The following discussion is found in the U.S. Bankruptcy Report on Lehman Bros. Holdings dated March 22, 2010:

Lehman employed off-balance sheet devices, known within Lehman as "Repo 105" and "Repo 108" transactions, to temporarily remove securities inventory from its balance sheet, usually for a period of seven to ten days … in late 2007 and 2008. Repo 105 transactions were nearly identical to standard repurchase and resale ("repo") transactions that Lehman (and other investment banks) used to secure short-term financing, with a critical difference: Lehman accounted for Repo 105 transactions as "sales" as opposed to financing transactions … By recharacterizing the Repo 105 transaction as a "sale," Lehman removed the inventory from its balance sheet.
Lehman regularly increased its use of Repo 105 transactions in the days prior to reporting periods to reduce its publicly reported net leverage and balance sheet. Lehman's periodic reports did not disclose the cash borrowing from the Repo 105 transaction … Lehman used the cash from the Repo 105 transaction to pay down other liabilities, thereby reducing both the total liabilities and the total assets reported on its balance sheet and lowering its leverage ratios.… A few days after the new quarter began, Lehman would borrow the necessary funds to repay the cash borrowing plus interest, repurchase the securities, and restore the assets to its balance sheet.
Lehman never publicly disclosed its use of Repo 105 transactions, its accounting treatment for these transactions, the considerable escalation of its total Repo 105 usage in late 2007 and into 2008, or the material impact these transactions had on the firm's publicly reported net leverage ratio. According to former Global Financial Controller Martin Kelly, a careful review of Lehman's Forms 10-K and 10-Q would not reveal Lehman's use of Repo 105 transactions.
Lehman failed to disclose its Repo 105 practice even though Kelly believed “that the only purpose or motive for the transactions was reduction in balance sheet;" felt that "there was no substance to the transactions;" and expressed concerns with Lehman's Repo 105 program to two consecutive Lehman Chief Financial Officers … advising them that the lack of economic substance to Repo 105 transactions meant "reputational risk" to Lehman if the firm's use of the transactions became known to the public. In addition to its material omissions, Lehman affirmatively misrepresented in its financial statements that the firm treated all repo transactions as financing transactions-i.e., not sales-for financial reporting purposes.
Starting in mid-2007, Lehman faced a crisis: market observers began demanding that investment banks reduce their leverage. The inability to reduce leverage could lead to a ratings downgrade, which would have had an immediate, tangible monetary impact on Lehman.… In mid-to-late 2007, top Lehman executives from across the firm felt pressure to reduce the firm's leverage for quarterly and annual reports.…
By January 2008, Lehman CEO Fuld ordered a firm-wide deleveraging strategy, hoping to reduce the firm's positions in commercial and residential real estate and leveraged loans in particular by half. In the words of one internal Lehman presentation, "Reducing leverage is necessary to remove refinancing risk and win back the confidence of the market, lenders, and investors." Fuld recalled that Lehman had to improve its net leverage ratio by selling inventory … Selling inventory, however, proved difficult in late 2007 and into 2008 because, starting in mid-2007, many of Lehman's inventory positions had grown increasingly "sticky"-i.e., difficult to sell without incurring substantial losses.… In light of these factors, Lehman relied at an increasing pace on Repo 105 transactions at each quarter-end in late 2007 and early 2008 …
Notably, during Lehman's 2008 earnings calls in which it touted its leverage reduction, analysts frequently inquired about the means by which Lehman was reducing its leverage.… CFO Callan told analysts that Lehman … was reducing its leverage through the sale of less liquid asset categories but said nothing about the firm's use of Repo 105 transactions.

Is it ethical to keep the types of liabilities discussed in this article off the balance sheet, or is this a type of financial statement fraud?