Relationship with Lehman Brothers
In 2001, Lehman Brothers became a minority investor in IBEX Capital Markets, Incorporated (predecessor to Hudson Castle) joining 27 other shareholders, including two other publicly traded financial services companies, private institutional investors, high-net-worth individuals and employees. In 2001, Lehman employees held a third of Hudson Castle’s board seats and so controlled the firm. The remaining seats were held by representatives of the other shareholders and 2 independent directors. By 2002, Lehman’s representation on the board was reduced and after 2004 Lehman never registered more than one vote at board meetings. In 2002, Kyle Miller, a managing director at Lehman, resigned with two others and was hired by IBEX as its CEO and president. Shortly thereafter IBEX’s name was changed to Hudson Castle and the team of new and former IBEX employees (13 employees in total) moved the company from Boston to New York. Between 2001 and 2004, the business activities of Hudson Castle were controlled by Lehman. By 2004, as was cited by Anton Valukas, the examiner of the Lehman bankruptcy estate, Hudson Castle “to our knowledge … had become … independent of Lehman.” After 2004, as quoted in an April 13, 2010 ''New York Times'' article, “all funding decisions at Hudson Castle were solely made by the management team and neither the board of directors nor Lehman Brothers participated in or influenced those decisions in any way….” The April 2010 ''New York Times'' article reported that Hudson Castle was “used to move risky investments off their (Lehman’s) books to improve Lehman’s appearance of financial health” in the months leading to Lehman’s bankruptcy. However, in the same article, the ''New York Times'' reported that the examiner’s report (Anton Valukas) “did not say that Hudson was involved in the misleading accounting.” Furthermore, the transaction between Hudson Castle and Lehman cited in the ''New York Times'' article was later revealed in court documents to have been recorded on Lehman’s books as a financing transaction, and was not an off-balance sheet transaction, refuting the ''New York Times claims. On April 14, 2010, The ''New York Post'' reported that the U.S. Securities and Exchange Commission had launched an investigation into Lehman Brothers amid reports that Lehman Brothers had “shunted billions to….Hudson Castle in order to pretty up its books.” The ''Wall Street Journal'' later reported on March 12, 2011, that the commission’s probe into Lehman’s accounting treatment had stalled. In the same article, Ernst & Young said the firm “stands behind our work on the Lehman audit and our opinion that Lehman's financial statements were fairly stated in accordance with the U.S. accounting standards that existed at the time." Lehman’s stake in Hudson Castle was managed bySee also
* Bankruptcy of Lehman BrothersExternal links
*References
{{Reflist Lehman Brothers