Introduction
Professor Arturo Bris was born in 1967 and has been a professor of finance at IMD, Switzerland since 2005. At the same time, he has been a research associate at the European Corporate Government Institute since 2004. Since 2001 he has been a research fellow at Yale International Centre for Finance. Professor Arturo Bris was associated with Yale school of managements sometimes in the past at various capacities – as an associate and assistant professor of corporate finance (Arturo, 2011).
Arturo Bris obtained his first degree from the University of Autonoma de Madrid in BSc Economics majoring in econometric and econometric theory. He managed to obtain a degree in Law from the same university over relatively the same period of time he obtained his degree in economics. He undertook his masters in financial and monetary studies at CEMFI and proceeded to earn his Ph.D. He has made great contribution to the world of scholarly collections managing to post over 15 articles in various peer-refereed journals and writing five chapters in five different books. He has also made great contribution in other publications (Arturo, 2011) which cannot be reliably covered in this article and thus it can be boldly and reliably argued that his thoughts and opinions in the field of corporate finance can be relied upon.
Professor Arturo Bris has reviewed the examiner’s report which was published in March, 2010. The report was prepared to shade light on the bankruptcy of Lehman Brothers. The report was voluminous and Professor Arturo in a very brief article gave his opinions of what he thought about the report in relation to the Lehman Brothers bankruptcy.
Article Summary
The title of the article is the Lehman Brothers case. The author simply stated that this was a case of governance dysfunction and not an issue of troubled financial markets. In this article, the author gave ample evidence to prove his stand which he stated immediately below the title of the article.
The author was of the opinion that the Lehman Brothers’ bankruptcy was the largest bankruptcy case in history and continued to point out that the reorganization of the Lehman Brothers’ assets was carried out, as was described in the report, in an unscrupulous manner with a clear but hidden intention of fraud. A huge portion of the article was dedicated to showing descriptions, as were covered in the report, of schemes which the author felt were geared towards fraud.
The author made a remark about the assumption which had been made early on the bankruptcy of the Lehman Brothers: “we had assumed that the collapse of Lehman in September, 2008 was the consequence of a fatal combination of intricate accounting rules, complex derivatives, greed, excessive leverage and complacency of rating agencies” (Arturo, 2010, p. 2). The author after reading through the report made an observation of a close association of the events that led to the collapse of Enron to those that led to the bankruptcy of Lehman Brothers. The author argued that while the Enron case managed to leverage the balance book through the pre-pay transactions, the Lehman Brothers successfully used the Repo 105 to do the same thing that Enron had done. The author believed that the future was awaiting numerous scholarly articles on the term Repo-105 (Arturo, 2010).
Typically in a repo transaction a financial institution will get a loan with its securities acting as the collateral. In the case of the Lehman Brothers, after the repo transactions were carried out the securities which were used as collateral were reflected in the balance book as well as the injected cash. In the Lehman Brothers case, the repos which were used were not disclosed and were used as asset disposals but this was never disclosed as per the requirement of the US law as regards to repo transactions. Having this knowledge in mind, the Lehman Brothers opted to use the UK subsidiary to hatch the repos. The author was of the opinion that Ernst & Young must have played a role in the whole of this saga by failing to ensure that accounting policies were strictly adhered to (Arturo, 2010). There have been sharp reactions over the issue of the Lehman Brothers’ bankruptcy. Ernst & Young firm has been particularly brought under fire for just standing there as the company it has been working for engaged in unscrupulous accounting schemes (New York, 2010).
Conclusion
The case of Lehman Brothers bankruptcy is a classical example of unscrupulous accounting practice. It is amazing that another company in the US could easily work out its downfall just as Enron had done. The failure of Lehman Brothers can be tied down to the dishonest top executives who decided to circumvent the US jurisdiction through their UK subsidiary. The role that Ernst & Young played can not be underestimated either. The bankruptcy of Lehman Bothers cost investors’ funds a great deal. There is a need for stringent measures to be put in place to curb this wave of companies getting involved in accounting malpractices especially when considering the fact that so many companies have gone down due to accounting malpractices.
References
Arturo, B. (2010). The Lehman Brothers Case. Web.
Arturo, B. (2011). Curriculum Vitae. Web.
New York. (2010). E & Y faces fraud charges over Lehman Brothers collapse: Report. Web.