NY attorney sues Ernst & Young for role in Lehman collapse

Giant accountancy firm Ernst & Young has been sued in the US by New York's attorney general over its role in the collapse of Lehman Brothers during the financial crisis in 2008.

Andrew Cuomo claimed the firm was complicit in a "massive accounting fraud" perpetrated by Lehman.

Ernst & Young said that it would "vigorously defend" itself, as there is “No factual or legal basis for a claim to be brought against an auditor in this context," it said.

"Lehman's audited financial statements clearly portrayed Lehman as a highly leveraged entity operating in a risky and volatile industry."

The lawsuit, on the other hand claims “At a time when it was critical for investors to make informed decisions as to whether to keep or to buy Lehman, Ernst & Young assisted Lehman in defrauding the public."

The case focuses on Lehman's use of an accountancy practice known as Repo 105, which involves temporarily removing money from the balance sheet to give the impression of greater financial strength. As much as $50 billion was parked temporarily overseas, the lawsuit claims.

As Lehman's auditors, Cuomo said, Ernst & Young should not have approved the accounts, knowing that the practice had been used so widely.

Lehman Brothers was the first major bank to collapse as part of the global financial crisis in September 2008

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Alfred Galea
Aren't these the same guys involved in the Air Malta restructuring program??
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Jon Sciberras
Like they say, Bankers and Auditors, you make them or they break you.