Inside Lehman Brothers (2018) - full transcript

I'm on ten acres,
it's all wooded.

I could stand in this
house and scream

and nobody would come.

I went to work in 2003
with Lehman Brothers

completely a normal person.

This is where I ended up
having to learn

to be able to kill somebody
with my bare hands.

Wall Street was
destined for where it is now...

with or without Lehman
going out of business.

That they were on
roller-coaster to nowhere.

It was a bubble that had
to burst and it did burst,



and Lehman helped it burst.

I don't tell people I used
to work for Lehman Brothers.

I don't tell people
I was labeled

the Lehman Brothers
whistle-blower.

I can't prove it but I was
blacklisted from Wall Street.

So what I did was
I sold my house,

I bought a motorcycle and I
just travel all the time now.

Justice, to me, is a whole
host of things all happening,

and I don't think
they'll ever happen,

which is why I'm on
the bike around the world.

Lehman had a reputation on
Wall Street as being cowboys.

Their business practice
a bit aggressive.

I quickly learned
the culture is that

you don't tell people
what you're doing,



you just make money.

I joined Lehman in 1994.

I was vice president.

You were on your toes,
you were watching your back,

you had to do the best.

There was just a certain
vibrancy all the time.

But I enjoyed that.

It's difficult to describe
an electric feeling, but, um...

I had never felt so, uh,

intense all day as I did
at Lehman Brothers.

It sounds crazy
but actually was good.

I guess it's like
a drug.

Another drug we were on.

At the top level of the
corporation for Lehman Brothers,

people really believed
in what they were doing.

They thought they were
going to hit the home run,

hit the jackpot, money was
going to come flowing in.

Below that level,
at middle-management,

there were a number of people
who were greatly concerned

and believed that Lehman was
putting itself at enormous risk

and that it could be a disaster.

My responsibility is to simply
find the facts, the truth,

put them into a report
and then let others

decide the consequences of that.

So the question was,
what was it they were doing

and how did they
end up in bankruptcy?

So we had to assemble
a team with experts.

But the case was so
sophisticated that those experts

ended up hiring professors
and other experts

who then advised them so
they could advise us.

I had no sense in the beginning

of just how significant the
issue of Lehman's failure was

and how incredibly
massive it was.

Lehman's bankruptcy involved

almost 700 billion dollars
worth of assets

and the losses to the
creditors, even today,

are in the tens of
billions of dollars.

But it wasn't just
the size of the bankruptcy,

it's that Lehman's
was involved in all aspects

of the financial world
across the entire globe.

So when Lehman went
into bankruptcy,

they took a lot of things with
them and, to some extent,

they stopped a large part
of the financial economy,

at least for a short
period of time.

And we're still living
with the consequences

of that bankruptcy.

I started in late '97.

I had another job as a lawyer
at a Wall Street law firm

and decided to leave there
and, before I knew it,

I was a Lehman Brothers lawyer.

It did have a reputation
as an exciting,

up-and-coming place to work.

They were known as
the scrappy newer bank.

It felt good, I didn't know
anything at that point,

I thought nothing but the best,
I had the highest hopes.

The aim of Lehman Brothers
was to make money

any way that we could.

You know, any way that could be
done without an undue risk

of being caught or
penalized, we would do.

It was not about right or wrong,

it was about can we or can't we.

And if we could, we did.

Lehman began to get into
the mortgage game early on.

They had wanted to be
on that entire chain,

to own an interest
on that entire chain.

We did have one of
the best real estate teams

and one of the best bond
departments on Wall Street,

so why not? It was sort of
natural that Lehman

would take a leadership
role in that area.

And we did.

I started working in
the mortgage industry in 1981

as a receptionist.

It was very exciting, and I felt
that it was really important

to know more about
the housing industry

because I know it's the biggest
purchase in one's lifetime.

And then, in 1985,

I became a loan processor.

A loan processor is the person

that meets personally
with the borrower

and gathers their information
about purchasing a home.

So once they have completed
a loan application,

I'm the one who gets
the paperwork at that point.

So it's my responsibility
to make sure

that they met all
the requirements

before submitting it
to the underwriter.

My job was to solicit

new brokers who
solicit consumers.

My job was to help people to
fulfill the American Dream.

To have a home where
a family can be happy.

Kids can lounge on the couch.

Being able to have
outrageous birthday parties.

That's the American
Dream for me.

So what I liked about
the mortgage industry

was the freedom that it offered.

I was able to work
the hours that I needed to

to be with my children as well.

That was very,
very important to me.

And the income was amazing.

There's no other job
that you can get

and walk away with

30,000 dollars in a month.

What I remember from BNC is
doing my background on them

because I needed to make
sure they were stable

and that they were reputable.

And when I did the
research, I googled them,

of course, like everybody else,

and they were owned
by Lehman Brothers

which, at the time,
was one of the largest

financial institutions
in the world.

And so I felt very confident
about making the switch.

And, unfortunately, they didn't
turn out to be so reputable.

When I got into
the business,

I was told that an
underwriter's job was

to assume that
everybody is lying,

and that your job is
to go into the file

and either validate
that they are lying

or that they have
totally told the truth.

So, an underwriter
that never underwrites

or approves a loan,
no one is getting paid.

And that's what puts
the target on our back,

that's what puts
the pressure on us

when there is a shop
that are not doing

all of their deals
on top of the table.

- Hello?
- I'm coming up close

to the causeway, where are you?

Keep straight
and I'll flag you down.

Are you in Sacramento?

- Oh, yeah.
- All right, well,

I'm coming through West Sac.

I'm looking for you now

'cause I saw your car pass.

Come here!

Hey, honey, I'm parked.

- It's changed a lot, huh?
- Huh?

- It changed a lot, didn't it?
- Yeah.

I haven't been
back here since 2005.

Standing over here and
looking at the building.

Yeah, never.

The nice change about it is that

it's no more memories
of being, say, left.

I remember my last day,

after I came back off
of stress leave.

- Yes.
- You weren't there

'cause you were on stress leave!

- God.
- When I arrived at BNC Mortgage,

the atmosphere in
the office was very upbeat.

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The overall expansion
came following the tech bubble.

The tech bubble
burst in '01, '02

and that was followed
by a real estate bubble.

Interest rates were
pushed way down

and real estate became
the new game to play.

And at the same time,
there was this expansion

and development of new forms
of lending, subprime lending

and there was a realization
that this was a market

that could really be pushed up.

And Lehman was a big
part of that wave.

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It was just
a very volatile time

and it was a crazy,
frenzied time.

Because subprimes came into play

and they targeted people who
had these lower credit scores

that weren't able to go to the banks
because their score wasn't high enough.

- So now they offer subprimes.
- Tammy has a mortgage

for those with
low credit or high debt.

It's called a subprime mortgage.

Many of these loans
entice borrowers

with no money down
and low monthly payments.

Back in 2001,
so-called subprime loans

made up just 5% of
the mortgage market.

Five years later,
it was up to 20%.

They targeted everybody
who was ever gullible.

And sales is sales, you know,
if you got the gift of gab

and you can talk real good
and convince a person,

they were taking
the bite and going for it.

Somebody sold them
a dream that was not true.

That practice led
people buying homes

that they could not afford because
they got it at a low interest rate

and nobody explained to them,

in two years, your payment
is going to triple.

And so if you go
from a 1200 dollar payment

to a 3300 or 3600 dollar
payment, you can't make it.

There's no way you can do that.

The higher the interest
rate that they were charging

was more money

for the broker to make.

And then they would
charge an origination fee,

like two or 3000 dollars.

and then on that back end
with an interest rate

that the homeowner didn't
know anything about,

they can make up to nine, 10,
11, 12,000 dollars on a deal.

And once the loan
officers and all of the parties

involved administratively,
the company,

once those checks are cut
and everybody gets paid,

nothing happens to them.

But you as a homeowner
can't sustain your mortgage.

You would take
a thousand subprime mortgages,

put them into one bond,

then you would sell that
bond with a higher rating,

because the rating
agencies believed

that if all of these
mortgages were together

they would have less
likelihood of failing.

And a second belief
was that the value

of real estate would
never go down.

So when the Lehman
Brothers of the world

packaged these CDOs, they sold
them as A-rated investments,

but all the mortgages within
the CDO were B-rated.

And, ultimately,
when they started to fail,

they all failed in a crescendo

and the house came
tumbling down.

The 2008 crash is
still a big open book

that people don't focus on.

I focus on it all the time

because I'm waiting for justice
which hasn't happened yet.

It's an email I get called
"Compliance Exchange",

which is a daily newsletter

that lists all
the financial wrongdoings.

It says, "Barclays
information security chief

is facing an internal
whistle-blowing probe."

Apparently, he wanted to find
out who whistle-blowers were.

Barclays bought some of
the Lehman Brothers business

in Europe and the U.S.

How do you make as much
money as possible?

By going where
no one's gone before.

And you have to
dream up legal ways

of making a lot of money that,

to a lot of people who have
ethical or moral standards,

may seem quite illegal.

But if there's no law,
it's not illegal,

so do it because you're
going to make some money.

Investment banks operate
in that fashion.

We were pushing hard
on legal questions

and on accounting questions
to do things that,

to most reasonable people,
would seem illegal.

But we would find a way to
tell ourselves it was legal.

But as time went on,

I kept having these sort
of troubling moments

of, wait a second, is that
really what I think it is?

Are we really doing what
that looks like we're doing?

And I started raising questions.

One of my bosses just told me,

"Look, these guys are
here just to make money.

Stop being a boy scout.
Stop thinking they want to save the world

or they want to treat
everybody with respect.

No, they're here
to make money."

This is the time when
I worked at BNC, I was so cute.

Some good times.

Until it got crazy.

Management would give us this
thing to hang from the wall

to tell us what our office
was to accomplish each month.

And the goal would go up.

So it would start at like
two billion in volume,

three billion.

Slowly but surely
the loan officers

are out in the field hustling.

Just bringing in loan.

There goes Linda.

She had come out of her
office with those loans.

There's loan files over here,
and loan files over there,

and loan files up here,
loan files on her desk...

files she was working on
and who knows what else.

We had files everywhere,
on the floor.

And then this cabinet was
just full of loan files.

There was so much to do.

The volume picked up

and, in order for them
to meet their quotas,

they just started
bringing in junk.

I always consider myself
like an FBI agent

because I think it is my job
to make sure, number one,

that the information
that they have indicated

in their documentation,
I verify that that is accurate.

I also verify that
it is legitimate

by looking at the
documentation to make sure

that they have not been
doctored or information changed.

And I look to see if it's
a different typeset of printing,

anything that looks suspicious.

Ugh, BNC.

Ooh.

This is the loan.

I see that all
that's whited out.

I can tell it now
like I could tell it then.

Here's for me, I checked
some falsified information.

They've whited out
the information here

and handwritten in what
they want me to know,

but they don't realize
that the average balance

does not even support it.

If I gave this to
Stevie Wonder he could see it.

During that time,
it happened to be

that I underwrote five files
from the same broker.

I'm calculating, I'm retaining
information, you know,

and now I'm going
to do the approval.

So I did the approval,

wrote up the conditions
on the first one,

and then pull up the second one.

The second one, I started
going through it.

The W2

looked identical

with the exception of the name,

the social and the party's
name who it was to.

So then I said, hmm,
it looked familiar.

So I picked up the file
that I had already approved

and I opened it up, and it was
the same W2 with the changes.

They didn't change
the employer ID number.

So it was a different company
with the same ID number.

So now I'm really...
all my senses are up now,

like, well, what else
is a lie in this file?

Then I picked up the third file.

I wonder what's
wrong with this one?

Picked up the fourth file,
picked up the fifth file,

all from the same lender.
Oh, my goodness, all fraud.

It's disgusting.

I got a phone call
from Linda Weekes

that I needed to come into
the office immediately.

So I come in, I sit at her desk and she shows me
two files from my brokers, from my clients,

and she says, "I want you
to look through these files,

take your time,
and tell me what you see."

So I'm looking through it,
and I go to the other file,

and I flip through it, and
the tax numbers are the same

but the companies are different.

My goodness.

And so I said, "Okay,

that mortgage company
is committing fraud."

And so, I got another file
the following day

from that same office
and I was looking through it,

and there was a gentleman
who they claim

worked at Kentucky Fried
Chicken, which he did,

but that he was
earning 7000 dollars.

So I got in my car
with that information,

went to that Kentucky Fried
Chicken, spoke to the owner

and said, "I would like
to apply for the job

that pays 7000 dollars
a month in salary."

Not hourly wages, but salary.

And he looked at me
from behind the counter

and he said,
"I would like to have

7000 dollars a month
from this business.

It doesn't happen."

And so I went back, went
to that mortgage company,

as a courtesy, to let them know

that they needed to
have quality control.

What I did not know is
that someone in our office

had contacted them and said,

all you need to do
is change the broker.

I thought, you know,
I'm not going

to allow this to happen.

Because this man clearly knows
they're committing fraud,

and he thinks he can just
put paint over the top,

and get re-approved
and be doing the same thing.

So, at that time,
I got an email sent to me

that was not supposed
to come to me.

And what the email said is that

we need to keep
this company going

because I have all these
loans that need a fund.

And so this was
a corporate approval

of them committing fraud.

Wow.

I realized that the entire
corporation was corrupt.

And they don't want me
to know about it.

Lie after lie after lie.

If we get this right today,

I hope we'll squeeze
some of those shorts.

Squeeze them hard.

Not that I want to hurt 'em.

Don't get that, please,
'cause that's just not who I am.

Very few people ever
saw Dick Fuld in the flesh.

He was like Big Brother, every
quarter he'd give us a speech

and we'd tune in on
our computer screens.

And here was Big Brother saying
"You've done a great job!

But it's not good enough,
next quarter we want more!"

I am soft, I'm lovable,
but what I really want to do

is I want to reach in,
rip out their heart

and eat it before they die!

Lehman Brothers
was Dick Fuld's life.

And he was considered
one of the most

brilliant men on Wall Street.

He was the longest
serving executive

in any investment house
on Wall Street.

In that year he was named
one of the top executives

in the United States, the very
same year of the bankruptcy.

And he led Lehman
Brothers to record years,

record earnings, record bonuses
for its executives.

He was described to me
by Secretary Paulson

as the eternal optimist.

He said,
"If Dick Fuld was fishing

and he had a nibble
on the line,

he was already
filleting the fish,

believing he'd
already caught it."

He had this reputation
of being a ruthless guy,

whatever that means.

Does that mean willing
to break the law wherever...?

Maybe. In my view, apparently.

That's what it
looked like to me.

Or maybe it just meant he was
very aggressive in trading

and was very good at making
money for his employer.

That probably too.
He was known as the Gorilla,

and this ripping of
the heart out thing

is just another dimension
of that reputation.

He was famous
for being reclusive,

up on the 31st floor in the end.

He had his own elevator.

In my first years,
I saw him in the lift,

the elevator, in the building.

And he'd walk in,
and he'd stand in the corner

and not interact with anyone,
just kind of glare.

I'm the chairman, don't look
at me, don't talk to me.

Reach in, rip out their heart
and eat it before they die!

When I saw this
video of Mr. Fuld

giving the speech about how

if anybody gets in your way,
anybody says anything,

your job is to kill them,
to get rid of them.

The wave of reality that
came over me was horrifying.

See, when you're
a public company,

the top five
executives of the firm

have to show all of the
compensation that they are paid

and you have to disclose
the numbers, the value.

And we were basically hiding

certain of those awards
through a loophole,

a technical interpretation
of a law, of the rules,

that we said, no,
we can twist that this way

and find a way where
we can leave off

hundreds of millions of
dollars worth of pay.

We don't have to tell
the public about that.

This was very troubling to me.

And my bosses said
this loophole

covers us.

The reason that
they wanted to hide

these additional stock awards
was that they were already

paying themselves
quite generously.

So, let's say for
the CEO, Dick Fuld,

you know, we would disclose
that he would get paid

25 million but really
he got 30 million.

We would disclose a year later

30 million and he
really got 35 million.

And it was just because
they wanted more

than they thought the
shareholders would approve.

Finally, it got to me, the numbers
kept getting bigger and bigger.

It was a source of
constant bother

and, finally,
in 2006 I said "enough".

♪ You created me to worship ♪

♪ You created me to fear ♪

♪ You help me say yes ♪

I take pride in my job,

so when I started looking
at the documentation

and noticing some discrepancies,
I would question it.

Then my manager started taking

these particular
accounts away from me

and passing them on to
another account manager.

My volume decreased
slowly but surely.

I started questioning myself.

Am I not doing my job right?

But I wasn't doing
anything different.

Good coffee.

And then not knowing everyday

when you walk up in that office,

what's going to happen today?

Because there was always
something changing.

Um, the attitudes,
the accounts being waved,

management calling
me on the phone.

You could just feel the tension.

So it just got to the point...

I dreaded going
to work every day.

This is an email sent to
the acting branch manager.

"I am insulted that I would
be placed under a microscope

for discovering fraud
in files I underwrite

and brought to the
attention of corporate.

I felt singled out
and attempts have been made

to force me out of the company

because I wasn't
a team player."

One morning
I went into the office

and I said, hi, so-and-so,
do you have my files?

"Nope, haven't seen them, don't
know anything about them."

Went to the next person,
there were five processors.

"Nope, haven't seen them,
don't know anything about them."

I'm like, okay,
am I losing my mind?

How's it possible that
30-plus million dollars

in loans are disappearing?

And then the manager of
the office came up to me.

I'm standing by the front door

'cause I'm asking
the receptionist,

have you seen these loans?

'Cause she's the one
that logs them in.

"Nope, I haven't seen them."

And the manager suggests that
I came in and took them.

58 files, that's
a huge amount of files.

And I started laughing,
I was giggling,

I said, you think that I
came in here and got them?

And he said, "Well, they're not
here and you're responsible."

What a joke.

What they wanted
to do to me was

to destroy my credibility.

I decided to call
the senior vice president

and it went from bad

to unimaginably worse.

And, um, within a week
they had hired a new manager.

When they walked
into our office,

they walked in our
office like the mafia.

They were like arm
to arm, marching in,

like, we're taking
over the world.

The gentleman that they
brought into the office

who had no particular job title,

he was a grimy guy.

And he would just walk
around the office,

which was a small office.

What is he doing,
what is his job?

And then there was
one particular time

that he was sitting at my
desk and he had his chair,

and he kind of had a
leg here close to mine,

and then that's when
he's kind of breathing...

...the heavy breathing
I could hear.

And then again he was talking
about African American women

and what he heard that
they're good about,

and was, "I like that,"
you know, um, and, um,

just being very sexual,

which was totally out of
place and I was like, ugh.

You know, and then what
he would like to do... with me.

I pop in,
I open the file drawer

and, next thing I know,
I felt a hand on my shoulder,

at the same time,
breath on my neck.

And before I could
even gasp at it,

he pushed himself up
against my backside.

And...

I lost it.

On a particular day,
I was leaving the office,

I shook hands with him
and when I went to leave,

he wouldn't let go of my hand.

He pulled me towards him
and whispered in my ear.

He said, "I know
everything about you,

I know where your
daughters go to school,

I know where
they live, I own you."

Everyone was
making the complaints

about how we were being treated

and nobody was listening
to us, nobody.

People that
are like them,

who hire people to come
in and do dirty work,

um, that those people
want to see you down.

They want to see me be afraid.

I came home and plants were
moved around on my porch,

screens were torn,

so people were
letting me know,

"Hey, we've been at your house."

My attorney,
my trainer, all told me,

"Change your ID and move away,
move to another state."

And I looked around
and I said, you know what?

I'm not running from anybody,
I am not going to run.

And my children
at one point came to me,

"We just want our mom back,
we don't like this new you,

we want life the way it was."

They could have fired me
at any moment in time

but they chose not to,
they chose to torture me,

they chose to ruin
my credibility,

they chose to make me
look like a loon,

which they successfully did.

It was a long time ago
that I was contacted on this case

and I got a call from
someone that said

that there were some women
at a mortgage office

that had been harassed.

What's interesting
is that these women

did not know exactly what was
happening to each of them.

They had not sat together
and planned this.

Although they worked
in the same office,

they each had their own
individual experiences.

And so, all of a sudden,
when they realized

that the same harassment,
the same problems,

the same complaints about
the mortgages were happening,

they came together
and said, this is wrong.

So they have a claim
for wrongful termination,

it's based upon the fact that
they were whistle-blowers,

that they are protected by law
because they were complaining

about illegal behavior
in the workplace.

As a part of this,
they were also

sexually harassed
and threatened.

If you talked to these women,
you know how serious

this has been for them
and what it's caused them.

Our claims are currently
worth 27 million dollars,

I think they're worth
every dime of that,

because these women's lives
have been ruined by this.

And how much money is it worth
to have your life ruined?

To stand up for what you
believe in and what's right.

The first time that
BNC came on my radar

was when I read the papers about

the alleged mortgage
fraud in California.

So, as soon as you heard that,
I went to my boss saying,

did you hear about this?

And the answer's, "Yes,"
and nothing's said.

So you knew that
the papers were right,

and don't ask questions.

So I wanted to go and check
them out, but I was told, no,

you can't do that,
somebody else is going.

So I knew things
must be really bad

because they don't
even want me to go.

I was in charge of
the balance sheet,

which is everything you own,
and everything you owe

and the difference.

Lehman had well over a thousand
companies worldwide,

so what you have to do is add up

all those thousands
of companies,

come up with the
balance sheet number.

Yeah, that's what
we showed the public.

The total assets
of Lehman Brothers

were about one
and a half trillion.

But then they had derivatives

which work in what's
called notional value

and they had even
more trillions.

Through 2005, into 2006, at
Lehman everything was fantastic.

Everything was
green, green, green.

And then small things happened,

not so much in Lehman Brothers,

but you knew that
the real estate market

and mortgages were
too good to be true.

A lot of
homeowners in this country

are under tremendous
stress right now.

Doesn't matter
how hard you work,

you're still going
to lose your home.

The signs dotting
Stockton neighborhoods

are as familiar as flags
flying on the fourth.

So many homes in this
California community have been vacated.

Foreclosures
across the country are up

a staggering 87 percent over
this very same time last year.

They call the
dead lawns foreclosure brim.

Those falling home prices
are like an infection,

now spreading throughout
the U.S. economy.

It's a war out there. I mean, these people are
losing homes every single day.

There is one faucet
for the entire camp

of potable water
which is right here.

Okay.

Did you run into
a lot of traffic down there?

No, I mean, not that much.

Traffic but not that
much traffic though.

You could just feel
the tension in the office.

You're going to have your
good days and your bad days.

But those bad days
became more...

and more, and more,
and it was depressing.

It just got to the point where
I just said I needed a break.

So I took off for two weeks.

During that time
that I took off,

I was inquiring about
other employment

with some girlfriends that
worked at some other companies,

and I went and interviewed,
and was offered the position.

And I was like, great, yeah!

The Lord is good. I need y'all
to get down back on this song...

That is what
the environment at BNC was.

I just wanted to
get out of there.

♪ Lord, you are good
And your mercy ♪

♪ Endureth forever ♪

♪ Lord, you are good
And your mercy ♪

♪ Endureth forever ♪

♪ Everybody pray, Lord ♪

♪ Lord, you are good
And your mercy ♪

♪ Endureth forever ♪

♪ Lord, you are good ♪

♪ Lord, you are good
And your mercy ♪

♪ Endureth forever ♪

♪ And ever, and ever ♪

♪ Forever and ever, and ever ♪

After I left BNC,
my regional manager,

she said,
for some reason, she says,

"I don't think this is it,
this is over." She said,

"Just dot your I's
and cross your T's."

You know?

I remember one day
sitting on my couch

calling the new supervisor
at the other job

trying to find out when
I was going to start.

And then they said, "this
time we've change our mind,

we're not going to hire you."

I was in a panic.

I was like, oh, my gosh!

The bottom fell out.

14.8 million American adults

are suffering with depressions.

- Right?
- Right, amen.

What is depression?
'Cause some poor men I know,

you may be in it
but you don't know.

Depression is a common
and serious medical...

And then I started having
to work some temporary jobs

going through
an employment agency.

And the rate of
pay was a lot less

than I was accustomed
to making, you know.

And not knowing
if the assignment

was going to be two weeks
or three weeks, whatever,

so it was just a very rocky

and tight situation
at that time.

And then I eventually
lost my place.

I got evicted because I couldn't
pay the rent anymore, um,

I lost my car.

I was four months to pay
my car off.

My very first car that
I bought by myself.

You know, the car
got repossessed.

And, um, I couldn't send
Shawn off to school.

And, you know, to this day
he'll say it didn't bother him

but I know it did,
'cause he kind of blames me

for not being able
to pursue his career.

That's what that
industry did to me,

and the fraud and BNC.

- Say Amen!
- Amen!

I left BNC and I did go
to work for Countrywide.

The same issues were
present at Countrywide

that I had just gotten
out of with BNC.

And then I got a job
with another company,

and within six months
they closed their doors.

So, in that three years,

you had companies
here today, gone tomorrow.

During that time, I was
turned down left and right.

I could not get any job
in the mortgage industry.

By 2007 you knew
things were going downhill.

And then our financial year
was November 30th, 2007.

And we had a record year.
The best year ever at Lehman Brothers.

And I couldn't believe it.

I thought, um,

things should be much worse.

Lehman in
the spring of 2008

issued its very first losses
that they'd ever incurred.

And they needed to have something positive
to say to the market.

The only way that Lehman
could get rid of assets

would be to sell them.

The problem was that
the assets they had,

no one wanted to buy.

So what they did was,
they came up with a gimmick.

It was called Repo 105.

A repo is a sale with
an agreement to buy back later.

Repo 105.

Repo 105 was a method of
hiding how much you borrowed.

And what it
involved, essentially, was

transferring
50 billion dollars worth

of assets off of
the balance sheet

at the beginning or
end of each quarter,

just before the reporting
would be made public.

Assets were transferred from
the United States subsidiary

to the British subsidiary,

engaging in repo
transactions there

where the repos could then
be considered as sales

rather than simply loans, as
they were in the United States.

And at the end of a few
days after the quarter,

the monies were simply returned
back to the United States

and put back on
the balance sheet.

The whole
purpose of this

is to be able to bring
your balance sheet down,

so that shareholders think
you haven't borrowed

as much as you actually have.

And you're allowed to say that

you've been reducing bad
assets where you haven't.

And every time
they did it,

commentators, TV personalities,

would say, "Well, Lehman's
getting better. Look it,

they've gotten rid
of all of these assets!"

And the answer is
they never had.

It was illegal
to tell the public

we have these assets,
we have these borrowings,

when I knew the numbers
were different, yeah.

To me that was illegal,
I'm not a lawyer but that was wrong.

That was not a gray area,
it was red with bells ringing.

When Lehman started
raising money in 2008

using all these
numbers and Repo 105,

that's when I thought,
ah, this is the end.

You can't raise billions.

And it was, by the time
they went bankrupt,

they'd raised almost 12 billion.

The population of the
planet's seven billion.

So, a lot of money.

And whoever invested, they lost
everything in eight months.

And that's where I drew a line.

The fact that they were
raising money through lying,

that was it.

I had quit in 2006.

I mentioned that they were hiding
all kinds of compensation, okay.

Certain stock
awards were being hidden

and not being disclosed
to the public

because we had found
this loophole.

But then the rules changed.

The rules now made it
very plain.

All of it must be
out there in front.

And so this meant that,
for the CEO,

he was going to have to
show 100 million dollars or more

of new compensation that
just came out of nowhere.

This was going to be
very embarrassing

and I couldn't wait to see it.

We're finally at the booklet,
it's called the proxy statement,

containing this
compensation information

came out in March of 2008,

so I had already been
away for two years.

I got the book
and I opened it up,

and I'm like,
where is it, where did it go?

They didn't put it in there!

They didn't follow
the new rules.

It was stunning,
it was amazing to me.

By then, Mr. Fuld,
the CEO, and the other guys

had been collecting these
secret payments for many years.

And so, on this
new table that said,

tell us everything, all the
restricted stock you're holding.

He was holding 409 million
and they disclosed 146 million.

They hid 260 million dollars
worth of stock awards.

That's how big it had gotten.

Over a quarter billion
dollars worth of stock

that should have been shown
under these new rules

was hidden, gone.

Now it was black and white,

and I knew that they were
breaking the law,

and so I brought that
to the SEC in April of 2008.

The Securities and Exchange
Commission is the regulator

for the public stock
and bond markets in America.

It's like the police
of Wall Street.

You submit the material
through an email,

like a whistle-blower
submission.

I gave them all this
information that said, hey,

the Lehman executives
have been lying

about their
compensation for years.

Here is the hidden stuff,
here is the value today.

It was easy enough
for a reporter,

any member of the public,
anybody could have followed it.

And I sent it in and I got
an automatic email back

saying, "Thank you, we have it,
we're looking at it."

And they completely ignored me.

Just silence.

I'm still waiting.

I didn't really have
much faith in the SEC.

And I thought,
what can I do, what can I do?

And then I remembered
this code of ethics

which I'd read
when it first came out.

And I remember how
I thought it was funny

because what they were
saying in the code of ethics

was like,
completely the opposite

of the way they ran
their business.

And it said that
it is your duty...

so it was telling me,
the code of ethics

was telling me,
I've got to write a letter

because you know something
and it is your duty.

So I sat down on Sunday
afternoon with my computer

and I wrote out the letter.

"During my tenure with the firm,

I have been a loyal
and dedicated employee,

and always have acted
in the firm's best interests.

I have become aware of
certain conduct and practices,

however, that I feel compelled
to bring to your attention.

The firm has tens of
billions of dollars

of unsubstantiated balances
which may or may not be bad,

or non-performing assets
or real liabilities.

In any event, the firm's
senior management

may not be in
a position to know,

whether all of these
accounts are in fact

described in a 'full,
fair, accurate and timely'

manner
as required by the code."

"But I felt compelled,
both morally and legally,

to bring these issues
to your attention.

Very truly yours, Matthew Lee."

I wanted to hand deliver it because
if I'd just put in internal mail

I'd never know that
it had arrived.

Part of the reason
I sent it to four people

was one of them, surely,
is going to read it.

And, actually, out of the four,
only one of them

was in their office,
and he was on the phone.

And I just walked into the room,
thrust it in his face.

He took it and kept on going.
And I went, bye!

I felt relief,
and I walked into the office

of somebody I could
kind of confided in,

and I just said, I've done

the craziest thing
I ever did in my life.

We had this individual
who wrote a letter

complaining that,
in fact, Lehman Brothers

was making their books look
better than what they were.

So I sent two young lawyers
out to interview this person.

And they came back and they said,
"We think he's telling the truth!"

And I said, I just
can't believe Lehman

would do something like
he's describing in the letter.

And then, finally, they came
in with a series of emails

which involved some
of the senior people

describing this process as

a, you know, a gimmick,
a drug we are on.

You know, all those sort of things,
and I realized that, in fact,

what he had been
saying was true.

You know,
there's always

strange things going on
in all industries.

And you, "Can I live with it,
can I live with it?"

And you can usually
live with most things

because, in the long run,
it'll be okay.

But in 2008

it wasn't that way.

I remember the moment
I was fired.

I was sitting in my office,
I had a round table in my office.

And there were about five people

and we were on
the phone to Brazil,

and my phone went,
and I saw it was my boss.

So I swivel my chair
and I picked up.

I said, "Look, I'm in a meeting,
we're discussing this."

And he said, "Come right away."

So I had to get up
and I went down to his office

and he just said,
"You're fired."

Lehman, it was
already in the abyss,

it just hadn't hit
the bottom yet.

We found that, Lehman,
their approach was,

we believe that we are
right in what we're doing,

and even though we have
set these risk limits

they continue to exceed
those risk limits,

believing that they were going
to ultimately be successful.

So it's like you're
running in a direction

and you're not going
to stop even though

you're going through stop
signs, one after another.

And they just kept going.

Good evening, everybody.

The worst financial
crisis in decades

today sent political
and economic shock waves

- throughout the country.
- Lehman Brothers,

one of the oldest
institutions of its kind

filed the largest
bankruptcy in U.S. history.

New York
investment bankers,

once called the masters
of the universe,

were sent packing, humiliated.

Please tell
us how you're feeling.

- It's awful, I know, but...
- It sucks.

I never for a minute thought
that Lehman would go bankrupt.

And when it did, I was as
amazed as anybody else was.

There's a 158 year old company,

its rise and its performance
has mirrored

the performance of
the United States of America

becoming a superpower
in the world.

If Lehman can go down,
people are saying,

what does that mean
about the health

of the American financial
system right now?

And as financial
market convulsions

raced around the world
like a tsunami.

Take a look at this! Nothing like
this has ever happened before.

The United States, Canada,
the United Kingdom,

Sweden, Switzerland, European
Central Bank, even China...

I'd never imagined

that the bad behavior
that I saw at Lehman

and similar behavior
at these other banks

would take the world down
the way that it did.

You're
watching video right here

of the Greek riot police

pushing back protesters
in Athens tonight.

Lehman
Brothers' former CEO,

Richard Fuld, is living pretty.

A multi-million dollar
estate in Florida,

a 21 million dollar apartment
on Park Avenue,

another lavish estate
in Greenwich, Connecticut.

It made me feel like
that they're just running.

They've taken all
the money they want,

they've drained everything
they wanted to drain

out of that company,
the handful of people.

And left all the other
people there to figure out

what they were going to do
with the rest of their lives.

If you haven't
discovered your role,

you're the villain today.

Your company
is now bankrupt,

our economy is in
a state of crisis,

but you get to keep
480 million dollars.

I have a very basic question
for you. Is this fair?

The actual documents
we reviewed probably

was in a range
of 30 million documents.

And we did over 250 interviews

in conducting the investigation.

When we started
interviewing the witnesses,

what surprised me the most
was everyone wanted to talk.

And you know what
they wanted to say?

They wanted to say,
it wasn't me.

I spoke with Dick Fuld
for maybe up to 15, 18 hours,

and he answered every
question I put to him.

I asked him whether
or not he was aware

of the views of some individuals
within the corporation

that the risks were
too concentrated,

and that they had
exceeded risk limits

and he made clear he was.

I asked him why
he didn't rely on that

in making his judgment,

and he said, "Do you
think I'm foolish?"

No living, breathing human
being lost more money

than Dick Fuld lost as
a result of the bankruptcy.

He lost over a billion dollars.

And he pointed out to me,
quite accurately,

none of those individuals had
made billions trading stocks,

none of them had headed
major corporations

in the financial area
and brought them

to the success that he had
brought the Lehman Brothers,

and he was in a position of
having to rely on his judgment.

Did you mislead your investors?

And I remind you, sir,
you're under oath.

No, sir, we did not
mislead our investors.

To the best of my
ability at the time,

given the information
that I had,

we made disclosures that we
fully believed were accurate.

If everything
had been properly exposed,

Wall Street as we know it
would be gone.

And most everybody
who's down here,

who was here during the crisis
would be in jail right now.

The crimes were committed
up and down the street

and everyone knows that.

Both the Securities
and Exchange Commission

and the Federal Reserve Bank

had put personnel on premises
with Lehman Brothers.

Lehman Brothers provided

every single document
the regulators asked for.

So the SEC, as well as
the federal government,

knew that risk exceedances
were taking place

as they were occurring.

They saw the documents
and the materials

which reflected that
and yet nothing was done.

The Securities
and Exchange Commission

did not understand what
they were looking at,

they did not understand
the documents

and the impact of
these documents.

And on the very day that
one of the SEC lawyers

finally looked at what they had

and he wrote an email
which was spectacular,

because what it said was,
in essence, "Oh, my God.

Look at this,
this could be a problem!"

And indeed it was, 24 hours
later they were in bankruptcy.

The SEC does not
work properly

and it hasn't in a long time.

The major problem
is the top people

are brought in
with every new president.

They are not people
who have worked

their whole lives in this area.

The top people at the SEC
are at the Department of Justice

while they were making
millions of dollars defending

Wall Street banks or working
inside of Wall Street banks

before they became
the so-called police, okay?

Why on earth would
we expect them

to go against their friends?

And they almost
always then go back

and work for Wall Street
when they're done.

Well, now, instead of prosperity

trickling down,

the pain has trickled up.

From the struggles of hard-working
Americans on main street

to the largest firms
on Wall Street.

This country can not
afford four more years

of this failed philosophy.

In the beginning of
2009, Obama was elected

and so he brought in his
new people at the SEC.

You have a director,
the boss, the top boss,

the CEO of the SEC, if you will,
and then there is something

called the director
of enforcement,

so he's in charge of
doing the investigations.

The guy that they put in
was a lawyer from Deutsche Bank,

and Deutsche Bank is one
of the biggest banks

involved in the crisis, okay?

And, furthermore, Deutsche
Bank is one of the banks

that was most involved
with Lehman Brothers.

And then we expect him as the director
of enforcement at the SEC

to now go
and investigate Repo 105.

This is never going to happen,
never going to happen!

The terrible
thing happened,

which is that Lehman Brothers
declared bankruptcy.

And as soon as
they declared bankruptcy

our case got shut down.

You can't do anything more
in the state court

until the bankruptcy
is resolved.

I can't see it now.
They've taken out this now.

Oh, wow! "Lehman Brothers holdings
and bankruptcy estate

will pay 2.38 billion
to compensate for its role

in the previous decade's
mortgage crisis,

a federal judge decided.

Far less than the 11.4 billion

some hedge funds had sought."

People usually,
when they get bankruptcy,

get very small settlements,

we call it pennies
on the dollar.

So we had very low expectations.

But, as time went on and we came
out of the recession,

they were beginning
to have some money.

And so we were contacted

by the lawyers
for Lehman Brothers

and they said they wanted
to settle our case.

So we had high
expectations, finally,

that we were going to get justice
and get a fair settlement.

Didn't turn out that way.

We have been fighting
this case in bankruptcy

- for all these years since 2008.
- Yep.

And Lehman keeps saying, well,

there's another claim out there

that's going to eat
up all your cases.

They're talking about
paying two billion dollars

to all these big banks who claim

that they lost money
on this mortgage fraud.

What they want
to do is they want

to take the money
that they owe you

and put it back into
equity funds, they call it,

so that the leaders of Lehman
Brothers who are still there

are going to profit
off this at your expense.

It's an outrage,
I'm not going to let it happen,

we're not going to let it happen,
we're not going to do it.

They don't want to pay us
because it's going to make news.

Just because
we are surviving it,

- does not mean it was okay.
- Certainly.

And if they are so willing
to bail out the banks

and protect all of the crooks

that stole from so many people.

They still haven't recovered,
and I say it often,

that many homeowners
were displaced,

their children were
yanked out of the schools

that they had grown
accustomed to,

they were in their
car or in shelters

while the biggies kept their
money, got bailed out,

got parachutes,
millions of dollars.

And so I really think
my drive, my concern,

is to find a way to rectify

what happened
to the American Dream.

The world still
waits for justice.

And we could fill this
courtroom and several more

with the management
committees of the big banks,

the boards of directors
and I would add in

the accounting firms,
the rating firms, the law firms,

everybody is culpable
in the crisis

and really no one has
been held accountable.

What Lehman did here is
they looked for an edge.

And there are people out there
who are still doing that,

and the question is
have we regulated them

so that in their headlong
search for that big profit,

that they don't take the rest
of the economy down with them?

And that's a question
that I don't know

that we've necessarily answered.

So I don't know that
we've changed enough.

These guys, Lehman Brothers...

they didn't get my soul
but they changed who I was.

Though there is no money that's
going to compensate me, ever.

What would compensate me,
what would make me feel good,

is if the people
from the top were punished.

And that's never
going to happen.

If I had Mr. Fuld
in front of me,

I would tell him

that destroying lives

is not a good way to make money.

Once you fail on your mortgage,
you can't rent a home.

You go to get a job, "Oh,
you're not credit-worthy,"

you're not going to
get that position.

That's what he destroyed.
He destroyed my life, he destroyed their lives,

he destroyed their
children's lives

because now they're
from a broken home.

And they know what it
feels like to be homeless

when he's got three
or four homes,

and yachts and helicopters.

No, that's not okay.

But it is okay
because guess what?

He got away with it.

I have no regret about
writing that letter.

Would I do the same
thing?

I wish I could have done more.

But I did what I did.

It's very peaceful.

By oneself one is peaceful.

Normally there's activity.

Whistle-blowers get crushed,

swept under the rug,
forget about them.

Let's move on.

I'll never go back to New York.

I'm going to keep going on my
motorcycle for as long as I can.

We did not mislead
our investors.

And to the best of my
ability at the time,

given the information
that I had,

we made disclosures we fully
believed were accurate.

This is truly
a great day for America,

and a great day for
American workers

and small businesses
all throughout the nation.

The legislation
I'm signing today

rolls back the crippling
Dodd-Frank regulations

that are crushing community
banks and credit unions

nationwide,
they were in such trouble.

One size fits all,
those rules just don't work,

and community banks
and credit unions

should be regulated
the same way.

And you have to really look at...

They should be
regulated the same way

with proviso for safety
as in the past

when they were
vibrant and strong.

They shouldn't be
regulated the same way

as the large, complex
financial institutions.

By liberating small banks
from excessive bureaucracy,

and that's what it was,
bureaucracy,

we are unleashing the economic
potential of our people.