The Earnings Story Changes, The Actors Are Different, But The Spread Sheet Remains The Same

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While many on Wall Street focused on the second quarter earnings of Lehman Brothers, they may have overlooked something odd that occurred behind the scenes. In connection with this morning's earnings report, Lehman issued a detailed financial appendix breaking down its balance sheet by various asset groups. But behind the numbers there was another story--the story of a persistent bit of data that no one caught until it was too late.
More after the jump.


Lehman's appendix was in the form of a spreadsheet created by Microsoft's Excel application, a nearly ubiquitous piece of software on Wall Street. The appendix contained hidden data on its author--data that claimed the document was authored by Merrill Lynch. All documents created in Microsoft Excel contain hidden data--what the techies call metadata--about the date of its creation, its author, who last saved the document and when it was finalized. This data can be erased but is easily overlooked since it is invisible except by asking the Excel program to reveal it.
The Lehman spreadsheet that was posted on its website this morning showed that the document was authored by Merrill Lynch. It was created, according to the metadata, over a decade ago, back in January 1998. (Our readers first noticed this, leaving comments and sending emails bringing it to our attention.)
It's not uncommon for older files to get copied and reused as templates for new documents. When the information contained in metadata isn't cleared out, it can persist in the new version. In this case, the document seems extremely long-lived, harkening back to 1998. That was an inauspicious year for many investment banks, particularly Merrill Lynch. That year the firm suffered big bond-trading losses that led landed it in the red for one quarter. Lehman Brothers today reported its first quarterly loss since going public. So, of course, we have to ask: did someone use this as a precedent for the Lehman appendix because it is the quarterly loss template?
A short time afterwards, someone at Lehman Brothers must have noticed the metadata. The document was replaced with a newer version that had no "author" information at all. A few hours later, we found that the author information had been changed to Lehman Brothers.
Lehman Brothers could not immediately comment on this story. Merrill Lynch did not return our phone call. A message left with a media relations firm representing Microsoft was not returned, despite the fact that they self-style themselves as "rapid response team."

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