Ernst & Young could be charged with civil
fraud by US prosecutors over its role as auditors of collapsed bank
New York State Attorney General Andrew Cuomo
is reportedly ready to file the charges, which are based on alleged
transactions by Lehman aimed at making the bank’s risk appear lower
than it actually was, according sources talking to the Wall
Street Journal (WSJ).
The main tool in the alleged fraud are
transactions known as Repo 105, which involve repurchase
agreements, a form of short-term borrowing that allows banks to
assume bigger trading risks.
A US court appointed investigator alleged in
March 2010 that Lehman Brothers used the accounting tricks Repo 105
to temporarily move $50 billion off its balance sheets in late 2007
and early 2008. Ernst & Young was auditing Lehman Brothers at
the time and gave the bank a clean audit opinion for 2007.
The charges against the Big four firm may be
laid as early as this week, reports WSJ.