Neutron production in lead by cosmic muons has been studied with a Gadolinium doped liquid scintillator detector. The detector was installed next to the Muon-Induced Neutron Indirect Detection EXperiment (MINIDEX), permanently located in the Tübingen shallow underground laboratory where the mean muon energy is approximately 7 GeV. The MINIDEX plastic scintillators were used to tag muons; the neutrons were detected through neutron capture and neutron-induced nuclear recoil signals in the liquid scintillator detector. Results on the rates of observed neutron captures and nuclear recoils are presented and compared to predictions from GEANT4-9.6 and GEANT4-10.3. The predicted rates are significantly too low for both versions of GEANT4. For neutron capture events, the observation exceeds the predictions by factors of 1.65 ± 0.02 (stat.) ± 0.07 (syst.) and 2.58 ± 0.03 (stat.) ± 0.11 (syst.) for GEANT4-9.6 and GEANT4-10.3, respectively. For neutron nuclear recoil events, which require neutron energies above approximately 5 MeV, the factors are even larger, 2.22 ± 0.05 (stat.) ± 0.25 (syst.) and 3.76 ± 0.09 (stat.) ± 0.41 (syst.), respectively. Also presented is the first statistically significant measurement of the spectrum of neutrons induced by cosmic muons in lead between 5 and 40 MeV. It was obtained by unfolding the nuclear recoil spectrum. The observed neutron spectrum is harder than predicted by GEANT4. An investigation of the distribution of the time difference between muon tags and nuclear recoil signals confirms the validity of the unfolding procedure and shows that GEANT4 cannot properly describe the time distribution of nuclear recoil events. In general, the description of the data is worse for GEANT4-10.3 than for GEANT4-9.6.