Fuld’s perjury

By Felix Salmon
April 29, 2010
The latest bombshells come from former Lehman lawyer Oliver Budde, who spent many years drafting the bank's compensation disclosures and hiding the restricted stock unit (RSU) component of Fuld's pay. Lehman had to change that after Budde left, but it didn't:

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Dick Fuld said under oath that he was paid less than $310 million from 2000 through 2007, and that he held, rather than sold, the “vast majority” of his shares, if not all of them. But it’s becoming increasingly clear that he was lying. The latest bombshells come from former Lehman lawyer Oliver Budde, who spent many years drafting the bank’s compensation disclosures and hiding the restricted stock unit (RSU) component of Fuld’s pay. Lehman had to change that after Budde left, but it didn’t:

Budde calculated that while Lehman reported Fuld’s RSUs as worth $146 million, the real figure, based on the Section 16 reports, was $409.5 million. Lehman had counted just 2 of 15 RSU awards…

Considering his options, Budde decided to go to the SEC as a whistleblower. He sent a detailed two-page e-mail on April 14, 2008, to the SEC’s Enforcement Division, under the subject line “Possible Material Noncompliance with New Executive Compensation Disclosure Rules.”…

He got a standardized form thanking him for his letter in return. He never heard anything else…

While Fuld said he earned less than $310 million from 2000 through 2007, he actually had received $529.4 million, according to Budde’s calculations.

In direct contradiction to Fuld’s claim to Waxman that he had not sold the majority of his shares, Budde estimates that Fuld earned $469 million from stock sales between 2000 and 2008.

Budde’s numbers are almost identical to the numbers already published by Lucian Bebchuk, so they are credible on their face. And Budde clearly knows what he’s talking about.

It comes down to this: Fuld claimed that he was paid less than $310 million over the years in question, and lost nearly all of it. In fact, according to Budde, he was paid $529 million, and kept $469 million — more than he said he was paid in total.

Fuld’s in a lot of legal jeopardy already, of course. But we’re still waiting for a villain from this crisis to end up in jail. Is there any chance, do you think, that an aggressive attorney general somewhere might launch a criminal prosecution for perjury?


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Your Bloomberg link is broken.

Only the Department of Justice has jurisdiction to bring perjury charges against Fuld, since the statements were made before Congress.

Posted by AnonymousChef | Report as abusive

Perjury or not, the SEC has to explain to the entire world, not just to the American public, why they have not brought charges against Lehman’s executives for fraudulent accounting. Fraud is a legal reason to pierce the corporate veil, which enables the government to reach the private property of someone like Fuld to recuperate defrauded funds. Evidence that he deliberately disguised his compensation would be supportive evidence in such a suit, without requiring a sentence of perjury. He can be asked about his past statements when he is on the witness stand, and be impeached for prior inconsistent statements if he changes his story. If he does not change his story, then he can be cross examined about the facts that seem to show the inconsistency.

Keep up the good work Felix. We don’t want the crooks to escape scotch free through legal loopholes.

Posted by Jos5319 | Report as abusive

While I am not a lawyer, perjury I think has to do with material facts. Does it matter if he said he was paid $350 million or $500 million? Maybe…if it was a divorce case or if he was taking a bank loan, but not at a senate hearing.

You also have to wonder how ‘payment’ is calculated, between stock options, salary and other methods.

Posted by my-Screenname | Report as abusive

Justice department is not the only body that can bring charges concerning this. As he perjured himself before Congress, he can be held in contempt of Congress.

Posted by rmosler | Report as abusive

Chef, sorry about that, link fixed. I swear it worked when I posted the article!

Perhaps the IRS have records on Fuld’s declared income? Remember Capone?

Posted by polit2k | Report as abusive

Uh, the outrage is the 310 million (OH, EXCUSE ME – less than 310 million…that must mean 309,999,999.99).

Its like murdering a dozen people…and defending yourself by saying, “I did not murder TWO dozen people.”

gulible people murmer “O, well that not so bad than…why, that’s 12 people alive today thanks to his munificence…what a good man.”

Posted by fresnodan | Report as abusive

For God’s sake, even Martha did her time… but I guess she couldn’t buy the defense the big money men can…

Money is power and those who are against reforming this greedy guts mentality that has no social value, defend fat cat Capitalism at its worst. Reigning in that kind of Capitalism does not mean socialism, other then to protect the societies of the world from their unstoppable greed. ‘Perceived value’ is the new ‘value’ but in the end real money lined a lot of pockets and economies around the world are shaken. That has to stop!

This isn’t about a pound of flesh. Its about preventing the cycle from continuing, because these adrenaline junkies are NOT going to police themselves, no matter how apologetic and contrite and how many fines paid. The only deterrent criminal charges and jail time.

Cooking books is illegal. Cooking books is fraud… it was intentional…this level of fraud is criminal… why aren’t criminal charges being laid?

Posted by hsvkitty | Report as abusive

Martha did her time for a technicality. She didn’t do time for insider trading nor “cooking the books” and at the time she was richer than Fuld and possibly still is. She also wasn’t someone overleveraged homeowners buying crap they can’t afford are blaming for their own stupidity.

Posted by Danny_Black | Report as abusive

Martha came to mind more than once for me also.

Martha could not get away because of legal reasons, but the contrasting stories also exemplify how dysfunctional the current anti-fraud laws are interpreted, for the purpose of litigating the hardened crooks who deliberately hid and contributed to the story.

Emails showed that Martha was tipped. Then her brokers bought those stocks. I heard her explain on TV that she should have been thinking more carefully, implying that she should have known, but she did not know.
The law specifies that “should have known” is enough to convict such tippers and tippees’ behavior as insider tradings violations. They did siphon off profits from ordinary investors and shareholders based on knowledge that should have been private. Her position with the exchange rendered her without excuse.

Fuld, and his team of lawyers know all the laws. Their actions, accounting methods were tageted specifically at the accounting loopholes, and the lack of specific laws forbidding the use of auctions, to effectuate fraud.

There is also no law yet, specifically criminalizing somebody who knew the market was about to crash, and put together bets as if he did not know that the market would crash. Until Congress makes it manifestly illegal for J Paulson’s failure to disclose his inside insight into the fraudulent nature of the entire subprime-market, to people he was putting together the portfolio for, it appears, so far, that Khuzami is not planning to prosecute J Paulson. That kind of misrepresenting, (though we might think of as fraud), was not within the contemplation of Congress at the time of their legislation.


It’s up to the Supreme Court ultimately, to interpret the laws narrowly or broadly. Khuzami and the head of the SEC seem to be interpreting the concept of misrepresentation narrowly. Most common voters, from the sentiments expressed, would have voted to interpret the scope of “misrepresentation” broadly, and the fiduciary duty more broadly. If Khuzami & the head of SEC continues to interpret J Paulson’s misrepresentation as NOT included in the law, then there is no chance taxpayers can recuperate money from J Paulson. Based on the precedents, Roberts and Alito would likely have voted to interpret it like Khuzami now. However, somebody like Goodwin Liu, President of the American Constitution Society, were to interpret the concept of “misrepresentation”, it might be more consistent with what common people, and common sense would interpret it.

His views are that legislations are a “living” set of laws that should be applied with common sense to situations not within the original contemplation of the legislators. If the Supreme Court consists of somebody like Goodwin Liu, then Sotomayor, and others might be persuaded to interpret laws with more common sense, and J Paulson may be convicted.

Professional murderers are more difficult to catch than drunk drives who inadvertently kill. If common sense is not used where discretion is allowed, convictions for professional murderers could be impossible. How often do such “professional” leave a trail that is not within a legal loophole.

Obama should know that. He should pick a Sup Court judge who sides with the American People, where the law itself allows such degree of discretion.

Posted by Jos5319 | Report as abusive