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Wash. AG announces $31 million from Lehman Brothers

By Bryan Cohen | Feb 3, 2014

OLYMPIA, Wash. (Legal Newsline) - Washington Attorney General Bob Ferguson announced on Thursday that his office and a special assistant attorney general recovered $31.3 million in a settlement related to the 2008 collapse of Lehman Brothers Inc.

In May 2009, Ferguson's office filed a lawsuit against Lehman, which was the fourth largest investment bank in the U.S. before its collapse, alleging the company failed to disclose material facts related to the various securities it sold to Washington. The facts included the true value and risky nature of the company's mortgage-related assets.

Lehman also allegedly engaged in a practice called "Repo 105," in which the company transferred billions of assets each quarter and accounted for them as sales of assets as opposed to financings. The accounting maneuver allegedly gave Lehman the illusion it was more financially stable than it actually was.

The Washington State Investment Board bought Lehman bonds between 2006 and 2008. After Lehman declared bankruptcy, WSIB liquidated its holdings and recorded losses of more than $92 million.

The settlement with Lehman recovers approximately one-third of the WSIB's losses from Ernst and Young LLP, Lehman's outside auditor, underwriters for several Lehman offerings and former Lehman executives and directors.

"The attorney general's office will hold powerful interests accountable when they don't play by the rules," Ferguson said. "The recovery of $31 million, despite Lehman's dramatic collapse, helps Washington's bottom line and returns money to the state retirement plans."

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