As the U.S. financial markets melted down in 2008, I wondered how the in-house legal teams at the Wall Street firms were able to manage the immense internal and external pressures bearing down upon them. My curiosity involved abstract appreciation of the chaotic conditions under which the in-house teams operated. The examiner in the Lehman Brothers' bankruptcy, however, recently issued a detailed account of the storm that heralded Lehman's demise (See "Blaming Lehman"). The report, including its copious citation of e-mails reflecting management's frantic response to the crisis, permits in-house counsel to reflect upon how we would have handled our jobs amid that tempest.
In January 2008, Lehman's market capitalization was pegged at more than $30 billion; less than eight months later, Lehman sought bankruptcy protection. Although the bankruptcy examiner cited several reasons for Lehman's collapse, he concluded that its troubles were "exacerbated by Lehman's executives, whose conduct ranged from serious but nonculpable errors of business management to actionable balance sheet manipulation." The examiner concluded that "colorable claims" exist against several officers who were allegedly responsible for the balance sheet management and who signed and certified Lehman's financial statements.