#MeToo Has a Lehman Moment as Pre-Crisis Case Drags On and On
(Bloomberg) -- Sexist comments, lewd gestures -- and worse.
Allegations like these are sorely familiar in the #MeToo era. Only this time, they hail from what seems like Wall Street’s Dark Ages: back when Lehman Brothers was flying high.
More than a decade after Lehman collapsed, six women who worked at the bank’s subprime-mortgage unit are still accusing a former colleague of sexual harassment -- and still waiting for answers.
The story of these employees-turned-whistleblowers-turned-plaintiffs gained new attention with a 2018 documentary, “Inside Lehman Brothers,’’ about alleged financial irregularities at the bank.
But as the #MeToo movement shakes power structures in some of the nation’s most visible arenas, the tale also underscores a sober reality for many women in finance. The industry has long nurtured a culture that keeps harassment complaints out of courts and the public eye -- and has so far avoided a mega-scandal like the one engulfing Harvey Weinstein.
The Lehman story begins in Sacramento, California, as the great American mortgage bubble was swelling. The women -- Coleen Colombo, Cheryl McNeil, Linda Howard-James, Sylvia Vega-Sutfin, Isabel Guajardo and Michelle Seymour -- were working for BNC Mortgage, the subprime business that Lehman bought in 2004 and shut in 2007.
Colombo, an underwriter, approached regional leadership about signs of fraudulent lending in early 2005, saying she’d seen loan-application files with fabricated pay stubs and doctored numbers, according to the lawsuit.
Pressure to approve loans with falsified information was affecting her physical and emotional health, and she took a leave of absence to deal with the stress, the suit claims. When she returned she was told one of the branch’s managers wanted her fired for making the report. Colombo later resigned.
Colombo said in the complaint that an account manager at the office, Daniel Keenan, began sexually harassing her after she expressed concern about the loans. Among other things, she said he entered her office and rubbed his body against hers. Other women reported that Keenan had inappropriately touched them, looked down their blouses and made racist and sexual remarks.
A representative for Lehman didn’t respond to requests for comment. Attempts by Bloomberg to reach Keenan were unsuccessful, and a court notice published in 2012 showed he hadn’t been served with the complaint because he couldn’t be located.
Howard-James, who now uses the surname Weekes, said in an interview that she began flagging altered tax forms and bank statements within six months of joining BNC.
“It got to the point where I didn’t believe anything in any file,’’ Weekes said. “I got pretty efficient at looking at documentation and reporting it back to corporate. I thought I was doing them a huge favor. All I did was put a target on my back.’’
Weekes attributes much of what she described as a “hostile workplace’’ to her decision to report her findings. She said she was told managers didn’t want her to underwrite certain loans and wanted her fired but wouldn’t do so because they were afraid she’d sue.
When Guajardo joined the branch in April 2005, she was told not to associate with Colombo and Weekes, according to the lawsuit. Managers asked her to observe them and report on their activities.
Seymour, who joined in May 2005, began being sexually harassed by Keenan around the time she reported fraudulent documents in mortgage-application files, the suit claims. When she complained to a manager, he said he’d seen the behavior but dismissed it as “fun and games.’’ The manager nicknamed Keenan “Chester Molester.’’
Five of the woman resigned in September 2005, after Keenan approached Weekes in a file room and forced his body against hers while breathing down her neck, the suit says.
McNeil, who said she stopped receiving new loans to process after flagging possible fraudulent activity to a regional account manager, had resigned earlier. She said Keenan made remarks about her clothes, asked about her sex life and made offensive remarks about “black people and their music.’’
The six women sued in November 2005. BNC initially sought to send the suit to arbitration, the typical route in finance. But by the time a court ruled the case could go to trial, Lehman had shut the mortgage unit. A year later, the bank collapsed, leaving the lawsuit in limbo.
After resigning from BNC, Weekes worked for Countrywide Financial, a subprime-era giant. But she said that job had many of the same stresses. She ended up taking medical leave and later resigned. For about two years, she struggled to find a steady job in the mortgage industry. The other women reported similar difficulties finding work.
“It just felt like I was on a blacklist,’’ Weekes said.
Gary Gwilliam, who represents the women, said money in a trust tied to BNC, believed to be about $10 million, represents the low end of what they should receive based on almost 15 years of lost wages and emotional distress.
Lehman is seeking to preserve this money in case it can be applied toward the $2.4 billion Lehman was ordered to pay last year to resolve a dispute over its flawed residential-mortgage-backed securities. Gwilliam argues the trust money isn’t eligible for that payment because representatives for mortgage-bond buyers failed to prove there were breaches on tens of thousands of loans bundled into the securities.
“We’re talking about six women who have suffered for well over 10 years,’’ Gwilliam said in an interview. “There are no other serious creditors to this part of the bankruptcy. They should be paid.’’
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