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By Ray Fleming

THE US Bankruptcy Court report on the collapse of Lehman Brothers in 2008 is full of technical information and jargon that most people will find hard to understand. However, the essential facts about this company whose failure, more than any other single event, defined the credit-crunch, are plain enough. According to the report, its chief executive, Dick Fuld, was grossly negligent for allowing the firm's accounts to be compiled using the “materially misleading” Repo 105 technique which gave a much better picture of the company's position than the reality. Mr Fuld and his senior executives also showed “non-culpable errors of judgement” and mistakenly saw the coming economic crisis as an opportunity for increasing property investment.

Lehman Brothers is not the only company excoriated by this report. The British accountants Ernst & Young is accused of “professional malpractice” and the respected law firm Linklaters is criticised for approving the Repo 51 practice when no US firm was prepared to do so -- although it has challenged the accusation.

All in all it's a sorry story which may well have been repeated in greater or lesser degree elsewhere in Wall Street and the City of London during the frantic days of late-2008. The question, obviously, is how regulations can be devised to prevent such things happening without hobbling the freedom to take risks that is apparently an essential feature of the financial world. Clearly, sharp practice has become commonplace in that world.