LEHMAN BROTHERS used accounting gimmicks and had been insolvent for weeks before it filed for bankruptcy in September 2008, but there was not extensive wrongdoing, a court-appointed examiner has found.

In a 2,200-page report released late last night, examiner Anton Valukas, chairman of law firm Jenner and Block, reported the results of his more than year-long investigation into the firm’s collapse, which deepened the global financial crisis.

The examiner said that while some of Lehman’s management’s decisions “can be questioned in retrospect” and the firm’s valuation procedures for its assets “may have been wanting,” those responsible for the firm had used their business judgment and were largely not liable for the firm’s collapse.

He said, however, that the bankruptcy estate, which is now being liquidated for the benefit of Lehman’s creditors, could have claims against former Lehman chief executive Dick Fuld and chief financial officers Chris O’Meara, Erin Callan and Ian Lowitt.

The examiner said there was also sufficient evidence to support a possible claim that the firm’s auditor, Ernst and Young, had been “negligent” and that Lehman could pursue claims against the firm for “professional malpractice”. He did not find that Lehman’s directors had explicitly violated their fiduciary duty. However, he also said some top executives may have not lived up to professional standards.

He also said actions by rival banks at JP Morgan Citigroup and that restricted Lehman’s liquidity in its final days may have worsened the bank’s downward spiral.

The long-awaited report contains explosive allegations about a gimmick, known as “Repo 105,” that was used for the sole purpose of manipulating Lehman’s books, contributing to the firm’s demise.

The examiner concluded that the gimmick, which dated back to 2001 and was used without telling investors or regulators, gave the appearance that Lehman was reducing its overall leverage levels in 2008 when in reality it was not. – (Reuters)