On the second question, according to this Reuters blog Lehman Brothers may have used transfers between the US [Lehman Brothers Special Financing] and UK [Lehman Brothers International (Europe)] branches as an intermediate step, but an outside party was necessary for this to work at the level of the books of the holding company [Lehman Brothers Holdings].

I don't know about the first question but I suspect that the counterparties would be overleveraged if they chose the same accounting interpretation of the transaction as Lehman Brothers. But since accounting involves an element of interpretation it is possible that they didn't

Accountants can treat these agreements as sales of assets rather than loans, only if the companies show that the company receiving the loan does not retain control over the securities used as collateral

(my emphasis)

See here for another example where it might be possible for the two counterparties to a transaction to disagree on the value of the asset for accounting purposes.

Oh, and this Repo 105 "loss of control" guidance aplies only to US GAAP, not to international accounting regulations. However, in an interesting twist, the reason they used the London arm of the holding company to do this was that they could classify the Repo as a sale under English law, but not under US law. So the holding company used UK law to make the transaction a sale, but they filed their accounts under US accounting regulations. See Marketwatch

Lehman had to overcome one final hurdle before it could book the deals as a sale -- it had to get a legal opinion that the deal was a "true sale."

"The problem was that Lehman was unable to obtain a true sale opinion from a U.S. lawyer," Valukas said in his report.

Instead all the deals were channeled through the firm's London operations, where it was able to get a true sale opinion from law firm Linklaters under U.K. law.

In a statement, Linklaters said Friday that Valukas' report doesn't suggest the legal opinion it gave under English law was wrong or improper.

"We have reviewed the opinions and are not aware of any facts or circumstances which would justify any criticism," the law firm said.

The brainless should not be in banking -- Willem Buiter