Repo 105 at centre of SEC’s investigation into Lehman Brothers, news report claims

13 September 2010

Repo 15 is thought to be at the centre of a Securities and Exchange Commission (SEC) investigation into how Lehman Brothers collapsed during 2008, a news report has claimed.

According to the Wall Street Journal, which cited unnamed sources familiar with the matter, the focus of the probe is aimed at the accounting practice.

SEC officials are also investigating whether a failure by the bank to mark down the value of a real estate portfolio, which it acquired during the takeover of Archstone-Smith Trust, may have impacted the bank’s financial stability.

The news provider claimed that the renewed focus of the probe could mean that civil charges could be filed soon by the regulator.

A number of officials including former chief executive officer Dick Fuld have been questioned by investigators during recent weeks.

The Repo 105 process is a way for banks to keep debt off their balance sheets and was criticised earlier in the year by a report into the bankruptcy of Lehman Brothers by Anton Valukas.

Mr Valukas described Repo 105 as “accounting gimmick” in his analysis of the reasons behind Lehman Brothers’ failure.

Ernst & Young, the auditing firm for Lehman Brothers, is also under investigation by the SEC.

By Jim Ottewill

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