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Saturday, June 15, 2024 | Back issues
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Long Beach City Sues Lehman Execs and Ernst & Young for $20 Million on Short Term Paper

LONG BEACH, Calif. (CN) - The City of Long Beach sued Lehman Bros. CEO Richard Fuld Jr., 12 other top Lehman officers and Ernst & Young accountants, saying they suckered the city into buying $20 million worth of 27-day short-term paper on Sept. 3, 2008, despite warning signs of Lehman's impending collapse. Fuld was paid $100 million in salary and stock grants from 2005-2007, according to the complaint.

Long Beach says its $19,963,250 investment in Lehman's short-term paper has been written down to "zero."

"Despite the fact that defendants were aware of materially adverse facts on Sept. 3, 2008, a mere two weeks before the company filed for bankruptcy, said defendants did not disclose the financial disaster that was about to decimate the company," according to the Superior Court complaint. "instead, defendants lulled the plaintiff, and the rest of the market, into a false sense of security that Lehman would survive, right up to the brink of the bankruptcy filing."

Defendants in the claim of fraud, deceit and misrepresentation are Lehman CEO and Chairman of the Board Richard S. Fuld Jr.; CFO and controller Christopher M. O'Meara; controller Erin M. Callan, who resigned in June 2008 but signed Lehman's Form 10-K for FY 2007; and directors Michael L. Ainslie, John F. Akers, Roger S. Berlind, Thomas H. Cruikshank, Marsha Johnson Evans, Sir Christopher Gent, Roland A. Hernandez, Henry Kaufman, John D. Macomber.

Ernst & Young was Lehman's auditor for FY 2005-07.

Plaintiffs are represented by Bruce Simon with Pearson Simon & Warshaw of San Francisco.

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