New York: Lehman Brothers Holdings' former chief executive officer Richard Fuld asked a judge to dismiss a lawsuit accusing him and his colleagues of failing to disclose Repo 105, a financing method allegedly used to conceal billions of dollars of debt, according to court records.
Separately, Ernst & Young, the Lehman auditor, also asked the judge to dismiss the lawsuit in a court filing on Friday, saying its work met all applicable professional standards.
The class-action lawsuit, based on a 2,200-page report by Lehman bankruptcy examiner Anton Valukas, was filed on April 23 on behalf of retirement funds including the Alameda County Employees' Retirement Association in Oakland, California, and the Government of Guam Retirement Fund.
The Lehman executives denied in court papers that the investors had lost money on Lehman securities because of misstatements and omissions in offering documents. Lehman's accounting for Repo 105 transactions conformed to generally accepted accounting principles and was approved by Ernst & Young, they said.
"Plaintiffs' effort to turn the report into a basis for securities law violations fails," they said in a filing in federal court in Manhattan.
Repo 105 transactions are a form of short-term financing that Valukas said Lehman used to move as much as $50 billion (Dh183.6 billion) off its balance sheet temporarily to show investors it wasn't carrying too much debt.
Jointly asking the judge to dismiss the lawsuit were Fuld, former Lehman chief financial officers Christopher O'Meara, Erin Callan and Ian Lowitt, former President Joseph Gregory, present and past Lehman directors, and underwriters of the bank's securities.
The Lehman executives said Repo 105 wasn't used to create "a false impression" of Lehman's balance sheet, as alleged. Offering documents told investors "in blunt words" that the balance sheet would "fluctuate from time to time", they said in the filing.
Disclosure claim
"Not only did Lehman disclose that during the interim periods it might have more assets, it revealed that it did, and the magnitude of the variance," they said.
The retirement funds, which have amended their lawsuit twice, are trying to join with thousands of as-yet unidentified investors who lost money buying $31 billion of Lehman securities. They have asked the judge to make Fuld return profits from alleged insider sales of Lehman shares, and to award them unspecified damages.
Valukas said in his study published on March 11 that Lehman officials may be sued for certifying misleading financial statements. At least three suits citing the examiner's report have been filed against Lehman's former executives.
Lehman filed the biggest US bankruptcy in history in September 2008 with $639 billion in assets. It has said it will spend another five years liquidating to pay unsecured creditors as little as 14.7 cents on the dollar.
The lawsuit is being heard in the US District Court of the Southern District of New York.
