Lehman Brothers, the investment bank whose collapse in September 2008 brought the world's financial system to its knees, was hiding tens of billions of dollars of its debts through accounting tricks and was insolvent weeks before it actually filed for bankruptcy, according to an explosive report made public last night.
A US court-appointed examiner named a string of senior executives, including the former Lehman Brothers chief executive Dick Fuld, whose conduct could lead to charges of gross negligence and breach of duty to shareholders.
And Ernst & Young, one of the most powerful accounting firms in the world, was also put in the spotlight after the examiner – Anton Valukas, chairman of the law firm Jenner & Block – said that there was evidence that it was negligent in its oversight of Lehman.
Mr Valukas had been appointed by a bankruptcy court, and his report, finished weeks ago, was unsealed yesterday.
The 2008 financial crisis reached its crescendo in the days after Lehman filed for bankruptcy, the biggest collapse in US corporate history, and the world plunged to its worst recession since the 1930s.
Despite public anger, and long investigations by the FBI, there have been no prosecutions of major Wall Street figures, but Mr Valukas's report makes public new evidence that Lehman went further than any other bank to hide the extent of its liabilities as the crisis worsened.
Mr Fuld should have more closely examined one particular practice that allowed Lehman to hide about $50bn (£33bn) of liabilities. "There is sufficient credible evidence to support a determination that Fuld's failure to make a deliberate decision about Lehman's disclosure obligations was grossly negligent or demonstrated a conscious disregard of his duties," Mr Valukas concluded.
Mr Fuld told the examiner he did know in detail about the practices. Ernst & Young said last night that it needed to study the report before commenting.