After Goldman Sachs, Morgan Stanley and Merrill Lynch, Lehman Brothers Holdings, Inc. was the fourth largest commercial banking institution in the United States as of 2008. This standing came to an end on Sept. 15, 2008 when, on the coattails of significant stock losses and shocking devaluations of the firm's assets by credit-rating agencies, the century-old firm filed for Chapter 11 bankruptcy. Within the following days, Lehman Brothers' world-wide operations would be bought by various international financial institutions.
Lehman Brothers' Bankruptcy
While the housing market and overall U.S. economy was plummeting in 2008, officials at Lehman Brothers had been misrepresenting the state of the company up until the eleventh hour, which only served to intensify the American financial crisis once the company declared bankruptcy.
Among the allegations against Lehman Brothers are intentionally:
- Failing to properly manage clients' risk, despite widely touted claims of having an innovative risk-management program.
- Misstating the company's leverage ratio, which was represented as being 12.1 when, in fact, it was really 13.9.
- Selling billions in loans without proper underwriting in an effort to manipulate their balance sheets and appear to be financially healthy.
The dark cloud of Lehman Brothers' legacy has been so pervasive that other financial consulting firms, including UBS have also been targeted for scrutiny. Allegations of misconduct against UBS claim that employees of the company steered clients towards investing in Lehman Brothers' options that could not be backed up.
Lehman Brothers' Legal Investigation
Upon the solvency of Lehman Brothers, the bankruptcy court appointed Mr. Anton Valukas to investigate and report on the circumstances of the company's implosion, as well as allegations of its illegal and unethical behavior. In front of the House of Representative's Committee on Financial Services, Mr. Valukas testified:
"The public did not know there were holes in the reported liquidity pool, nor did it know that Lehman's risk controls were being ignored, or that reported leverage numbers were artificially deflated. Billions of Lehman shares traded on misinformation."
Although the fate of Lehman Brothers has long been settled, many financial repercussions resulting from it have not. Those who have suffered monetary losses due to the misconduct of Lehman Brothers can still learn more about their case during an initial consultation with a qualified stock fraud lawyer.
Our attorneys represent individuals and institutional investors who have lost money as a result of stock broker fraud, corporate fraud, securities fraud, breaches of fiduciary duty and other financial wrongdoing. To discuss your circumstances with one of our attorneys , contact us today.