A worried accounting executive at Lehman Brothers, who raised the alarm about what he saw as dubious number-crunching at the doomed Wall Street bank, lost his job barely a month after alerting the auditor Ernst & Young, his lawyer claimed yesterday, in a case prompting calls for tighter protection for corporate whistleblowers.

Matthew Lee, a senior vice-president in Lehman's finance division, outlined six allegations of unethical accounting in a memo sent on 16 May 2008 to Lehman's senior managers, who asked Ernst & Young to investigate. In discussions with partners at Ernst & Young, he highlighted controversial "repo 105" transactions that artificially boosted Lehman's balance sheet by $50bn (£33bn).

But the London-based accounting firm took "virtually no action", according to an official report into Lehman's demise and Lee's lawyer, Erwin Shustak, said his client lost his job in late June 2008, officially as part of a broader downsizing. Shustak told the Wall Street Journal: "It was just easier to shut him up and let him go."

Lee, 56, has emerged as a crucial figure in Lehman's downfall and in controversy over the conduct of Ernst & Young. A court-appointed examiner, Anton Valukas, found gaping discrepancies in the accounts of E&Y partners who met Lee and concluded there are grounds for legal claims against the auditing firm for failing to meet professional standards.

The six allegations made by Lee included claims that Lehman's monthly balance sheet listed $5bn of assets above reality, that the bank failed to value its inventory of financial products in a "fully realistic or reasonable" way, that audit-level personnel were inadequately qualified, that systems were ineffective and that there were "tens of billions of dollars" of possibly toxic liabilities.

Ernst & YoungE&Y's senior partner responsible for auditing Lehman, William Schlich, and a colleague, Hillary Hansen, interviewed Lee. But reporting back to Lehman's independent directors, they did not mention Lee's key concern about repo 105, an issue which one Lehman director, the former Vodafone boss Sir Christopher Gent, later said ought to have been passed on.

Lehman's alleged handling of Lee was criticised by Stephen Kohn, director of the Washington-based National Whistleblowers Center, who said it was a common tactic for corporations to get rid of whistleblowers under the guise of broader redundancy programmes.

"If you're a company and want to get rid of a whistleblower, it's common to stick them in a round of layoffs," said Kohn. "It looks like this person has all the attributes of a major whistleblower retaliation case."

Kohn said the 2002 Sarbanes-Oxley Act, which reformed US accounting, had been ineffective. He said: "Publicly traded companies are required to have an audit committee that will look at employee concerns and companies are not allowed to retaliate. People are supposed to be protected but those protections haven't worked."

The detailsed circumstances of Lee's dismissal have not been disclosed.

One industry insider suggested that he could have written his memo after learning that he was on a list for imminent redundancy.

Larry McDonald, a former Lehman banker and author of a book on the bank's collapse entitled A Colossal Failure of Common Sense, said Lee was one of many middle-ranking employees who had come forward to aid investigators into Lehman's demise. He said: "He's a hero, and I agree with everything he said, but there are other whistleblowers too, and people helping out investigators."

An expert in whistleblower cases, John Phillips of the law firm Phillips & Cohen, said Ernst & Young faced "difficult questions" about its treatment of Lee and its relationship with Lehman's top brass: "Auditors are supposed to be independent and responsible to shareholders. When they get too close to management, it's always a problem – it can be too cosy a relationship."

In a statement, Ernst & Young said its last completed audit of Lehman was for the year to November 2007. The accountancy firm said Lehman itself had investigated Lee's memo but concluded: "The allegations were unfounded and there were no material issues identified." Ernst said: "We never concluded our review of this matter, because Lehman went into bankruptcy before we completed our audit."