By Chris Warmoll from Accountancy Age
EY’s US ARM has agreed to stump up $10m (£6.7m) to settle a New York lawsuit over accusations it helped Lehman Brothers Holdings deceive investors prior to its 2008 collapse.
The Big Four firm’s audit arm was accused of enabling the disgraced investment bank of temporarily removing tens of billions of dollars of securities from its balance sheet, creating an illusion of sound financial health, Bloomberg reports.
New York Attorney General Eric Schneiderman said yesterday that “auditors will be held accountable when they violate the law, just as they are supposed to hold the companies they audit accountable.”
An EY spokesman said in statement that it is “pleased to put this matter behind us” and that there were “no findings of wrongdoing” by the firm or its staff.
Andrew Cuomo, the attorney general in 2010, accused the firm of facilitating a “major accounting fraud” by helping Lehman deceive the public about its financial condition in the lawsuit.
The state had sought as much as $125m professional fees that EY collected from 2001 through the 2008 bankruptcy, along with damages for Lehman shareholders, according to court filings.
With help from EY, Lehman allegedly used Repo 105 transactions to help conceal debt. Lehman, according to a bankruptcy examiner’s report, used Repo 105 transactions as a form of short-term financing to temporarily move up to $50bn off its balance sheet.
In 2013, EY agreed to cough up $99m to investors to settle litigation over its Lehman audit. Much of the sum collected by New York will be disseminated to investors, the attorney general said.
Lehman was once the fourth-largest US investment bank. It filed for bankruptcy after listing more than $613bn in debt, the biggest bankruptcy in North American history.
For more on this story go to: http://www.accountancyage.com/aa/news/2404350/eys-us-arm-to-pay-usd10m-to-settle-a-ny-lawsuit-over-lehman-audit?utm_term=&utm_content=EY%27s%20US%20arm%20to%20pay%20%2410m%20to%20settle%20a%20NY%20lawsuit%20over%20Lehman%20audit&utm_campaign=AA.Daily_RL.EU.A.U&utm_medium=Email&utm_source=AA.DCM.Editors_Updates

EDITOR: EY are the financial experts liquidating Cayman Islands Caledonian Bank. They also executed the report for the Cayman Islands government with recommendations on downsizing the Civil Service. See iNews Cayman story published April 14 2015 “Cayman Islands premier outlines civil service changes likening EY Report as a ’toolkit’” at: http://www.ieyenews.com/wordpress/cayman-islands-premier-outlines-civil-service-changes-likening-ey-report-as-a-toolkit/