E&Y 'Vindicated' in $4.5 Billion Law Suit
Ernst & Young breathed a sigh of relief this week as a judge threw out two out of three of the claims made against it in a negligence case brought against the Big Four firm by Equitable Life. If successful, the suit could have cost the accounting firm $4.5 billion in damages.
Last month, AccountingWEB reported that British-based Equitable Life had brought a lawsuit against E&Y claiming that negligence on the part of the auditors led to the near collapse of the 240-year old insurer. The suit alleged that E&Y failed to alert Equitable to the catastrophic liabilities associated with annuity policies it sold in the 1970s and 1980s.
The law suit was thrown out of an English court today on the grounds that there was insufficient evidence that any negligence on the part of the auditor was related to the size of the loss that was claimed by Equitable.
"We are delighted with this success," says E&Y’s UK chairman Nick Land. “The judgment vindicates our belief that this claim was ill-conceived and bound to fail from the outset.”
The final count, relating to a bonus declaration claim, will be resubmitted by Equitable Life in an attempt to recover hundreds of millions of dollars from Ernst & Young. "It is very hard to see how Equitable can resurrect what remains of the claim. We are absolutely confident of defeating any restated claim that might emerge," said E&Y’s Chairman Land.
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Why is that, you might ask? My job is to replace the irreplaceable Gail Perry as Editor-in-Chief. What does that mean? I don’t really know! I think it’ll be fun getting a feel for things, throwing in my own thoughts here and there, and listening to the discussions you’re having about the accounting profession.