Ernst & Young ‘does not have a case to answer’ before the Joint
Disciplinary Scheme, the firm declared bullishly in the wake of its
extraordinary settlement with Equitable Life.
E&Y walked away with just £20m of costs, the bulk of which will be paid
by insurers, and chairman Nick Land immediately rejected the disciplinary
charges laid by JDS executive counsel Chris Dickson.
‘We don’t agree there is a prima facie case to answer. We will wait to see
how the JDS responds following this climbdown by Equitable. That may influence
its views – we don’t know,’ Land told Accountancy Age.
Land’s suggestion that the JDS may be influenced by Equitable’s retreat,
which saw both sides walk away with just legal costs to pay, will concern
policyholders baying for blood from the mutual’s former auditors.
The investigation by the JDS is the last credible threat hanging over E&
Y. The body has the power to impose unlimited fines on E&Y and issue
restrictions on its ability to practice.
The JDS complaints laid against E&Y are much broader than the negligence
claim, covering audits from 1990 to 2000, and alleging, among other things, a
general ‘failure to understand Equitable’s business’.
Dickson said any move by the firm to have the charges dropped would itself
require a disciplinary hearing.
The events of last week saw Equitable drop its claim against E&Y, which
at its original £2.7bn would have almost certainly destroyed the Big Four firm.
Land said that E&Y would only pick up ‘a few million’ in costs, with as much
as £15m being paid by its insurers.
The prospect of further legal action from the ex-directors of Equitable seems
unlikely. Former Equitable director David Wilson has said he is retaining an
option to sue the firm, as he picks up a legal bill from the case.
However, his own evidence in the trial, in which he said that different
advice from E&Y would not have caused him to change anything, may count
To cap a memorable month for E&Y, the firm is also expected to announce
bumper figures for the last year when it unveils its results on 3 October, with
an expected return to double-digit growth in line with the other Big Four firms.
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