Is E&Y to blame for the collapse of Lehman Brothers?
December 23, 2010 3 Comments
By now, many of you have heard quite a bit about the E&Y lawsuit (if you haven’t the Cliff Notes version is that Andrew Cuomo, the outgoing NY Attorney General, has filed a civil suit against E&Y for its role in the collapse of Lehman Brothers).
My question to the AG and everyone else is this – why are you surprised?
Of course the auditors may have tried to avoid conflict with Lehman’s management over the use of repos to window dress the balance sheet…management was compensating them handsomely and who wants to rock the boat. But E&Y is not the only firm that has such conflicts, they all do.
In addition, I am quite certain that we will find that the transactions, accounting treatment and the audit all complied with GAAP and relevant professional standards. Finally, does anyone REALLY believe that Lehman went under because the accounting treatment? Not a chance. Lehman went down because of idiotic business decisions, nothing more. What do you think? Feel free to weigh in to the debate and let me know if I am completely wrong about this one.
You’re right in what you say. The collapse of the company was down to the excessive risk taking by Lehman management. Taking risks with capital which they never had, which meant that potential losses would never be covered …… and when the losses materialised!!!!!!!
Interestingly E&Y are in an equally tricky position here in Ireland in relation to their role with failed bank Anglo http://www.rte.ie/news/2011/0418/ernstandyoung.html
Well, for me the crux of the story is in this quote, in which the matter is described as:
‘one which gave rise to questions of public concern and was also one of complexity and importance’.
Fluffy, vague nonsense that doesn’t actually mean anything but sounds legal-ish.
The activity that Ernst & Young were engaged in sounds a little amoral (rather than outright immoral) to me, but I really don’t understand what law they were breaking.
Then again, I don’t really know much about US law. Can anyone who does know something give a quick explanation of where E&Y stand from a legal viewpoint?