Senate Banking Committee Chairman Chris Dodd (D-CT) is calling for a criminal investigation into the activities of Lehman Brothers and other banking firms that may have engaged in accounting manipulation.
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Sen. Christopher J. Dodd (D-CT) speaks at a news conference following the Senate's cloture vote on health care reform legislation on Capitol Hill.
In a letter sent to to Attorney General Eric Holder, Dodd asks that Holder appoint a task force to investigate any possible accounting irregularities by Lehman and other banks to conceal the holdings of bad assets.
Dodd wrote to Holder:
"According to the report of the U.S. Trustee-appointed Examiner Anton R. Valukas, Lehman presented a misleading picture of its financial condition to the public by using extensive repurchase agreements known as Repo 105 transactions. The Examiner found that 'Lehman did not disclose its use - or the significant magnitude of its use - of Repo 105 to the Government, to the rating agencies, to its investors, or to its own Board of Directors.'"
Dodd is referring to a report by court appointed examiner that said last week that Lehman hid its debt and perilous financial condition by using an accounting gimmick called Repo 105.
In his letter, Dodd said that any one who broke the law should be prosecuted.
"We must work tirelessly to reduce the incidence of financial fraud in order to restore trust and confidence in the financial markets," Dodd wrote. "A task force investigation and taking appropriate Federal actions in these matters will contribute to these goals."
Meanwhile, the lawyer for a Lehman Brothers whistleblower said Friday his client warned his bosses that accounting gimmicks the bank used before its collapse may have been illegal.
Erwin Shustak says his client, former Lehman senior vice president Matthew Lee, was fired days after questioning the accounting tricks in a letter to his superiors.
Lehman Brothers Holdings imploded in September 2008. It became the biggest corporate bankruptcy in U.S. history, sent financial markets across the globe into a free-fall and prompted a massive bailout of the U.S. banking system.