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Lehman whistleblower letter

The letter from the ‘whistleblower’ in the Lehman situation is an interesting read.

My observations:

  • This is a great example of how difficult it can be do understand exactly what is being alleged simply by reading a whistleblower’s letter. This particular letter was written, probably with help from his lawyer, by somebody I presume has received a fine education and should know what he is talking about. Yet, it doesn’t contain specifics that can be investigated easily without interviewing the writer and obtaining additional information
  • Having said that, some of the media characterizations have not been accurate. Lee does not mention Repo 105 transactions or any accounting designed to move assets of the balance sheet to improve liquidity. He only asserts that the balance sheet contains assets in excess of the value of the assets being managed, and that there should be write-offs
  • The letter was addressed to management, not to the internal auditors, external auditors, general counsel, or audit committee. I have to wonder whether the Lehman code of conduct was sufficient, in that it should have recommended and provided ways to communicate to independent parties
  • The letter is not inconsistent with EY’s response (see my earlier post) to the Lehman situation

I for one will continue to follow this interesting saga.

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