A lawsuit initiated in 1994 ended this week with Big Four auditor Deloitte & Touche agreeing to pay $23 million to the State of Kentucky's Department of Insurance on behalf of Kentucky Central Life Insurance Company.

Deloitte, auditor for Kentucky Central for 23 years, was accused of engaging in reckless practices that resulted in the liquidation of Kentucky Central. The firm was charged with professional recklessness regarding its audits of Kentucky Central's financial statements.

Kentucky Central collapsed in 1993 and was taken over by the State of Kentucky's Department of Insurance. At that time Kentucky Central had a deficit of $141 million. Several lawsuits were filed and about $227 million was recovered for Kentucky Centrals shareholders, policyholders, and investors.

In the company's biggest lawsuit, five former Kentucky Central officers and directors along with Deloitte and the firm's legal counsel were sued for $200 million. Deloitte was accused of negligence that enabled Kentucky Central's directors to engage in "self-dealing and reckless practices" that resulted in the demise of the insurer. Deloitte's engagement partner endured a 29-day deposition, and nearly 3 billion pages of documents were examined in the course of the eight-year legal battle.

Kentucky Central endured losses on mortgage and real estate loans that allegedly were not included in the company's financial statements.

At one time the lawsuit against Deloitte was dismissed because it was not filed within the required statute of limitations. But in 2001 the Kentucky Court of Appeals reinstated the suit, stating that the statute didn't begin at the time of liquidation but instead began when the damages were fixed and non-speculative which, in this case, was when the Kentucky Central went into rehabilitation.