Ernst & Young, Capgemini Agree to $20 Million Travel Expense Settlement

The class action travel-billing lawsuit that has plagued Big Four firms Ernst & Young, PricewaterhouseCoopers and KPMG, and consultancies BearingPoint and Capgemini has finally come to an end. E&Y has agreed to a settlement of $18 million in the controversial lawsuit, and Capgemini has agreed to settle for $2 million.

Previously, KPMG and its former consulting unit BearingPoint had agreed to pay $34 million to settle the suit, and PricewaterhouseCoopers had agreed to a settlement of $54.5 million.

The class action lawsuit, filed by lead plaintiff Warmack-Muskogee LP, a former PwC client that operates an Oklahoma shopping mall, and E-Z Mart Corp., a former EY client that operates a chain of convenience stores, sought to resolve discrepancies in travel expenses billed by the big firms to their clients.

The firms were accused of being in collusion with one another to acquire rebates from travel agencies for the large volume of airfares booked through the agencies and then not passing those rebates on to their clients in the form of reduced fees for travel expenses. The firms argued that the rebates offset other firm expenses and enabled the firms to charge lower billing rates, and that without the rebates, billing rates would have been higher so in the end the clients did indeed benefit from the rebates.

The lawsuit was filed in state court in Texarkana, Arkansas in October 2001. None of the firms charged in the suit admitted to any wrongdoing, but all of them have now stopped the practice of receiving rebates on travel expenses and instead now pass through their actual cost of travel expenses to clients.

"We are pleased to have resolved this issue in a reasonable and equitable manner," said EY spokesman Charles Perkins. "We now bill clients directly at the discounted rates we receive from travel companies, having changed our policy in January 2002."

You may like these other stories...

Here's a CPA who truly walks the walk. On March 15, Frank Ryan, CPA, departed San Diego, California, with plans to be in Ocean City, Maryland, by July 2 to teach a course at the Maryland Association of CPAs’ (MACPA...
When Theodore J. Flynn first joined the Massachusetts Society of CPAs (MSCPA) in 1970, it was a different world and a different profession.  The "Big Eight" were still headquartered in Boston. Vietnam War...
Accountant Rickey Charles Goodrich had it a little too good. Many bean counters would kill to serve as financial guru to the likes of Pearl Jam. Goodrich was hired in 2005, and the following year, he became the CFO of Curtis...

Upcoming CPE Webinars

Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.
Aug 20
In this session we'll review best practices for how to generate interest in your firm’s services.
Aug 21
Meet budgets and client expectations using project management skills geared toward the unique challenges faced by CPAs. Kristen Rampe will share how knowing the keys to structuring and executing a successful project can make the difference between success and repeated failures.
Aug 28
Excel spreadsheets are often akin to the American Wild West, where users can input anything they want into any worksheet cell. Excel's Data Validation feature allows you to restrict user inputs to selected choices, but there are many nuances to the feature that often trip users up.