In a 2,200 page report, the U.S. Trustee appointed examiner said that JP Morgan Chase (NYSE: JPM) and Citigroup (NYSE: C) helped cause the demise of Lehman Brothers by changing guarantee agreements and requiring more capital from the defunct investment bank.
Anton Valukas, filed the report in a Manhattan federal court on Thursday, which details a wide array of misleading statements, negligence, disclosure shortfalls and warnings of impeding trouble. The massive report took Valukas a year to compile at a cost of $38 million. Lehman failed in September 2008, its $639 billion in assets marked the largest bankruptcy in U.S. history.
According to the report, JP Morgan and Citigroup adjusted agreements with Lehman and raised collateral demands in the investment bank’s final days. The two banks were Lehman’s main short-term lenders at the time.
Everything from interviews with former Lehman executives to document research was conducted in the study. According to the report, former Lehman CEO Richard Fuld, former CFO Erin Callan and former executive vice president Ian Lowitt certified misleading statements.
Furthermore, the report stated that Treasury Secretary Henry Paulson warned Fuld that Lehman might fail if it continued to report substantial losses without putting in a restructuring plan or even finding a potential buyer.
The report also cites audit firm Ernst & Young for failing to meet professional standards due to its inadequate questioning of disclosure by Lehman executives.
Valukas also examined the Barclay’s purchase of Lehman’s North American assets, stating that a limited number of assets belonging to Lehman were improperly transferred over to Barclays.
