Ernst & Young (E&Y) has been added as
a defendant in a US lawsuit seeking to recover money from former
executives and underwriters of Lehman Brothers because the Big Four
firm allegedly failed to disclose Repo 105 transactions, according
to media reports.
The lawsuit was filed last week at the US
District Court in New York on behalf of a group of retirement
funds, including the Alameda County Employees’ Retirement
Association and the Government of Guam Retirement Fund.
It was originally filed in June 2008 but has
been amended to include E&Y after US court appointed
investigator Anton Valukas recently released his 2,200 page report
on Lehman’s collapse.
Valukas alleged that Lehman Brothers used the
Repo 105 accounting trick to allow the bank to temporarily move $50
billion off its balance sheets in late 2007 and early 2008.
This made Lehman’s financial statements and
related disclosures materially misleading, Valukas said.
However, in a recent hearing at the US House
Committee on Financial Services, Lehman Brothers former chairman
and chief executive Richard Fuld defended the use of Repo
Fuld told the government panel these
transactions complied with US accounting rules and did not
contribute to Lehman’s bankruptcy.