E&Y Subpoenaed in SEC Investigation Into PNC
The Securities and Exchange Commission (SEC) has expanded its investigation into the troubled PNC Financial Services Group and has sent subpoenas to the company's auditor, Big Five firm Ernst & Young.
PNC, a Pittsburgh-based financial services group, is under investigation for possible transactions intended to remove bad loans from the company's books. Ernst & Young provided assistance in setting up three companies for the purposes of buying PNC loans and reselling them to investors. The firm allegedly misrepresented its earnings as well as its ability to reduce liabilities from non-performing assets.
Regulators have told PNC to bring $500 million of loans and $160 million of venture capital assets into the company's balance sheet. PNC restated financial results to reflect these changes, but the company claims that its auditors suggested such reporting wasn't necessary.
Ernst & Young is reportedly cooperating with the investigation. PNC paid Ernst & Young $2.9 million for its audit and $16.2 million for consulting services.
Three shareholder lawsuits have been filed naming PNC, company executives, and Ernst & Young as defendants and accusing the companies of misrepresenting financial results.