According to an article
in the Wall Street Journal:
A lawsuit contending that Lehman Brothers Holdings Inc.'s
former officials, underwriters and auditors are responsible for investor losses
should go forward for the most part, a federal judge ruled Wednesday.
According to the article, the judge ruled that:
"(I)nvestors who filed the lawsuit have "adequately
alleged" that the former Lehman executives...and other defendants misled
them about Lehman's financial health, leverage, risk management and exposure to
dicey mortgage and real-estate assets."
The article goes on to clarify that the investors "contend (that) Lehman's
use of "Repo 105" transactions-repurchase agreements that allowed
Lehman to lower its leverage temporarily-falsely allowed the bank to present
itself as financially stronger than it really was."
As for the impact of this ruling on Ernst & Young , the article states
(The judge) rejected the defendants' attempt to dismiss
the entire case, but he threw out some claims, particularly some of those
against Ernst & Young LLP, Lehman's independent auditor. The judge did
allow a claim to continue alleging that E&Y made misstatements in July 2008
about Lehman's compliance with accounting rules when in fact E&Y was aware
of the bank's use of Repo 105s, which "cast into doubt" whether its
balance sheet was consistent with generally accepted accounting principles.
So is this good news or bad news for EY? It sounds like
it's both but I believe that the good news is fairly minor and the bad news
overshadows any good news. On a good note, it helps that many of the claims
against EY have been dismissed. With that said, I'm not even sure what those
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