Lehman Brothers Holdings Inc.

was the fourth-largest global financial service firm in the United States at
the time of its collapse. It was founded by Henry Lehman, Emanuel Lehman and Mayer Lehman in 1850.
On September 15, 2008, the company filed for Chapter 11 bankruptcy protection which resulted in 26,000
employees losing their jobs and millions of investors losing all of their money. For many years, Lehman
executives manipulated the balance sheets and financial reports by allegedly selling approximately $50
billion of toxic assets to banks outside of the country. The company faced the penalties of the largest
bankruptcy in the United States history. Unfortunately, the S.E.C did not prosecute Lehman executives
and the companys auditors from Ernst &Young due to lack of evidence.
A year before the company filed bankruptcy, the company faced a great loss after closing its subprime
lender BNC Mortgage due to the collapse of the housing market. The collapse of the housing market
caused the devaluation of the companys stocks and assets. The executives at Lehman misused accounting
gimmicks at the end of each quarter that temporarily remove securities that creates the deception of the
company doing well when it really was not.
Auditors from Ernst and Young were responsible to review the companys financial statements over many
years. Allegedly, the auditors failed to disclose the companys use of Repo 105. Repo 105 is an
accounting maneuver where a short-term repurchase agreement is classified as a sale. That practice made
the company hid over $50 billion. Recently, Ernst & Young agreed to pay 10 million to settle a lawsuit
accusing the firm for helping Lehman Brothers deceive investors.
I believe that the auditors from Ernst & Young failed to ensure the accuracy and reliability of the financial
statements. If the company did not declare bankruptcy, the S.E.C would not have discovered the major
cover-ups in the companys financial statements for over many years.