The venture capitalists claim the firm, which acted as auditors of Steiner Industries, should have spotted alleged problems at the manufacturer before Duke Street purchased a 66% stake in the business for Pounds 35m in 1999.
Soon after the purchase, Steiner industries collapsed with debts of Pounds 200m.
According to reports on ThisIsLondon.co.uk, Duke Street is suing E&Y for Pounds 55m, the cost of its investment plus Pounds 20m which co-investors lost.
A spokesperson for Duke Street confirmed the lawsuit against E&Y, but said the amount of Pounds 55m may not be accurate. She also denied reports that Duke Street was also suing rival Big Five firm PricewaterhouseCoopers, which carried out a series of due diligence checks on the Austrian company.
Receivers are currently trying to sell Duke Street’s two operating companies, which make garden furniture and a plastic packaging. But even if they succeed in finding buyers, the company’s bankers will be first in line to receive any of the proceeds.
A spokesperson for E&Y was asked to comment on the matter, but has yet to respond.
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