Ernst and Young targeted in the first Lehman court case

Lehman is a name we would all like to forget. When it failed in September 2008, it nearly destroyed the global financial system. Looking back, doesn't it seem strange how quickly one of the giants of Wall Street came crashing down?

New York prosecutors have been asking that same question. They seem to have arrived at a tentative answer - Lehman's reported balance sheet was a sham. Since balance sheets should be audited correctly, prosecutors have pointed the finger at Lehman's auditors - Ernst & Young.

New York attorney general Andrew Cuomo has filed a lawsuit against the accounting firm. The civil fraud case claims that Ernst & Young did nothing except book handsome fees while Lehman used accounting gimmickry to mask its rotten balance sheet.

The lawsuit says Lehman was "a massive accounting fraud". This is strong language which begs the question why haven't any former top executives at the investment bank also been indicted.

The core of the case is centered on the infamous Repo 105 transaction. Lehman used this concocted "sale and repurchase" agreement to move $50 billion off its balance sheet. This allowed Lehman to temporarily to show investors it wasn’t carrying too much debt.

The lawsuit is looking to pull more than $150 million in fees from Ernst & Young, which were received from 2001 to 2008 as Lehman's outside auditor.