The New York State Attorney General settled a lawsuit against Ernst & Young related to its involvement in the financial statement preparation of Lehman Brothers Holding, Inc. The NY AG had alleged that the auditing firm had countenanced Lehman’s inclusion of certain repurchase transactions as sales and not as financings, which permitted the firm to remove “tens of billions of dollars” of securities from its balance sheet. According to the NY AG, the repo transactions—known as “Repo 105”—“served no legitimate purpose. … Lehman used the funds derived from the transactions to pay down billions of dollars or liabilities, which had the effect of temporarily and misleadingly reducing Lehman’s leverage ratio, an important metric for analyzing Lehman’s liquidity and financial health.” The NY AG had charged that E&Y’s failure to include any reference in Lehman’s financial statements about the Repo 105 transactions was “fraudulent and deceptive.” To resolve this matter, E&Y agreed to pay US $10 million, which the NY AG will distribute to investors in Lehman Brothers securities. Lehman Brothers filed for bankruptcy protection in September 2008, and remains the largest bankruptcy in American history.