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Lehman Brothers Records Discarded?

Rep. Henry Waxman (D-Calif.) just sent a letter to Lehman Brothers CEO Richard Fuld, who's scheduled to testify before the House Oversight Committee on October 6, to follow up on a previous document request. Among other things, the committee had sought e-mails and other documents that had been sent or received by Fuld over the past six months. According to Waxman, Lehman blew [PDF] Thursday's deadline to produce the records. And Fuld's counsel has apparently told the committee that he doesn't expect to have much to turn over.

In conversations with Committee staff, your counsel stated that he and his team are working on collecting your e-mails from this time period, but they expect to produce relatively few to the Committee because you were an infrequent user of e-mail.

Your counsel and his team have also informed Committee staff that they do not currently plan to produce any documents sent, received, or reviewed by you during the past six months that are nonelectronic, such as internal memoranda from company officials, assessments of the company’s potential liabilities, or warnings of the company’s impending collapse. According to your counsel, although these documents did exist at one time, they were typically “discarded.”

Discarded? Sarbanes-Oxley, signed into law after the Enron debacle, forced publicly traded companies—such as Lehman Brothers, before it was delisted by the New York Stock Exchange—to comply with heightened record-retention procedures. And it imposes strict criminal penalties on anyone who tampers with company records:

Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case, shall be fined under this title, imprisoned not more than 20 years, or both.

It's unclear whether the documents in question are covered under Sarbanes, but, just the same, "discarded" doesn't seem like it's going to fly, particularly since congressional scrutiny is the least of Lehman's problems. The failed investment bank is currently under investigation by the FBI, as well as the subject of multiple lawsuits, including a class action that was filed earlier this week.

And Waxman is growing testy with Lehman's lack of cooperation, too.

It is difficult to understand how Lehman Brothers is unable to produce a single internal document that went to or from the CEO’s office over the past six months. It is also difficult to understand why there is no log, file, or other record documenting where these internal documents went.

For these reasons, I request that you inform the Committee by the close of business today whether you will agree to expand your search of documents to include company officials and employees outside the office of the CEO. If we do not receive such a commitment, the Committee will begin the process of seeking these documents by compulsory means.

Have a nice weekend, Mr. Fuld.

Comments

The corporate witch hunt is becoming increasingly mean spirited and downright ludicrous.

9 times out of 10, documents are shredded because an executive is trying to cover his own ass, not the company's. Now, because of the "fall of wall street", everyone wants to prove that these corporations either plotted their own demise, or are profiting from their own demise.

The truth is, this lack of evidence doesn't prove a thing. More often than not, executives make mistakes which cost their company millions of dollars and so they take steps to remove traces of evidence which can be used against them.

This is not uncommon.

Posted by: HarryNads.com on 09/26/08 at 4:11 PM Respond

Waxman has very legitimate concerns. The question is whether Fuld raised capital throughout 2008 while knowingly mismarking the mortgage portfolio. The bridge equity on the Archestone Smith real estate deal was apparently very aggressively marked for example. If Fuld and senior management knowingly did not mark down their portfolio so they could raise capital at better levels, this would constitute misrepresentation. Did he know that shareholder equity was in reality much lower?

Posted by: Jan Smyth on 09/26/08 at 7:34 PM Respond

A whole bunch of CEO's need to be on their way to prison, extorting or trying to extorting money from the taxpayers using fear that the economy is going to collapse immediately. They are the ones who collapsed the economy, should the economy collapse and they should have squeaked up a long time ago.

These CEO's and owners of the collapsing institutions that need FREE money from the taxpayers; need to borrow the money from the government with a sufficient lien on their capital assets [owners and CEO's] for collateral in order to save their institutions from collapsing, and if they don't want to, then the owners and CEO's need to go before Henry Waxman and find out why not? -- because what they are trying to do is EXTORTION of the taxpayers via the CONGRESS. Putting up those worthless securities that have caused their institution to collapse for the taxpayers security is not collateral. The taxpayers need REAL CAPITAL ASSETS for collateral. $700 Billion needs a lien to the government for the taxpayers in the amount of $700 Billion in capital assets, and don't forget interest, or it is time for jail for their dastardly deeds.

Posted by: MarthaA on 09/28/08 at 5:52 PM Respond

does anyone have the balls to lock up these crooked CEOS for life, for all the lives they have ruined, thats worse than murder,and they need to pay the price,no ifs or ants about it.

Posted by: joe on 09/29/08 at 5:48 AM Respond