Lehman Finger Pointing: Examiner’s Report Casts Blame All Around

On January 29, 2008, Lehman Brothers Holdings Inc. (“LBHI”) reported record revenues of nearly $60 billion and record earnings in excess of $4 billion for its fiscal year ending November 30, 2007.

During January 2008, Lehman’s stock traded as high as $65.73 per share and averaged in the high to mid‐fifties, implying a market capitalization of over $30 billion. Less than eight months later, on September 12, 2008, Lehman’s stock closed under $4, a decline of nearly 95% from its January 2008 value. On September 15, 2008, LBHI sought Chapter 11 protection, in the largest bankruptcy proceeding ever filed.
 
There are many reasons Lehman failed, and now we have a report that examines them. The examiner appointed in the LBHI bankruptcy case, Anton R. Valukas, a partner with the Jenner & Block law firm, has issued a report that is now public and that says, among many, many other things: the “the responsibility is shared.” Of special note, the report declares:
 
“Lehman’s financial plight, and the consequences to Lehman’s creditors and shareholders, was exacerbated by Lehman executives, whose conduct ranged from serious but non‐culpable errors of business judgment to actionable balance sheet manipulation; by the investment bank business model, which rewarded excessive risk taking and leverage; and by Government agencies, who by their own admission might better have anticipated or mitigated the outcome.”
 
The complete report is available on the Jenner & Block Web site, at http://lehmanreport.jenner.com/.