One of Britain's leading law firms allowed Lehman Brothers to keep billions of dollars off its balance sheet and hid the turbulent state of the failed investment bank's finances by approving a controversial technique.
Linklaters gave the green light to 'balance sheet manipulation' in the form of an accounting practice known as 'Repo 105' when approached by Lehman after a US law firm denied the process, according to evidence uncovered in an explosive 2,200-page report.
The document, which analyses the events that led to the collapse of the 158-year-old institution, claims the technique, which is not illegal under English law, had been carried out since 2001 but was frequently applied in the bank's final two years to make the business appear healthier.
In 2008, just before Lehman filed for bankruptcy with £461bn in assets, the report reveals it transferred £33.2bn in a Repo 105 sign-off which reduced its leverage from 13.9% to 12.1%.
Although there is no suggestion that Linklaters acted either illegally or unethically, the report by Jenner & Block chairman Anton Valukas, claims Lehman turned to the firm after not getting the transactions signed off by its US lawyers.
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