Thursday, April 16, 2015

Ernst & Young LLP [ERNY.UL] will pay $10 million to settle a New York lawsuit

Ernst & Young LLP [ERNY.UL] will pay $10 million to settle a New York lawsuit accusing the accounting firm of helping Lehman Brothers Holdings Inc [LEHMB.UL] deceive investors in the years leading up to its 2008 collapse, the New York attorney general said on Wednesday.
The 2010 lawsuit claimed Ernst & Young's auditing facilitated a "massive accounting fraud" and sought $150 million in fees that the firm earned from Lehman between 2001 and 2008, plus investor damages and equitable relief.
While the $10 million was much smaller than what the attorney general's office had sought, Ernst & Young agreed to pay $99 million in damages to investors in a class action settlement approved a year ago.
The case was the only action by a law enforcement authority in connection with Lehman's 2008 collapse, New York Attorney General Eric Schneiderman said in a statement.
"If auditors' reports...provide cover for their clients by helping to hide material information, that harms the investing public, our economy and our country," Schneiderman said.
Nearly all the $10 million will go to investors in Lehman securities, the office said.
An Ernst & Young spokesperson said the New York case is the last significant piece of litigation against it over Lehman, but declined to comment on the settlement.
According to the complaint, Ernst approved the "surreptitious" removal of tens of billions of dollars of debt from Lehman's balance sheet to make the investment bank appear less indebted at the close of financial quarters.
The earlier class action settlement relied in part on facts uncovered by the Attorney General's investigation, the attorney general's office said, including more than a dozen depositions its lawyers took.
Lehman filed for bankruptcy on Sept. 15, 2008, helping to trigger the global financial crisis. Once the fourth-largest U.S. investment bank, Lehman held large quantities of risky subprime mortgage securities.
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