Insolvency - PW and E&Y settle on BCCI
The auditors of the Bank of Credit and Commerce International, which crashed in 1991 with estimated debts of $17bn, have settled claims made on behalf of the creditors for just $195m (#118m).
Deloitte & Touche accepted the settlement, which amounts to just 2% of the original $11bn (#6.5bn) claim, from former auditors Price Waterhouse (now part of PricewaterhouseCoopers) and Ernst & Young.
The settlement, signalled last week in Accountancy Age, brings to an end the largest ever civil suit against a firm of auditors, following the biggest corporate collapse in history.
Under the agreement, PW will pay $95m and E&Y, $35m. Both payments will be covered by personal indemnity insurance of partners in PW and Ernst & Whinney – now part of Ernst & Young – in the UK, Luxembourg and Cayman Island firms.
The remainder will be paid by principal shareholder, the Abu Dhabi government.
Observers said the relatively small sum was agreed after several significant payouts to creditors. By the end of last year, the claims against each firm had been reduced to $1.8bn.
But it was the prospect of spiralling legal fees and a possible ten-year court wait that finally closed the settlement.
Ian Brindle, senior partner of PW before its merger with Coopers & Lybrand, said he hoped the disparity in the figures demonstrated the original claim’s lack of merit.
Deloittes is disputing a #1.1m reduction in fees, imposed by a Luxembourg court.