NEW YORK CITY-A 2008 lawsuit by Lehman Brothers investors has gotten a new lease on life, thanks to a court-appointed examiner’s report last month that was sharply critical of the bankrupt investment firm’s accounting practices, including understatement of its commercial real estate exposure. Attorneys for the investors filed an amended complaint Friday in US District Court in Manhattan, adding Ernst & Young, which approved Lehman’s financial statements, to the list of defendants. An E&Y spokesman defends the firm’s performance as Lehman’s auditor.

The amended class-action suit alleges that through its stock offering materials, Lehman failed to disclose that it used Repo 105 transactions to temporarily reduce its net leverage ratio at the end of each quarter, that the Repo 105 transactions “had the effect of materially understating” the firm’s liquidity risk, that Lehman disregarded its own risk limits and that the firm overstated the value of its commercial real estate assets. These assets included the $22-billion acquisition of Archstone-Smith with Tishman Speyer Properties in 2007—an acquisition that put Lehman “clearly in excess of its established risk limits,” the suit alleges, quoting the report by bankruptcy examiner Anton Valukas.

In the commercial real estate sphere, Lehman failed to disclose “adequately or meaningfully” its risk concentrations in “highly risky Alt-A loans, illiquid commercial real estate assets and leveraged loan commitments,” the lawsuit alleges. “In addition, the offering materials failed to disclose that Lehman had heavy concentrations of illiquid assets, such as residential and commercial real estate with deteriorating values.”

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?


NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2024 ALM Global, LLC. All Rights Reserved.