Repo 105

Lehman Brothers ran a multiyear fraud scheme that hid billions in loans from investors and regulators. It was straightforward, expensive, and clearly orchestrated at the highest levels. Yet no executives faced criminal charges. The only remaining question is how this was possible.

• The scheme was a quarterly shell game where loans disappeared from the books for a few days. The expense and infrastructure required suggest it was being run by people who understood exactly what they were doing.
•  Lehman routed the fraud through offshore subsidiaries and hired a UK law firm to bless it as a 'true sale' because no American firm would. Ernst & Young signed off in exchange for higher fees. The architecture of fraud was entirely transparent.
• Dick Fuld, known for controlling every detail at Lehman, claims he knew nothing about the program concealing existential risk to the company. His version of plausible deniability assumes an understanding of power most people would reject.
• This exact fraud would result in prosecution if committed by anyone else. Paul Manafort was convicted on similar charges. The difference isn't the crime but the perpetrator.
• No criminal charges were filed against anyone at Lehman over Repo 105. Ernst & Young paid a fine. Fuld left with half a billion dollars. What this absence of accountability meant for what followed is the real question.