Lehman report may point way for criminal charges

The 2,200-page report could lay the groundwork for felony charges under securities fraud laws, the Sarbanes-Oxley Act or New York's Martin Act, which is more expansive than federal securities laws, the experts say.

"I think there are definitely criminal liability issues here -- especially for at least the handful of executives who sent emails making clear they knew they were helping Lehman hide its liabilities," said Elizabeth Nowicki, a former lawyer with the Securities and Exchange Commission and now a visiting professor at Boston University School of Law.

Even with a roadmap, getting to a place where a criminal case can be brought will be difficult. The bar is high, as prosecutors must be able to prove intent. And while Lehman may have been at the epicentre of the financial quake, it was not the only failure during the financial crisis.

That may explain why, a year and a half after the Lehman bankruptcy, no criminal cases have yet been announced.

Still, a dozen former Lehman executives, including former CEO Richard Fuld, have been subpoenaed in federal grand jury investigations. Representatives for both the U.S. attorney in Manhattan and the U.S. attorney in Brooklyn declined to comment on Friday.

The report by the examiner, Anton Valukas, a former prosecutor and chairman of the law firm Jenner & Block, points to one direction prosecutors may take -- accounting tricks.

The report details how Lehman used an accounting gimmick to move $50 billion (33 billion pounds) in assets off its balance sheet, making the now-bankrupt banking firm appear financially healthier than it was.

The report said the use of the accounting device was "materially misleading" and done for the sole purpose of "balance sheet manipulation."

In finding that there may be "colourable claims" against senior officers who oversaw and certified misleading financial statements, the report virtually invited prosecutors to bring claims under Sarbanes-Oxley, which imposes criminal penalties on CEOs and CFOs who knowingly attest to misleading statements.