Fact check
Is it true: Lehman Brothers Repo 105 balance-sheet transactions (2007-08)?
Yes — this is confirmed.
Confirmed as to the documented conduct, not as to a legal finding of fraud. Court-appointed examiner Anton Valukas documented in a report of about 2,200 pages (March 2010) that Lehman used Repo 105 to temporarily remove $38.6 billion (Q4 2007), $49.1 billion (Q1 2008) and $50.38 billion (Q2 2008) from its balance sheet at quarter-end, and that it did not disclose the practice to the government, rating agencies, investors or its own board. Lehman could not obtain a US-law true-sale opinion; the transactions relied on an English-law opinion from Linklaters in London. The examiner found “colorable” civil claims against Lehman’s CEO, three of its chief financial officers and Ernst & Young, which is not a finding of liability. What is not established is that the conduct was legally fraud: no court has ruled on it, the SEC and the Department of Justice brought no charges against any executive, and Ernst & Young settled a $99 million investor class action (approved April 2014) and a $10 million New York Attorney General suit (April 2015) without a finding of liability.
The claim
Lehman Brothers used “Repo 105” transactions at the end of its fiscal quarters in 2007 and 2008 to temporarily move tens of billions of dollars of assets off its balance sheet, so that it reported lower leverage than it actually carried, without disclosing the practice to investors, regulators, rating agencies or its own board. Whether this amounted to accounting fraud has never been decided by a court or regulator.
Key evidence
Valukas Report: 2,200-page bankruptcy examiner finding
No SEC or DOJ charges were brought against Lehman's senior executives
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