The Lehman Letter by Matthew Lee, Sr. Vice President (WSJBlog)

By Michael Corkery

In May 2008, former Lehman Senior Vice President Matthew Lee wrote a letter to senior management warning that the New York securities firm may have been masking the true risks on its balance sheet. A month later, he had been ousted.

His warning was revealed for the first time in a report by a U.S. bankruptcy-court examiner and showed that Lehman’s auditors knew of potential accounting irregularities and allegedly failed to raise the issue with Lehman’s board. Here is the letter that placed the little-known Lehman executive at the center of allegations that Lehman manipulated its numbers and misled investors.

MATTHEW LEE

May 18, 2008

PERSONAL AND CONFIDENTIAL

BY HAND

Mr. Martin Kelly, Controller
Mr. Gerard Reilly, Head of Capital Markets Product Control
Ms. Erin Callan, Chief Financial Officer
Mr. Christopher O’Meara, Chief Risk Officer
Lehman Brothers Holdings, Inc. and subsidiaries
745 7th Avenue
New York, N.Y. 10019

Gentlemen and Madam:

I have been employed by Lehman Brothers Holdings, Inc. and subsidiaries (the “Firm”) since May 1994, currently in the position of Senior Vice President in charge of the Firm’s consolidated and unconsolidated balance sheets of over one thousand legal entities worldwide. 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, as required by the Firm’s Code of Ethics, as Amended February 17, 2004 (the “Code”) and which requires me, as a Firm employee, to bring to the attention of management conduct and actions on the part of the Firm that I consider to possibly constitute unethical or unlawful conduct. I therefore bring the following to your attention, as required by the Code, “to help maintain a culture of honesty and accountability”. (Code, first paragraph).

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