Tuesday before Congress about the defunct investment bank’s accounting practices in light of the recent report by bankruptcy examiner Anton Valukas.

According to the prepared testimony that has already appeared on the House Financial Services Committee Web site, Fuld will defend the bank’s use of so-called Repo 105 transactions.

“As to that, I believe that the Examiner’s report distorted the relevant facts, and the press, in turn, distorted the Examiner’s report. The result is that Lehman and its people have been unfairly vilified,” he says.

Fuld claims he has no recollection of hearing about Repo 105 while he was Lehman's CEO nor of any documents related to Repo 105 transactions. However, he also claims that the bank did not use the transactions to remove toxic assets from its balance sheet, and that in fact the transactions were mandated by Financial Accounting Standards Board rules.

“There has been a lot of misinformation about Repo 105. Among the worst were the completely erroneous reports on the front pages of major newspapers claiming that Lehman used Repo 105 transactions to remove toxic assets from its balance sheet,” he says in his prepared testimony. “That simply was not true. According to the Examiner, virtually all of the Repo 105 transactions involved highly liquid investment grade securities, most of them government securities. Some of the newspapers that got it wrong were fair-minded enough to print a correction. Another piece of misinformation was that Repo 105 transactions were used to hide Lehman’s assets. That also was not true. Repo 105 transactions were sales, as mandated by the accounting rule, FAS 140.”

However, Valukas will also have his chance to testify before the committee. His prepared testimony has also been posted on the committee Web site. He focuses on the level of risk-taking at the bank.

“We found that Lehman was significantly and persistently in excess of its own risk limits. Lehman management decided to disregard the guidance provided by Lehman’s risk management systems,” he says. “Rather than adjust business decisions to adapt to risk limit excesses, management decided to adjust the risk limits to adapt to business goals.”

However, Valukas also takes to task the regulators, particularly the SEC. “We found that the SEC was aware of these excesses and simply acquiesced. ... The SEC knew that Lehman was reporting sums in its reported liquidity pool that the SEC did not believe were in fact liquid; the SEC knew that Lehman was exceeding its risk control limits; and the SEC should have known that Lehman was manipulating its balance sheet to make its leverage appear better than it was. Yet even in the face of actual knowledge of critical shortcomings, and after Bear Stearns’ near collapse in March 2008 following a liquidity crisis, the SEC did not take decisive action.”

The SEC finally seems to be taking decisive action now in the case of Goldman Sachs, but that case may drag on for years as Goldman fights the charges. Lehman did not last long enough to fight the SEC or any other regulator, as the financial crisis took its toll on the bank, helped in part by its own accounting maneuvers and the level of reckless risk-taking that all too often holds sway on Wall Street.