County sues Lehman execs

San Mateo County sued Lehman Bros. Holdings Inc. executives after losing $150 million when the securities firm collapsed in the biggest bankruptcy in U.S. history.

The county, just south of San Francisco, held Lehman debt in its investment pool, which handles short-term investments for cities and schools.

The county said current and former Lehman executives, including Chief Executive Richard Fuld, and auditor Ernst & Young sought to conceal the mortgage-related losses that toppled the firm and battered owners of its bonds.

“We’re hoping to get at least some recovery,” said Michael Murphy, the San Mateo County counsel. “We’re not alone in public agencies that got hammered by the Lehman Bros. bankruptcy.”

Lehman, the largest underwriter of bonds backed by mortgages at the height of the U.S. real estate market, filed for bankruptcy protection in September, sending shock waves through the world’s stock and bond markets and causing the U.S. government to create a $700-billion rescue package for financial companies.

Lehman had more than $613 billion of debt when it filed for bankruptcy.

Ernst & Young spokesman Charles Perkins said the firm hadn’t seen the lawsuit and declined to comment. Lehman attorneys didn’t immediately return a call seeking comment.