Equitable Life’s new management and auditors PwC accepted Ernst & Young’s advice on GAR provisioning at the same time as they said it was negligent, a court has heard.
Opening Ernst & Young’s defence against a £2bn claim against it from Equitable Life, Jonathan Gaisman QC pointed to documents that he said demonstrated ‘the rankest hypocrisy’.
In 2002, he said, not only did Charles Thomson, Equitable’s current chief executive, sign off accounts with a £200m provision for Guaranteed Annuity Rates (GAR), he also signed off a claim against E&Y saying that E&Y should have told it to provide for a greater provision and was negligent in not doing so.
The issue of the GAR provision is at the heart of Equitable’s case. It claims that E&Y should have told it to provide for more than that figure in 1999, and that its failure to do so has made it more than £2bn worse off.
Gaisman pointed to documents, however, showing the Thomson and PwC both accepted the £200m figure in several sets of accounts.
Not only that, but on April 15th 2002, it released its annual report and accounts which included the figure as an acceptable way of provisioning for GARs. On the same day, Thomson, in conjunction with PwC, signed a claim against its former auditors, E&Y, saying that E&Y should have warned it the figure was inaccurate.
If E&Y’s provisioning was so self-evidently wrong, Gaisman said, PwC and Thomson should have picked it up themselves in the 2001 Annual Report. Gaisman said: ‘the bringing of this claim represents the rankest hypocrisy’.
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