Remember the hearings on Repo 105 debt hiding scams with Lehman Brothers? How Bill Black called the SEC criminally negligent for letting Lehman Brothers move $50 billion dollars in liabilities temporary off their books with an accounting trick, a Repo 105 transaction?

It seems New York Prosecutors are going to sue Ernst & Young over these accounting gimmicks used to temporarily make a firm look more solvent. New York Attorney General Andrew Cuomo is going after the audit firm in civil court.

Prosecutors in New York are set to file civil fraud charges against accounting firm Ernst & Young LLC over the collapse of Lehman Brothers Holdings Inc, the Wall Street Journal said on Monday, citing people familiar with the matter.

The suit, led by Andrew Cuomo, could come as early as this week and might seek to impose fines and other penalties, the paper said.

A spokeswoman for Ernst & Young said the company did not comment on speculation and repeated a previous statement made by the firm about its dealings with Lehman Brothers.

"Throughout our period as the auditor of Lehman, we firmly believe our work met all applicable professional standards, applying the rules that existed at the time," the statement said.

The Wall Street Journal notes this is the first time Repo 105 has received any legal action and that Ernst & Young received $100 million in fees from Lehman Brothers from 2001 to 2008.

Other financial institutions also used Repo 105s, which are ways to move liabilities & risks temporarily off the books to make a corporation's balance sheet look better temporarily. Repo standard for repurchase agreements and Repo 105 means a short term loan was classified not as debt, but as a sale, by associating the loan with some sort of asset, usually a bond. The 105 number came about because the asset is usually worth 105% of the actual loan amount.

These techniques are legal (as far as I know), but Lehman Brothers did not disclose a $50 billion dollar Repo 105.

The transactions in question, known as "window dressing," involve repurchase agreements, or repos, a form of short-term borrowing that allows banks to take bigger trading risks. Some banks have systematically lowered their repo debt at the ends of fiscal quarters, making it appear they were less risk-burdened than they actually were most of the time.

There are many more reasons for Lehman Brother's financial black hole when lead to it's down fall beyond Repo 105s. Yves Smith at Naked Capitalism hopes this legal action opens the window for further discovery, investigation and leads to charges against former Lehman Brothers CEO, Richard Fuld.