The bankruptcy of Lehman Brothers Holding Inc., a global financial service firm, in September of 2008 shocked the business world. Marking the largest bankruptcy filing in U.S. history, Lehman’s bankruptcy was not accidental. As early as in 2003 Lehman has borrowed significant amounts to fund its investments, however, due to the downturn in the market, Lehman was going through some financial hardships. Instead of positively facing and actively solving these problems, Lehman decided to lie on their financial statements, manipulating the public and the government. With laws confining “selling” toxic assets to other banks in the United States, Lehman instead entered into repurchase agreements with banks in the Cayman Islands, a trick that made Lehman Brothers look much healthier — on paper. However, lying about their financial state was not the only unethical thing Lehman did, Richard Fuld, head of Lehman Brothers, had taken about $300 million in pay and bonuses over the past eight years. Furthermore, Fuld is taking advantage and profiting $480 million from the bankruptcy, when in fact Lehman is holding over $ 600 billion in debt! They had screwed up on a truly colossal scale, and lined their pockets all the while. Lehman’s intentional manipulation of their accounting reports not only affected the investors, and rating agencies, on a larger scale it almost brought the entire United States’ economy to the brink!
An in-depth explanation of how Lehman pulled off the scheme:
https://www.youtube.com/watch?v=DSU7XHqvnlE&feature=player_embedded#!
references:
http://en.wikipedia.org/wiki/Bankruptcy_of_Lehman_Brothers
http://www.wealthdaily.com/articles/lehman-brothers-enron-accounting-gimmicks/2375
http://en.wikipedia.org/wiki/Lehman_Brothers
image source:
http://www.huffingtonpost.com/2008/09/22/outrage-as-lehman-brother_n_128438.html