Ex-Lehman Brothers Holdings Inc. Chief Executive Officer Richard Fuld, other former executives of the bankrupt firm and its auditor were sued by a California nonprofit over their use of so-called Repo 105 transactions.
The former Lehman executives used the transactions to create “a materially misleading picture of the firm’s financial condition in late 2007 to 2008,” the Retirement Housing Foundation said yesterday in a complaint filed in state court in Los Angeles. The group said it lost more than $1 million on its investment in Lehman bonds as a result of misleading reporting.
The lawsuit may be the first based on Lehman’s use of the off-balance-sheet transactions after a report last month by a bankruptcy examiner that said Fuld was “at least grossly negligent” for letting Lehman file financial reports in which a key gauge of strength was “reverse-engineered.”
The banks are still doing this.