& Young ‘recklessly disregarded’ the true state of Lehman Brothers’
finances in a bid to secure its continued fees, claims a Californian county
suing the firm for its role in the biggest corporate bankruptcy in US history.
San Mateo County Investment Pool, a local government investment pool that
suffered a $150m loss when Lehman failed, has named the accountancy giant and
various Lehman executives in a lawsuit filed last week. ‘This case represents
the worst example of the fraud committed by modern day robber barons of Wall
Street, who targeted public entities to finance their risky practices,’ said the
Lead counsel for the plaintiff Joseph W Cotchett said he felt the plaintiff’s
chances of recovering some of their losses were ‘good’.
According to the lawsuit, E&Y ‘chose to look the other way and give its
stamp of approval to Lehman’s financial condition and risk exposure, rather than
risk losing lucrative accounting and auditing fees – estimated at $31m in 2007
alone’. It accuses the auditor of making ‘materially misleading’ statements and
says ‘E&Y knew or recklessly disregarded the true financial condition of
A US spokesperson for E&Y was dismissive of the case. ‘The complaint has
no merit. Lehman Brothers’ demise was triggered by dramatic and unprecedented
market events that continue to be felt throughout the world.’
The fast-track move is a bold departure from the norm, as a probe would normally only begin several months after administrators had finished their own enquiries
Head of Editorial Kevin Reed looks at the week's news, including the BHS and Austin Reed administration, Accountex and much more.
MPs launch probe into the sale of BHS that will look at role of auditors and accountancy firms in sale process
A short moratorium will give struggling companies a chance to be open with their creditors and negotiate a way out of their problems transparently, says Sykes