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Just Stupid: How Attorneys Found Evidence in Lehman Bros Suit

By Tanya Roth, Esq. on June 14, 2010 | Last updated on March 21, 2019

In the litigation following the destruction of the fourth largest securities firm, Lehman Brothers, some weird and wonderful stories have emerged. In cases such as the litigation around Lehman Brothers' demise, one of the key questions is always, "who know what, when?" It is rarely easy for the attorneys reviewing the literally millions of pages of emails, reports and other documents to find evidence of that crucial question. Well, one man has found a way.

According to Bloomberg news, Anton Valukas is the bankruptcy examiner in charge of discovering who knew about what risks at what time and then ignored that knowledge, leading to the demise of Lehman Bros. But how to sort through 34 million pages of documents? You use your head. And your search terms.

Twenty lawyers at the Chicago-based law firm Valukas chairs, Jenner & Block, were told to sit down in a conference room and figure out how to search the documents for what they needed, being "as imaginative as you can." The search terms the gang of 20 came up with proved quite useful, and future captains of finance should take note to avoid using same: "just between us," "discuss," "big trouble," "risk," "concern" and all-time greats, "too late," and "stupid."

Of course the term "stupid" showed up in one of the most prescient emails, from the then head of fixed income at Lehman, Roger Nagioff, to David Goldfarb, Lehman's former chief strategy officer. "I am probably 3 months too late in the job," Nagioff wrote to Goldfarb on June 26, 2007. "A big deal got pulled today and others are being restructured down ... we are probably going to get punished for our stupidity."

Many of the communications flowing from Lehman executives including Chief Executive Officer Richard "Dick" Fuld, were the focus of Anton Valukas' 2,200 page report, now being used in at least three lawsuits against the former CEO and other Lehman executives.

Why are such communications important to the lawsuit? Peter Henning, a former SEC lawyer who now teaches at Wayne State University Law School in Detroit, explained it to Bloomberg like this: "What investigators are looking for is any turn of phrase that can give them insight into what people were thinking at that time. That can be valuable because emails are real-time and often unfiltered and can help to establish intent."

Especially when the intent, and the outcome are, well ... stupid.

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