Lehman Exec Who Flagged Repo 105 Was Suddenly Fired

[swag]

Source: Wall Street & Technology

WASHINGTON - A former executive at Lehman Brothers said Tuesday that he was suddenly fired in 2008 after raising concerns about the now-bankrupt firm's accounting practices, including "Repo 105" transactions.

Matthew Lee, a former senior vice president who had been at the firm for 14 years, said his peers shared his concerns about Lehman's accounting but said management did not respond.

"On multiple occasions, I attempted to bring these issues to the attention of Lehman Brothers' executive management, and on one occasion to the attention of Lehman's outside auditors. Within days of first raising issues, I was terminated," Lee said in testimony prepared for delivery before the House Financial Services Committee.
. . .
Last month a court-appointed examiner said the firm used a technique known as "Repo 105" to temporarily remove some assets from Lehman's books, obscuring its full financial picture.


Read more: http://wallstreetandtech.com/career-management/showArticle.jhtml?articleID=224500135&cid=nl_wallstreettech_daily

[DirkGently]

1. Good find. This is the type of ingrained corruption

That needs pointing out, again and again. And once more, as with the accounting firm scandal, we have auditors being co-opted by the auditees. Auditing needs to be carried out by disinterested parties. Fox-guards-the-henhouse is a tired routine with a bad, predictable outcome.

[TheDebbieDee]

2. Hopefully, by the time all is said and done,

Mr. Lee will wind up owning Lehman Brothers.

[apnu]

3. The big question in my mind is when did Lee raise this isuse?

From the article: "Former Lehman Chief Executive Richard Fuld is also scheduled to testify. Fuld said in prepared remarks that he only learned of the firm's use of Repo 105, a controversial accounting technique, a year after the investment bank filed for bankruptcy in September 2008."

So when was Lee fired? Before Sept 2008 or after?

Either way this means Fuld is either lying about Repo 105 or he was aware and approved of Repo 105 and thus was covering it up by firing Lee.

[leveymg]

4. Hedge funds gamed the Repo market to lock-up, destroying Lehman the primary market maker

The September 2008 financial collapse was an engineered burn-out. The primary method was a strategic failure of trades on the Repo market, which is the primary vehicle for liquidity under the "supervision" of the NY Fed. The Repo market trades long T-bills that are needed to balance out portfolios with "zero-risk" instruments With the Repo market locked, Lehman Bros. got caught holding the bag, and risk premium went through the roof for all institutional traders. Result - systemic collapse of the credit markets.

All along there was this gaping vulnerability -- a ready-made scam -- just waiting for someone with enough CDS and political pull to make sure the US Treasury would insure their value with public money.