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Lehman Bros. used accounting trick amid financial crisis – and earlier

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Mr. Valukas found colorable claims against former Lehman chief executive officer Richard Fuld, three former Lehman chief financial officers (Christopher O'Meara, Erin Callan, and Ian Lowitt), and the firm's external auditor (Ernst & Young).

The report shines fresh light on how Lehman Brothers failed 18 months ago – in a collapse that shook financial markets worldwide and precipated the worst stage of the financial crisis. The firm was rapidly losing the confidence of clients and investors, and the Repo 105 deals are one new piece of evidence that those parties had good reason to be concerned.

The report also puts fresh focus on a broader issue: Wall Street's culture of risk and sometimes-shoddy accounting. It comes amid debate over where financial stocks are headed. Many investment strategists predict that these stocks will continue to climb from lows reached a year ago, but some argue that the industry's recovery is built on fuzzy accounting for still-troubled real estate portfolios.

Lehman's Repo 105 ramped up in volume as the firm became more desperate during the crisis. According to the report, then-Treasury Secretary Henry Paulson "urged Fuld to find a buyer" after the collapse of Lehman rival Bear Stearns and Lehman's own reporting of a large second-quarter loss in 2008.

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