E&Y Faces $2.2 Billion Swiss Lawsuit
The trend of suing accounting firms continues, this time in Switzerland. Aided by the results of a year-long study performed by PricewaterhouseCoopers, the Swiss state of Geneva has demanded 3 billion Swiss francs (US$2.2 billion) from Big Four firm Ernst & Young for damages from audits stemming from 1994 to the present.
According to the PwC report, E&Y used a method of risk evaluation that was "outside legal norms" when issuing statements concerning the merger of audit client Banque Cantonale de Geneve with another bank.
The report claims that E&Y made insufficient provision for risks associated with the merger and continued to certify statements each year that failed to reflect the actual financial condition of the bank.
Bank Cantonale de Geneve was bailed out in 2000 by the state of Geneva. Geneva authorities claim E&Y deviated from generally accepted accounting principles in their certification of the bank's financial statements. "These acts caused the state damage of more than three billion francs, which it is reclaiming from Ernst & Young," read a statement issued by the state.
A similar investigation is pending into the audits of another regional Swiss bank, Banque Cantonale Vaudoise. E&Y is also the auditor of that bank.