Friday, March 12, 2010

City of London is a secrecy jurisdiction - part 683

Yet more anecdotal evidence of the City of London's status as a tax haven/secrecy jurisdiction. From the FT:

"A one-year probe into the collapse of Lehman Brothers found “credible evidence” that top executives, including the former chief Dick Fuld, approved misleading financial statements and used an “accounting gimmick” to flatter results."

Now before continuing, secrecy jurisdictions/tax havens are places that seek to attract financial business by offering facilities that help people or entities get around the rules, laws and regulations of jurisdictions elsewhere. What has this got to do with London? Well, as the FT article explains, the accounting mechanism seems to have had the sole purpose of lowering the leverage on Lehman's balance sheet.

"When Lehman first began engaging in such window dressing in approximately 2001, the firm could not get a US law firm to sign off on the transactions, which led Lehman to conduct these repo transactions out of its London unit, with the blessing of a UK law firm, the report said."

Economic catastrophe, brought to you with the compliments of those clever folk at the City of London!


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