Report key in meltdown investigation

Lehman Brothers bankruptcy examiner’s report will help securities regulators in
their investigation of large financial firms involved in the Wall Street
meltdown, a top regulator said.

and Exchange Commission Chairman Mary Schapiro, testifying at a congressional
hearing, provided scant details on who and what the agency is probing.

Schapiro said the report would be “helpful to us.”

was asked what the SEC was doing to investigate Lehman Brothers and its
auditor, Ernst & Young, after a report found the investment bank used accounting
gimmicks before it filed for bankruptcy in September 2008.

is safe to assume that we are looking at the conduct of a number of
firms,” Schapiro told a House appropriations subcommittee without naming
Lehman or Ernst & Young.

SEC was the primary regulator of Lehman Brothers and the other largest
investment banks including the now defunct Bear Stearns.

who was not SEC chairman at the time of the investment bank’s collapse, said
the SEC’s program to supervise investment banks was flawed from the start
because it was voluntary regulation and inadequately staffed.

were ill suited because of our disclosure and enforcement mentality,” she
said, adding that the SEC is trying to address the agency’s shortcomings.

2,200-page report from a court-appointed examiner alleges that an accounting
gimmick known as “Repo 105” was used for the sole purpose of manipulating
Lehman’s books.

examiner also said there was sufficient evidence to support a possible claim
that Ernst & Young had been negligent and that Lehman could pursue claims
against the firm for “professional malpractice.”