Ernst And Young May Be On The Hook For Big-time Fraud
Underhanded manipulations of financial records won’t fly in New York any more, says Attorney General Andrew Cuomo. The accountancy practice of Ernst and Young is currently Cuomo’s target. He is suing the company for alleged civil fraud. Ernst and Young is getting charged with helping Lehman Brothers Holdings Inc. to hide its ailing balance sheet from investors for seven years, before the bank collapsed in Sept. 2008.
NY sues Ernst and Young for scamming individuals
Not only did Ernst and Young allegedly help Lehman Brothers hide the truth from investors who were legally entitled to know, but the bookkeeping firm allegedly advised Lehman to take on “Repo 105″ debt. Repo 105 is a bookkeeping move where short-term loans are classified on the books as sales, and the money obtained through the “sale” is used to pay down debt. A company can make itself look good long enough to gets its balance sheet published as it will appear to be reducing leverage by paying down liabilities. The business then borrows cash and repurchases its original assets after the report is then released which makes investors upset. All of this made Lehman Brothers Holdings Inc. appear to be a much less risky investment than it was in reality.
‘An enormous bookkeeping scam’ is what the majority are saying
Ernst and Young “substantially assisted” the Lehman Brothers in committing some “massive accounting fraud” according to Andrew Cuomo. There has been no comment from Ernst and Young yet. Between 2001 and 2008, Ernst and Young got paid $150 million from Lehman according to bookkeeping records. During that time, Lehman shifted an estimated $50 billion in assets off its balance sheet and moved them to foreign banks when it was time to report financials. Days later, Lehman bought them back, completing their Repo 105 accounting fraud. Attorney General Cuomo was told this is “acceptable” by Ernst and Young partner Kevin Reilly.
Data from
Wall Street Journal
online.wsj.com/article/SB10001424052748704259704576033540546160536.html?mod=WSJ_hp_LEFTTopStories
Wikipedia
en.wikipedia.org/wiki/Repo_105