Repo 105 email exchange

I recently read an article about the exchange of emails between executives at Lehman Brothers regarding the Repo 105 practice the company was engaged in. Below are some of the comments of the executives-

Martin Kelly, Lehman’s global financial controller, stated that the transactions had “no substance”—their “only purpose or motive . . . was reduction in the balance sheet.”

Other Lehman executives described Repo 105 transactions as an “accounting gimmick” and a “lazy way of managing the balance sheet as opposed to legitimately meeting balance sheet targets at quarter-end.” Bart McDade, Lehman’s president and chief operating officer in 2008 (the year the company filed for bankruptcy), in an email called Repo 105 transactions “another drug we are on.”

This drug definitely was fatal for the organization which filed for bankruptcy in 2008!

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Satyam Computers

Chairman of Satyam Computers, Ramalinga Raju resigned on the 7th of January, 2009 after notifying the board that he had falsified the company’s accounts. The company’s Balance Sheet as of September 30, 2008, carried inflated figures for cash and bank balances of INR 50.4B as against INR 53.6B reflected in books, it carried accrued interest of INR 376M which actually did not exist, an understated liability of INR 1.23B on account of funds arranged by the Chairman and overstated  debtors position of INR 490M as against INR 2.65B in the books. The company’s auditors were Price Waterhouse, the Indian division of PWC.