New York's attorney general on Tuesday charged accounting firm Ernst & Young with fraud for allegedly helping Lehman Brothers conceal billions of dollars in debt prior to the bank's collapse.
In a lawsuit, New York attorney general and incoming governor Andrew Cuomo charged Ernst & Young with helping Lehman Brothers remove tens of billions of dollars in securities from its balance sheet "in order to deceive the public about Lehman�s true liquidity condition."
The alleged fraud was practiced seven years prior to the 2008 collapse, it said in a statement.
According to Cuomo's office, the securities were sold to European banks in return for cash which was used to pay down debts and improve the balance sheet, "while failing to disclose to the investing public the obligation to repurchase the securities at a higher price."
"This practice was a house-of-cards business model designed to hide billions in liabilities in the years before Lehman collapsed," Cuomo said in a statement.
"Just as troubling, a global accounting firm, tasked with auditing Lehman's financial statements, helped hide this crucial information from the investing public."
"Our lawsuit seeks to recover the fees collected by Ernst & Young while it was supposed to be using accountable, honest measures to protect the public," Cuomo said.
New York-based Lehman Brothers was one of the leading international banks before it was forced to declare bankruptcy in September 2008 due an acute lack of cash, which accelerated the meltdown of the US economy.
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