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Last updated at 11:12 GMT, Monday, 15 March 2010

Report criticises Lehman Brothers

Summary

12 March 2010

A court-appointed investigator says the American investment bank, Lehman Brothers, used "accounting gimmicks", and had been insolvent for weeks before it filed for bankruptcy in September 2008.

Reporter:
Nick Cosgrove

The headquarters of the Lehman Brothers investment bank on Sixth Avenue in New York City

Lehman Brothers building in New York

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Report

The collapse of Lehman Brothers was the biggest bankruptcy in US history and sparked the worst financial crisis since the Great Depression. This report, which runs to two thousand, two hundred pages, has found that the leadership of Lehmans, including the Chief Executive, Dick Fuld, deliberately used financial trickery going back to 2001, to make the bank appear healthier than it really was.

In 2008 alone this mechanism enabled Lehmans to remove 50 billion dollars from its balance sheet, allowing it to maintain a decent credit rating and investor confidence.

The report says that Lehman was unable to get an American law firm to sign off these transactions, and instead moved the work to its London office, with the blessing of a leading city law firm. The bank's auditors also come in for criticism. Ernst and Young is accused of failing to question and challenge improper or inadequate disclosures in the bank's results.

Nick Cosgrove, BBC News

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Vocabulary

bankruptcy

state of being unable to pay what you owe

the Great Depression

a period of time, which began in 1929, when most of the world economies were in decline

deliberately used financial trickery

knowingly or purposefully changed the financial figures in a dishonest way

this mechanism enabled

this way of working allowed

to maintain a decent credit rating

to continue to appear to be a good and reliable bank

to sign off these transactions

to agree to these dealings

with the blessing of

with the approval of

auditors

people whose job it is to carry out an official examination of the accounts of a business and to write a report on it

improper or inadequate disclosures

not giving enough information openly and honestly

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