The Labours of Valukas-Document Review and the Lehmans Report

• Author: Bill Davies
• Position: Senior Lecturer in Law, University of Greenwich
• Pages: 12-17

JICLT

Journal of International Commercial Law and Technology

Vol. 6, Issue 1 (2011)

12

The Labours of Valukas -

Document Review and the Lehmans Report

Bill Davies

Senior Lecturer in Law,

University of Greenwich

W.D.Davies@greenwich.ac.uk

Abstract: This article considers the immense task faced by those compiling the Val ukas

Report into the fall of Lehman Brothers. The report published in March 2010 gave a valuable

insight into the collapse, examining the potential liabilit y of senior figures both inside and outside

Lehman Brothers. Of particular interest in the report were the techniques and methodolo gy used

by the investigators in the examination of electronically stored data. The article considers the

context of the report, in partic ular the collapse of Lehman Brother and the aftermath. It explores

the findings of the report and then considers how the investigators researched the huge quantity of

electronic information. Finally, the article considers the significance of the report for the industry

and in terms of broader issues of regulation and governance.

1. Introduction

This article considers the immense task faced by those c ompiling the Valukas Report on the fall of Lehman

Brothers - arguably the most significant event of the recent banking crisis. The report published in March 2010

provides a valuable insight into the collapse, examining the potential liability of senior figures both inside and

outside Lehman Brothers. However, the substantive nature of the report is not the primary focus of this article.

It considers the techniques and method ology used by the investigators in the examination of electronically stored

data. In addition, bearing in mind the extraordinary scale of this report, this article consider s what it has actually

achieved.

The article considers the context of the report, in particular the collapse of Lehman Br other and the

aftermath. It explores the findings of the report and then considers how the investigators r esearched the huge

quantity of electronic information. Finally, the article considers the signi ficance of the report for the industry

and in terms of regulation and governance.

2. The banking crisis and the fall of Lehman Brothers

Banking and financial crises, it is widely held, are more significant and more serious than crises and failures in

other industries. There are a large number of reasons attributed to this, ranging from the pivotal funct ion of

banks as providers of liquidity to the far reaching effects that bank crises can have on the wider “real” econom y.

A full discussion of these reasons is not appropriate here, but one particular peculiarity o f banking is highly

relevant: the propensity of the failure in one institution to spread problems throughout the industry, causing other

institutions to fail or sustain serious losses. This prob lem is thought to be particularly prevalent where t he failing

institution is large and/or highly interconnected with other institutions. The failure of the US investment bank

Lehman Brothers in 2008 is a recent, and it is suggested, a classic example o f this phenomenon.

Lehman Brothers filed for bankruptcy protection on Monday 15th September 2008. This was the largest

bankruptcy filing in US corporate history. The subsequent panic in the financial markets and institutions

occurred with frightening speed and threa tened to b ring th e entire global financial syste m down. The syste m

was only saved by unprecedented levels of governmental support. The Valukas report gives a flavour of the

fall-out in the USA: