E&Y drops own partners as witnesses

Ernst & Young has opted to drop its own partners as witnesses in its High
Court battle with Equitable Life.

Mark Hapgood QC, for E&Y, told the court yesterday that the Big Four firm
had decided Equitable’s case was now ‘utterly hopeless’: ‘We therefore see no
need to call any factual evidence and the decision has been taken today not to
do so. We will of course be calling our expert evidence,’ he said.

E&Y’s move is extremely unusual, and some are interpreting it as a
concession to Equitable’s point of view.

The judge himself was confused by the move, saying he needed ‘to get my mind
round this.’

Equitable is understood to think that the move strengthens its case. It does
mean that it will not be able to cross examine E&Y’s partners, but it might
also be interpreted by the judge as an admission conceding Equitable’s points on
the conduct of the audit.

E&Y argues that it does not need to prove what happened in the course of
the audits, since the directors’ testimony indicates that directors would not
have moved to make the changes Equitable says it would have made, for which it
is claiming losses.

The decision will also mean that E&Y avoids embarrassing cross
examinations of its own partners in the case, whose conduct would have attracted
the full media glare for up to two weeks. E&Y will not even be offering up
witness statements from the partners.

Equitable is expected to make the most out of the decision, with some comment
about it during next week’s proceedings.

Any discussions of the conduct of E&Y’s audit will emerge during expert
A spokeswoman for E&Y said: ‘As the case has proceeded it has become more
than apparent to us and our legal team that there is no material factual case
against Ernst & Young and therefore, no need to call our factual witnesses.’

The case continues.

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