It’s being touted as jurisdiction shopping, but Lehman’s use of the Repo 105 accounting rule can’t be explained away as a legal technicality. It goes to the heart of legal culture in the UK.
“This isn’t a question of whether something is illegal under US law but not under English law,” said one lawyer that IFLR spoke to. “It’s a question of whether it’s valid to write an abstract opinion on a very narrow point of law that is then going to be used in a wider context.”
The report that sparked the controversy was written by examiner Anton Valukas of law firm Jenner & Block, and commissioned by the New York bankruptcy court. It draws attention to Lehman Brothers' use of an accountancy loophole known as Repo 105, which allowed the bank...