Auditor found liable for Lehman fraud
April 15, 2015 • Reprints
Agreement Resolves Allegations Firm Enabled Bank To Paint False Picture Of Its Financial Statements By Temporarily Removing Tens Of Billions Of Dollars Of Securities From Its Balance Sheet Without Disclosing Those Transactions On Financial Statements
Schneiderman: Auditors Will Be Held Accountable For Failures To Honestly And Fairly Audit Public Companies
NEW YORK– Attorney General Eric T. Schneiderman today announced a $10 million settlement of a lawsuit filed against the auditing firm Ernst & Young LLP (“Ernst & Young”) over its involvement in a financial statement fraud at the now-defunct investment bank, Lehman Brothers Holdings, Inc. That money will be distributed as restitution to investors in Lehman securities, along with some $99 million being paid by Ernst & Young to settle a private federal class action that relied in part on facts uncovered by the Attorney General’s investigation. No other law enforcement authority has brought an enforcement action in connection with the 2008 collapse of Lehman. Moreover, today’s settlement resolves the first lawsuit brought against an auditor of a public company under New York’s securities laws. The case also resulted in an important decision by the Appellate Division’s First Department, which confirmed the Attorney General’s power to obtain disgorgement of professional fees received by a firm, in this case Ernst and Young’s fees.
“The basic duty and legal obligation of auditors is to ensure that the public companies they audit provide reliable and unbiased information about their operations to the investing public. If auditors issue opinions that are unreliable or provide cover for their clients by helping to hide material information, that harms the investing public, our economy, and our country,” Attorney General Schneiderman said. “Auditors will be held accountable when they violate the law, just as they are supposed to hold the companies they audit accountable.”