Letting No Disaster Go To Waste, SEC Prepares To Let Lehman Executives Walk For Repo 105 Fraud

Tyler Durden's picture

And while the general public frets over the latest geopolitical disasters, the SEC proves Rahm Emanuel correct once again, and letting no disaster go to waste, man-made or natural, the world's most incompetent (but massively underpaid, or so they claim) regulator is preparing to let Dick Fuld completely off the hook for last spring's stunning Repo 105 report by Anton Valukas, whose findings even the bankruptcy expert said were probably cause for civil lawsuits. The WSJ reports: "In recent months, Securities and Exchange Commission officials have grown increasingly doubtful they can prove that Lehman violated U.S. laws by using an accounting maneuver to move as much as $50 billion in assets off its balance sheet, which made it appear that the securities firm had reduced its debt levels....After zeroing in last summer on the battered real-estate portfolio and an accounting move known as Repo 105, SEC officials have grown more worried they could lose a court battle if they bring civil charges that allege Lehman investors were duped by company executives. The key stumbling block: The accounting move, while controversial, isn't necessarily illegal." Oh no, illegal it is. The problem is that should the SEC actually pursue it and win, that act would open up the floodgates for hundreds of lawsuits against everyone from Bank of America and Citi, which have also disclosed they used comparable tactics to misrepresent the true status of their books, to shady accounts like Ernst & Young, all the way to FASB at the very top of the corruption pyramid. And with hundreds of millions if not billions in legal fees about to be paid out if the fraudclosure back door settlement fails, the SEC simply can not allow the pursuit of justice to threaten the viability of America's only national interest: that of its criminal banking syndicate.

From the WSJ:

A year ago, it looked as if the SEC and federal prosecutors had a road map to use against Lehman's former top executives. Last March, the Repo 105 transactions were condemned by court-appointed examiner Anton R. Valukas, who said in a report that they enabled Lehman to "paint a misleading picture of its financial condition."

In the transactions, Lehman swapped fixed-income assets for cash shortly before the securities firm reported quarterly results, promising to buy back the securities later. The cash was used to pay down the company's debts. Emails sent by executives at the company referred to Repo 105 as a "drug" and "basically window dressing."

Mr. Valukas concluded there were "colorable," or credible, legal claims against Ernst & Young, Mr. Fuld and former finance chiefs Ian Lowitt, Erin Callan and Christopher O'Meara.

People close to the investigation cautioned that no decision has been reached on whether to bring civil charges, adding that new evidence still could emerge. Investigators are reviewing thousands of documents turned over to the SEC since it began its probe shortly after Lehman tumbled into bankruptcy in September 2008 and was sold off in pieces. Officials also have questioned a number of former Lehman executives, some of them multiple times, the people said.

But after zeroing in last summer on the battered real-estate portfolio and an accounting move known as Repo 105, SEC officials have grown more worried they could lose a court battle if they bring civil charges that allege Lehman investors were duped by company executives. The key stumbling block: The accounting move, while controversial, isn't necessarily illegal.

In a possible sign that the probe has slowed, the SEC hasn't issued a Wells notice to Lehman's longtime auditor, Ernst & Young, according to people familiar with the situation. The firm had concluded that the accounting in the Repo 105 transactions was acceptable. Wells notices are a formal signal that the SEC's enforcement staff has decided it might file civil charges against the recipient.

The snags are the latest sign of trouble for the SEC and other U.S. regulators trying to punish companies and executives at the center of the financial crisis. So far, no high-profile executives have been successfully prosecuted. Last month, a federal criminal investigation of former Countrywide Financial Corp. Chief Executive Angelo Mozilo was closed without charges.

The punchline:

It isn't clear what the Lehman executives have said to SEC officials during the probe. Last year, Mr. Fuld told lawmakers he had "absolutely no recollection whatsoever of hearing anything" about Repo 105 at the time of the transactions. Lehman's demise was caused by "uncontrollable market forces" and the U.S. government's unwillingness to rescue the firm, he said.

In other words, with everyone complicit on the crime, there is not one party that can be singled out without every party having to be sued. Ah the benefits of risk diversification: Wall Street realized all too well that a symbiotic approach to middle class parasitism is the best one, as it leaves it far less open to direct attack. Yes, any given bank may reap slightly less in benefits immediately, but over the long run everyone makes money and if there is some catastrophe the taxpaying peasant will have no choice but to bail everyone out. And should there be a legal case against one, in a reverse case of the Three Musketeers, it would have to be a case against all. 2008 confirmed the first. Dick Fuld is confirming the second. But don't forget - the SEC has no money and no computers. So it is isn't their fault they are corrupt and siding with the criminals on this one... and on every other one.

Expect Charles Ferguson's question of why nobody has ever gone to jail over the greatest financial crisis since the depression to remain unanswered in this lifetime.

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downwiththebanks's picture

Why should Lehman executives go to jail when the working people of Wisconsin caused the crisis?

Now, cue the phony outrage . . . 

Twindrives's picture

Fuck up Obama will be playing golf with these same guys next week.

cdskiller's picture

This thread just went off the rails.

JW n FL's picture

Thank God for the Republicans!!! Bite Your Tongue Sir!!! Not Your Thumb!!!


Thank God the Lobby Saved the Bankers!!!


Free the Bankers Bitchez!!!


Lil Bush Part Duex in Technicolor "Change You Cant Fucking Believe Didnt Happen"...

Michael's picture

When someone criticizes Obama, it doesn't necessarily mean they are cheering for the republicans.

The Lehman's are shareholders in the New York Federal Reserve Corporation. Any Questions?



JW n FL's picture

Lil Bush Part Duex in Technicolor "Change You Cant Fucking Believe Didnt Happen"...


is Obama.. you fruit.

Pegasus Muse's picture

When does the Reign of Terror begin in America?  What will it take? 


IQ 145's picture

 nice. good research.

Bringin It's picture

Michael - since you showed up, you've been posting some great stuff.  Thanks.

Savyindallas's picture

really, really funny. sounds like a line from Dick Fuld's testimony. maybe someone can put together a Utube highlight video - the best best of Dick Fuld and Lloyd Blankfein Congressional testimony. Hard to believe these pathetic, weasily little piece of shits are maters of the universe - or at least henchmen and stooges for the masters of the universe. Can't they do better than that? Actually, i think the Rothschilds think it's all very funny  -a joke on us. I'm sure they sit their and laugh while those two rich clowns   lie their asses off amidst evewn worse assclowns like barney frank and the former Chris dodd.

sun tzu's picture

You union parasite bastards should leech off the banker parasites instead of the middle class. Where were the union protesters when the bankers were being handed billions? No outrage back then as the union parasites were too busy stealing what was left from the taxpayers

fuu's picture


victor82's picture

Yes you will. Barack Obama and Erick Holder are the Banksters' Poodles.

Matt Taibibi has written a couple of very serious, penetrating articles for Rolling Stone magazine about the Fraudclosure Scandal, the Rocket Docket, and the failure to put Banksters behind Bars.

But, as Matt is a member in good standing of the MSM, and a good partisan Democrat, he refuses to walk back the cat to the reason why the Southern District of New York isn't prosecuting Banksters: they bought protection back in 2007 by giving generously to Obama's campaign. 

In turn, there will be some harsh words towards these economic war criminals, but no serious prosecutions, such as happened when Bill Black was one of the RTC's head regulators. I seem to recall that many of them went to prision in those days.

This doesn't relieve the Bushie Syndicate of their responsibility for what happened during the Fraudclosure Era. It simply indicates that the Banksters bought Protection against the day when the Republicans would be ushered out of town and the "Lefties" ushered into town by the Sheeple. And HopeNChange, like an old Roman Patrician Senator, is a bought politician.

Once Obama is bought, he stays bought. There is something to say for that, after all.

Duuude's picture

"I seem to recall that many of them went to prision in those days."




NewThor's picture

Wait? You mean Obama and his staff, of which about 37% came from Goldman Sachs,

isn't looking out for the well being of the American people and their future?


What's next? Are you gonna tell me some crazy jibber jabber that his Supreme Court

choice, Elena Kagan was a member of the Research Advisory Council of Goldman Sachs

from 2005 to 2008?

Oh. Wait. Never mind. I just remembered, I voted for Obama.

And then, I began to curse his evil name the day he appointed Tim "I'm really fucking evil"

Geithner to the Treasury.

Carry on!


tamboo's picture

they all happen to belong to the secret tribe, just a coincidence i guess.


Michael's picture

If you voted for Ron Paul last time You would be growing and smoking your own pot right now, and the criminals would be in jail by now.

You'll know better next time.

NewThor's picture

I will vote for Ron Paul in 2012 if...

A) He is running.

B) He is still alive.

C) Our country is still standing.

Freewheelin Franklin's picture

Ron Paul wasn't on the ballot in the general election in 2008. Instead, he supported the Constutition Party candidate, whose name I can't seem to recall.

LauraB's picture

The Constitution Party candidate was Chuck Baldwin.  Everyone needs to register Republican this time around to vote for Ron Paul in the primaries so we can get him on the ballot.

alien-IQ's picture

then this should make you just a little madder...

From Huff post today:

Fed Report Finds No Wrongful Foreclosures By Banks

WASHINGTON, D.C. -- A months-long internal investigation into abusive mortgage practices by the Federal Reserve found no wrongful foreclosures, members of the Fed's Consumer Advisory Council said Thursday.

During a public meeting attended by Fed chairman Ben Bernanke, consumer advocates on the panel criticized the central bank's examiners for narrowly defining what constitutes a "wrongful foreclosure." At least one member of the panel, comprised of consumer finance experts not employed by the Fed, voiced concerns that the public would not take the Fed's findings of improper practices seriously, since the wide-ranging review did not find a single homeowner who was wrongfully foreclosed upon.


NewThor's picture

" A months-long internal investigation into abusive mortgage practices by the Federal Reserve found no wrongful foreclosures..."

For having only 2 mandates, the Federal Reserve seems to have their tentacles and testicles in everything.


SwingForce's picture

At some point, the Buck must stop.

downwiththebanks's picture

It has - in Wisconsin.

Yesterday ZeroHedgers were giddy at the thought of the real culprits getting the shank.

This should be a day of celebration.  

Tyler Durden's picture

Are you really so confused you think our financial collapse is a zero sum either/or, where either the banks or the unions are at fault?

downwiththebanks's picture

Are you really so confused as to not realize there's a Class War taking place?  It's not about the unions - it's about the working people and those who bleed them dry.

Someone has to pay the bills.  Your mock outrage over banker-gangster criminality is pretty transparent, Tyler, after the last couple of days.

H. Perowne's picture

Last couple of days? Did we forget to pop a Ritalin this AM? Short attention span much? This site has been going after banksters for the last two years or so. Corrupt bankster pigmen or corrupt union pigmen . . . both are helping themselves at the taxpayer trough and gangbanging the soon-to-be-extinct middle class.

There is only one war here worth fighting . . . the war against criminals.

JW n FL's picture

The Zombie Corporations (Bank or Not) who control the Lobby Dollars and then thusly Control the Goobermint.. 


They have Commited Treason Against "We the People".


Until this informaiton is digested by the broader masses the rest of us will suffer along with the ignorant.


As of right now the Duely Elected Rule, we need for the popular idea to be Truth Bound and Boradly Accepted before we can Legally Effect Real Change.


Our Fate is Tied to the Fate of the Ignorant.

Zero Govt's picture

Correct JW....  but don't expect any of these crooks or their cronies in DC or the Regulators to fall on their sword or suddenly have an 'I See the Light' moment ..these WS and State parasites are pathalogical liars and will cling-on to the bitter end until they are physically removed from office and banged up in jail (or something not nice)

This is economic and moral War..... get your pitchforks ready, there's no other way

JW n FL's picture

I have rope! for Hanging these scumbags from the Trees on the White House Lawn for Treason.  

I have Bullets.. so when the scumbag fucking Law Enforcement / Police want to shoot un-armed Americans http://www.youtube.com/watch?v=vyzoNCJvy4c I will be shooting back...

I am / have been ready for a good long while.. lets go already! FUCK'EM!!!! ALL!!!!


gorillaonyourback's picture

sad but true. we have to wait till the ignorant get hungry before they sheepishly come out of there cave dwellings.  got no money for pizza to watch the game, hey im getting hungry, what the fuck who took my american dream.

Bob's picture

Great delivery, that.  Funny!

Zero Govt's picture

Yep, we're going to have to wait for the sheeple to get angry (lose it).....2013 to 2014 is my estimation before we see pitchforks down the streets based on waiting for the economy to meltdown and that news to really sink in... the American 'political' dream (and European socialists) was one big sack of shit all along ...that'll send the sheepies over the edge

Gargoyle's picture

And your Woody Guthrie-esque romanticizing of "the working man" as portrayed by patronage hacks in Wisconsin is an anachronism.  These aren't working people, they're grubby ward heelers.

SRV - ES339's picture

And you are one of the corporate elite's "useful idiots"... nice to know all that cash didn't go to waste.

sun tzu's picture

Are you a paid union parasite living off union members dues?

cdskiller's picture

Come on, Gargoyle, this article is about Lehman walking. It's about institutionalized crime on the highest level. Wisconsin has nothing to do with this.

You want to slam somebody and call them names, do it to Fuld. Do it to Bernanke. Do it to Paulson. Do it to everyone who let these crimes become so widespread.

Or better yet, go back to watching Fox.

rocker's picture

+3 @cds.....    Although, I would add Lloyd Blankfein from "Godman Shafts", J. Diamon from "The Morque", and V. Pandit from "Shitty Bank". 

sun tzu's picture

If you were too stupid to notice, the first post was making the greedy union hacks out to be victims when they are nothing more than wannabe bankers who couldn't graduate from high school. Go back to watching PMSNBC 

rich_wicks's picture

This is about the rule of law not being enforced.  It has nothing to do with Wisconsin.  It has to do with the criminality of our Federal government.

Bob's picture

Apparently, the finance community right down to the rabble-rousing young Turks are driven to be "fair and balanced" (in their minds) to a fault.  Seems everybody has to share blame, regardless of scale, and the degree of blame is apparently unqualifiable, therefor dependant upon nothing more substantive than the eyes of the beholder.

You might find it strange that the finance community seems so poorly equipped to appropriately weight the relative "blame" . . . actually, it stands out as a bizarrely incomprehensible disability in this context. 

My impression is that it's just too much fun to beat on the little guys in a orgiastic celebration of honor and political legitimacy among finance people. 

It appears that they really don't get it. 

NumberNone's picture

Douchebag...it's all related.  The banksters helped create the state pension mess as much as they helped create the overall fiscal crisis we are in now.  Read Matt Taibbi or do a litte homework.  Here's a great little article to start with...


rich_wicks's picture

Douchebag...it's all related.  The banksters helped create the state pension mess as much as they helped create the overall fiscal crisis we are in now. 


The reason bankers do this, is because they know they won't be prosecuted.

People need to understand now, that the government has given them a license to steal.  You need to take appropriate actions to protect yourself.  This means getting money that doesn't have counter party risk.

Michael's picture


Didn't I chastise you in a previous thread for spouting mindless drivel? Apparently everything they say about your kind is true.

Bottom line, the public unions are there to protect the high levels of spending the system needs to feed on.

Lower spending levels to balance in every state and the beast starves. It's not rocket science. 

SRV - ES339's picture

Have you always had this short sighted myopic view of the world, or was it the green dye... btw you're right, it's not rocket science... how come you don't get it?

sun tzu's picture

How far off the ground were you when your mother shat you out? We don't give a damn about those parasitic union fuckers. They were busy stealing what was left while the bankers were looting. 

velobabe's picture

tyler, zerohedge got huge shout outs on max keiser's, on the edge with david decraw. ampedstatus.com. you are very powerful and brilliant with instigating your anonymous status for these last two years. i get it now. it is really working. he put you in the same league as the anonymous group, leading the war against all the bankstars etc.

busting balls, durden†