Lehman Brothers Scandal (2008) Lehman Brothers was a global financial services firm based out of New York City, New York. It was one of the largest investment banks in the United States. During the 2008 financial crisis, it was discovered that the company had hidden over $50 billion in loans.
Madoff, his accountant, David Friehling , and second in command, Frank DiPascalli, were all convicted of the charges filed against them. The former stockbroker received a prison sentence of 150 years and was also ordered to pay $170 billion in restitution.
The Federal Home Loan Mortgage Corporation, also known as Freddie Mac, is a US federally-backed mortgage financing giant based out of Fairfax County, Virginia. In 2003, it was discovered that Freddie Mac had misstated over $5 billion in earnings. COO David Glenn, CEO Leland Brendsel, former CFO Vaughn Clarke, and former Senior Vice Presidents Robert Dean and Nazir Dossani had intentionally overstated earnings in the company’s books. The scandal came to light due to an SEC investigation into Freddie Mac’s accounting practices. Glenn, Clarke, and Brendsel were all fired and the company was fined $125 million.
According to an SEC investigation, the company had sold toxic assets to banks in the Cayman Islands on a short-term basis. It was understood that Lehman Brothers would buy back these assets. This gave the impression that the company had $50 billion more in cash and $50 billion less in toxic assets.