RegulationAccounting StandardsRepo 105 was no accounting gimmick: Fuld

Repo 105 was no accounting gimmick: Fuld

Lehman Brothers former chief defends repo-transactions

Dick Fuld has claimed ignorance of so-called “accounting gimmicks” in a
staunch defence of his stewardship of collapsed US bank Lehman Brothers.

In a prepared statement, to be read at today’s congressional house committee
on financial services, Fuld said he had “absolutely no recollection whatsoever”
of repurchase transactions strongly criticised in the wake of the bank’s
collapsed.

Last month court appointed examiner Anton Valukas released a lengthy report
into Lehman’s collapsed which roundly criticised the bank’s use of repurchase
arrangements, referred to internally at Lehman as Repo 105s. Valukas claimed the
transactions enabled the bank to manipulate its balance sheet position by
temporarily shifting assets off its books.

By setting the purchase price slightly above the sale price Lehman was able
to meet the accounting definition of a sale, even though it would repurchase the
assets, sometimes, after only a few days.

Fuld rejected criticism of the transactions and said Lehman should not be
attacked “for complying with the applicable accounting standards.”

“I believe that the examiner’s report distorted the relevant facts, and the
press, in turn, distorted the Examiner’s report,” he said.

“The result is that Lehman and its people have been unfairly vilified.”

Also giving testimony today will be Securities and Exchanges Commission
chairman Mar Schapiro, who will outline steps she has taken to identify banks
using repurchase transactions similar to lehman’s treatment.

“Where we find that companies are engaging in financial transactions that are
inconsistent with their publicly reported financial condition, we will take
appropriate action, she said in a prepared statement.

Read Fuld’s full statement
here

Read Schapiro’s full statement
here

Further reading:
Lehman
smoking gun leaves E&Y facing questions

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