Overview

In January 2008 Lehman was reporting revenues of $60 billion and stock at $65.00 per share. By September 12 its stock had dropped to $4.00, and three days later it filed for Chapter 11 protection in the largest bankruptcy ever.

This article, by Wall Street law firm Carter Ledyard & Milburn LLC, gives the inside story on the bankruptcy examiner’s findings.

Although the decision to double down on the sub-prime market ultimately contributed to Lehman’s demise, the examiner found that those responsible for these fateful decisions were protected by the Delaware business judgment rule, which protects directors and officers who act in good faith, from the consequences of pursuing risky strategies in pursuit of profit.

The conduct that the examiner found potentially actionable relates to Lehman’s alleged misrepresentations and omissions in its financial statements which Chief Executive Officer Richard Fuld certified under Sarbanes-Oxley as being correct.

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