Don't Expect Criminal Charges Against Ernst & Young For Lehman (Duh)
While the amateur financial media works itself into a lather over "potential" charges against Uncle Ernie for that whole Lehman debacle, those of us in the know know that the nature of accounting firms pretty much secures a settlement (read: slap on the wrist and/or ass) and not much more. This ain't Arthur Andersen, people, settle down.
The WSJ has the scoop:
New York prosecutors are poised to file civil fraud charges against Ernst & Young for its alleged role in the collapse of Lehman Brothers, saying the Big Four accounting firm stood by while the investment bank misled investors about its financial health, people familiar with the matter said.
State Attorney General Andrew Cuomo is close to filing the case, which would mark the first time a major accounting firm was targeted for its role in the financial crisis. The suit stems from transactions Lehman allegedly carried out to make its risk appear lower than it actually was.
Big fucking deal, let's all stand around and stare while Andrew Cuomo swings his giant cojones around and drops them on Uncle Ernie's chin for awhile.
The bankruptcy examiner's report and the attorney general's investigation found that Lehman Brothers carried out the Repo 105 transactions on a quarterly basis in 2007 and 2008 without telling investors. Mr. Cuomo's investigation found that Repo 105 transactions started as far back as 2001, said the person familiar with the probe.
The attorney general's investigation, which began after the bankruptcy examiner's report, found that Ernst & Young specifically approved of Lehman's use of Repo 105 transactions and provided the investment bank with a complete audit opinion from 2001 through 2007, said the person.
Listen, this is one of those things that happens all the time and isn't talked about, kind of like your pervy uncle hugging you too long and too hard at Christmas dinner. Perhaps GAAP should be on trial here, not the firm who took advantage of loopholes nor the auditors who simply checked the right boxes and went on with their day.
You guys didn't actually believe audits were meant to find shady accounting practices, were you? Come sit on my lap and I'll tell you a story all about how useless the entire song and dance is.
LLC people, look it up.