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February 2011

E&Y sued for hiding Lehman fraud for 7 years

By Raman Jokhakar
Tarunkumar G. Singhal
Chartered Accountants
Reading Time 1 mins
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43 E&Y
sued for hiding Lehman fraud for 7 years

New York attorney general
Andrew Cuomo sued Ernst & Young, accusing the firm of facilitating a ‘major
accounting fraud’ by helping Lehman Brothers deceive the public about its
financial condition.

For more than seven years
before Lehman declared bankruptcy in 2008, the investment bank engaged in
transactions approved by E&Y whose purpose was to move debt off its balance
sheet and make it appear less leveraged, Cuomo said. This was done through what
are known as ‘Repo 105’ transactions. “This practice was a house-of-cards
business model designed to hide billions in liabilities in the years before
Lehman collapsed,” Cuomo said on Wednesday in one of his last cases as attorney
general. “Just as troubling, a global accounting firm, tasked with auditing
Lehman’s financial statements, helped hide this crucial information from the
investing public.” The state seeks to recover more than $ 150 million in fees
collected by E&Y for performing Lehman’s work between 2001 and 2008, plus
investor damages and equitable relief, Cuomo said.

(Source : Times of India, dated 23-12-2010)

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