Litigation - Andersen pays for DeLorean
Arthur Andersen faced humiliation and costs of up to #100m after a New York jury unanimously agreed it was negligent and in breach of contract in its role as auditor of sports car maker DeLorean, which crashed in 1982.
The verdict was hailed as a victory after 16 years of legal battles by the trustee representing DeLorean’s US creditors, mostly small components suppliers.
Observers questioned why Andersens took the risk of a jury trial after it agreed to pay the UK government, which injected #77m in the company, z21m in an out of court settlement last November. It is understood the trustee, David Allard, was less willing to lower his claim for compensation.
Andersens partner Ian Plaistowe denied rumours ‘heads would roll’ in the firm or it would pursue compensation from its legal advisers. ‘This ridiculous verdict is more an issue of the US jury system than the advice we received,’ he said.
Andersens was told by the New York supreme court it should pay $46.2m in compensatory damages to the trustee – a sum that could rise to $120m after interest at 9% is backdated to 1978, when the breach of contract took place.
Chris Hughes, liquidator of the company and a Coopers & Lybrand partner, said Andersens should have avoided court ‘because the creditors could go for the core of the argument without the political baggage the UK government brought’.