Lehman Brothers employed the use of a small company to move investments off its books, according to a newspaper investigation.
The New York Times has reported that the firm, named Hudson Castle, was set up to appear to look like an independent business.
In fact, its board was actually controlled by Lehman Brothers, which had a 25 per cent stake in the company.
According to one insider, this allowed Lehman Brothers to treat it as an "alter-ego", to which the bank could temporarily transfer risky investments.
The arrangement went back as far as 2001, with an internal memo from the time revealing Lehman's intentions to use Hudson Castle "as the internal and external 'gatekeeper' for all business activities conducted by the firm".
It is reported that on several occasions, over $1 billion was passed between Lehman Brothers and various Hudson operations.
Last month, the now-defunct bank was criticized in a report on its collapse for using Repo 105, an accounting practice which allowed it to hide around $50 billion worth of debt from its balance sheet in the months leading up to its collapse.
No comments:
Post a Comment