Ernst and Young may face charges for their role in the collapse of Lehman Brothers
People walking behind a Lehman Brothers sign
Accounting firm Ernst and Young may be facing charges for its role in the collapse of Lehman Brothers. Listen to Stacey Vanek Smith and Eve Troeh discuss the newest story in the collaspe of Lehman Brothers, and watch our Whiteboard Series on Repo 105.
TEXT OF INTERVIEW
STACEY VANEK SMITH: Accounting firm Ernst and Young may be facing charges for its role in the collapse of Lehman Brothers. New York prosecutors are reportedly saying Ernst and Young helped the now defunct investment bank hide billions in losses.
Joining me live in our LA studio to talk about this is our own Eve Troeh. Good morning Eve!
EVE TROEH: Good morning.
VANEK SMITH: So Eve how did Ernst and Young allegedly defraud investors?
TROEH: Well let's got back to when Lehman Brothers collapsed in 2008 and kicked off the financial crisis. The New York State attorney general's office has been investigating ever since. They're trying to find out whether the bank illegally hid some of its debt so that it could report bigger profits that were, of course, not real. That practice is called "window dressing," appropriately. The Wall Street Journal reports this morning that Ernst and Young is likely to face charges that it let Lehman Brothers hide about $50 billion of debt behind some big curtains.
VANEK SMITH: Accounting firm Arthur Andersen took the hit for Enron's collapse and the whole company went down. Are there shades of that with Ernst and Young?
TROEH: Yes, in the sense of the accountants being held accountable for the current financial crisis. We haven't seen that the way we did when corporations like Enron collapsed several years ago. But these will be civil fraud charges, not criminal, brought against Ernst and Young by the state of New York. It was a "guilty" verdict in a criminal case that brought down Arthur Andersen. And though Ernst and Young hasn't commented yet, the Wall Street Journal says it's possible that the firm will settle out of court.
VANEK SMITH: Our own Eve Troeh here in Los Angeles. Thank you, Eve!