Washington State Sues E&Y Over Met Mortgage Woes
Washington's insurance commissioner is seeking millions of dollars from accounting firm Ernst & Young for its alleged neglect in overseeing finances at Metropolitan
Mortgage & Securities.
Insurance Commissioner Mike Kreidler, acting as the court-appointed receiver of Western United Life Assurance Co. - a Met Mortgage affiliate - filed the lawsuit in Spokane County Superior Court on Thursday, the Associated Press reported.
Kreidler took control of Western United in March, a month after Metropolitan and its sister company, Summit Securities, filed for bankruptcy. The insurance company lost money because Ernst & Young failed to follow accounting and auditing standards, the lawsuit says. The suit seeks unspecified millions of dollars, court costs and the costs to rehabilitate Western United.
"Ernst & Young failed to do its job, so it's my duty as receiver to pursue legal action to protect Western United and its policyholders," Kreidler said in a statement.
Samuel Maizel, the U.S. Bankruptcy Court-appointed investigator in the collapse of Met Mortgage, issued a report noting that PricewaterhouseCoopers LLP and Ernst & Young were "likely negligent in the performance of their duties."
PricewaterhouseCoopers audited the company's fiscal 2000 books. Ernst & Young produced audits in 2001 and 2002 but resigned, saying it couldn't trust numbers provided by the company.
The examiner has criticized Ernst & Young for failing to stop Metropolitan's practice of using last-minute deals to show end-of-year profits.