On July 1 2009, in a conference room high above downtown Chicago, a small group of lawyers were interviewing Matthew Lee–a former executive vice president of finance at Lehman Brothers Holdings Inc. The attorneys were part of a team working for Anton Valukas, the chairman of Jenner & Block and the Lehman bankruptcy examiner. During a break, Lee turned to Matt Basil, a Jenner litigation partner and member of the investigative team. “By the way,” Lee asked, “I suspect you want to talk to me about Repo 105?”
Lee explained that Repo 105 was the designated term for a bit of accounting sleight of hand involving repurchase agreements that Lehman had used to shift illiquid assets off its books to make its balance sheet appear less leveraged than it actually was. Lee had tried to sound the alarm on Repo 105 several months before Lehman collapsed, but neither bank management nor the company’s outside auditors did anything about it, he said.
