The New York Times reported on Tuesday that Lehman Brothers made use of Hudson Castle, a small company to transfer the investments prior to its collapse.

According to the newspaper, Hudson Castle, by the help of different litigations, borrowed amount by offering short-term IOUs to investors following which the company gave the same to Lehman and other financial bodies. This lending was done by "repurchase agreements", stated the New York Times.

The newspaper has also revealed that Hudson Castle, that initially was thought to be an independent business entity, was controlled by Lehman for years as the bank owned one-quarter of the company. It has been disclosed that although the agreement between the two had finished 2004, Lehman continued to preserve one board seat while it managed to stay the largest share largest shareholder of the company.

As cited in the New York Times report, it has been unveiled that, according a detailed report on Lehman's failure which was prepared by bank examiner last month, it was stated that the accounts of the investment banks were found to be "materially misleading". The report by bank examiner did not include any allegation regarding the involvement of Hudson Castle in the misleading.

After JPMorgan Chase & Co, Hudson Castle has been reportedly said to the "second-largest creditor" in the Lehman Estate.