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Abigail Hofman: Board at Lehman

by Abigail Hofman

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Board at Lehman

The Goldman edge

It’s weird how at the moment all roads lead back to Lehman Brothers. In mid-March, Anton Valukas, appointed by a US court to examine Lehman’s failure, finally delivered his 2,200-page report. It revealed a crucial new piece of information: Lehman had used repo transactions (so-called Repo 105 transactions) involving some $50 billion of assets to shrink its balance sheet, and consequently its leverage ratios, at crucial quarter-end dates in 2008. This gives rise to accusations of balance-sheet manipulation, inadequate disclosure and signing off on misleading accounts. One commentator wailed: "All this should have been reported to and approved by the audit committee." It is not clear that this happened but in any event I would point out to Wailing Commentator that the Lehman board appeared to be friends of Fuld rather than supporters of shareholders. I was the first journalist to spot this peculiarity. I examined the Lehman board in May 2006 and hinted strongly that it was not fit for purpose. Half the board were septuagenarians and few had relevant experience. The group included a former theatrical producer and a retired female navy rear-admiral: both of whom sat on the firm’s finance and risk committee. Now everyone talks about the failure of the Lehman board. Isn’t it a little late for such pontificating? In future, please read the Abigail with attitude column diligently and take note of my musings.

How was your month? Please send news and views to abigail@euromoney.com

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