Former C.F.O. Brad Hintz went on Bloomberg Television today to talk about the 2,000-page autopsy of Lehman Brothers, which appears to have overdosed on a drug-like accounting practice ominously called Repo 105.
“I would call it shenanigans,” said Mr. Hintz, who also pointed out that the company was severely leveraged. Repo 105 essentially allowed the company to hide assets and make its books look better. (‘[I]it is another drug we r on,” said executive Bart McDade in an email quoted in the report.)
“It wasn’t done at the other firms, so it was clearly an accounting technical approach in order to bring a balance sheet down. But you’re not bringing the balance sheet down,” said Mr. Hintz. “If all you’re doing is hiding behind a curtain, it’s not there.”
Mr. Hintz said C.E.O. Dick Fuld was always very involved with the amount of risk when he was with the company until the late 1990s; the report argues rather convincingly that the C.E.O. knew what was happening with Repo 105.
Although it’s hard to tell how engaged Mr. Fuld really was. When Mr. McDade presented him with a lengthy report arguing they cut back on their Repo 105 usage, Mr. Fuld’s entire response was said to be “good, good, good,” and some nodding.