Abacus is a more complicated case. The more shocking one to me is why Dick Flud isn't in jail. His use of the Repo 105 to move assets off the books to make Lehman look less leveraged and in better condition is a clearer case of fraud. He essentially did the same thing that Enron did - and Sarbanes Oxley requires that CEO sign off on the truthfulness of financial statements. Here's a guy that seems to have deliberately misled in those financial statements, yet he walks free. To me, that case is a more clear case of how the SEC is a toothless agency.
Is it fraud though? Repo 105 (and 108) were perfectly legitimate financing transactions and their reporting adhered to the relevant accounting standards.
Yes they were done to lower the firm's reported leverage, but again this computation conformed to regulator standards.
So not so clear cut it's "fraud" as nothing was mis-reported.
Edit: incidently this is nothing like what Enron did, which was to move assets off balance sheet by moving them to SPVs and swapping the risk back (incidently also completely legal and fairly common in structured finance). These were simple repo transactions.
This is very similar to what Enron did, although the vehicle was different - they moved liabilities off the books to make themselves look less leveraged. Enron did this through shell companies owned by Fastow - Fuld/Lehman did this through abusing a standard rule and then getting E&Y to hold their nose and say that these transactions were not material and did not involve reporting the information to shareholders. To me, that's fraud.
I'm not alone in this analysis:
"The segment, which marks the first time Vakulas has been interviewed since filing his nine-volume, 2,200-page report two years ago, claims there is sufficient evidence to prosecute officials at Lehman. According to Vakulas, Lehman Brothers was intentionally misrepresenting their financial health."
The key question, to me, is whether they knowingly misrepresented the health of the company in reporting to shareholders. If it ever went to trial I think the answer would be "yes" - but of course we'll never know because no one in the US government wants to go after them.
At least the NY Attorney General went after E&Y and extracted a minor settlement (albeit one with no admission of wrongdoing):
