Lawrence Scholars in Law Today (Thursday) 5:30

Be sure to get over to the Warch Campus Center Cinema  today at 5:30 p.m to see distinguished alumnus Tony Valukas (Class of 1965) talk about his career and the Lehman Brothers collapse.  Mr. Valukas is a hot commodity right now, and just yesterday the Legal Times points to continued congressional interest in Mr. Valukas’s services.

Congress Keeps Calling on Jenner & Block’s Valukas

A 2,200-page report on the Lehman Brothers bankruptcy is still reverberating on Capitol Hill, where the report’s author, Jenner & Block chairman Anton Valukas, appeared again today to talk about what he found.

Valukas, the government-appointed examiner in Lehman’s bankruptcy, testified during a Senate Banking subcommittee hearing on the role auditors played in the 2008 financial crisis. Although Lehman executives made the critical decisions that led to the company’s downfall in September 2008, Valukas said, the auditors were in a position to do more.

“The auditors did play a role in the disclosure or nondisclosure of information that would have been critical for the public to know about and which masked Lehman’s financial condition,” Valukas told the committee.

Valukas’ examiner’s report came out more than a year ago, in March 2010, and he testified about it a month later before the House Financial Services Committee. Sen. Jack Reed (D-R.I.), who presided over today’s hearing, quoted from the report and said it was still helpful as lawmakers figure out how to prevent financial crises in the future. (Reed and Valukas are pictured above.)

Lehman’s auditors had at least two opportunities to provide investors with better information about its financial condition, Valukas said. First, they did not object when Lehman omitted from its public filings any reference to an accounting device known as “Repo 105,” which Lehman used to make its leverage ratio appear stronger. Second, they did not examine the assets in Lehman’s liquidity pool to check whether the assets were truly liquid.

“It seems to me a simple question that someone ought to put on their checklist: Are there any transactions the purpose of which is to dress up the balance sheet?” Valukas said. Instead, he said, auditors and regulators believed that correcting the problems was “not their job.” Click here for a copy of Valukas’ written testimony.

In December, then-New York Attorney General Andrew Cuomo sued Lehman’s auditor, Ernst & Young, over its role in the firm’s collapse. Ernst & Young has said the claim has no basis.

Today’s (non-congressional) event is part of the fledgling Lawrence Scholars in Law program, and is of course sponsored by the Career Center.

Previous Econ Blog post here.

HT: Mr. Peterson!