Ernst & Young confronts Madoff's specter in trial over audits
The first trial of an auditor over losses tied to Bernie Madoff's Ponzi scheme is scheduled to begin in Seattle on Wednesday, wrote Sophia Pearson of Bloomberg. Ernst & Young must defend its decision to sign off on audits of a fund that helped feed the biggest Ponzi scheme in US history. FutureSelect Portfolio Management Inc., which lost $112 million in its investment in the feeder fund, says Ernst & Young was reckless in its review. The purported assets weren't just exaggerated; they didn't even exist, FutureSelect says. Ernst & Young calls its sign-off reasonable based on Generally Accepted Auditing Standards, which the firm âscrupulouslyâ followed. The case boils down to second-guessing a review that can provide only âreasonable assuranceâ that a client's financial statements are correct, the firm says. Most of the investments came from investors within the state of Washington.
Jury in Dewey trial makes progress
A jury made some progress on Tuesday toward reaching a verdict in the financial fraud trial against three ex-Dewey & LeBoeuf LLP leaders, but continues to grapple with the most serious charges facing the trio, wrote Sara Randazzo of the Wall Street Journal. In the second partial verdict delivered in the past week, the jurors cleared the former law firm executives of a handful of counts of falsifying business records. The jury still needs to reach a decision on more than 90 counts, including grand larceny, conspiracy, and scheme to defraud. Judge Robert Stolz urged the seven women and five men to continue deliberating Tuesday, telling them to reach a unanimous decision if at all possible, without compromising their conscience or abandoning their best judgment. The instruction was the second time the judge issued a so-called Allen charge, a legal order directing jurors to continue efforts to reach a verdict.
SEC trims use of in-house judges
Jean Eaglesham of the Wall Street Journal wrote that the US Securities and Exchange Commission (SEC) has quietly pulled back on its use of in-house judges, a practice that brought it criticism and legal challenges. A review of 160 cases affecting more than 500 defendants shows that in the three months through September, the SEC sent just 11 percent â four of 36 â of its contested cases to its administrative law judges. That was down from 40 percent in the like period of 2014. For the full fiscal year ended Sept. 30, the SEC used its internal tribunal for 28 percent of its contested cases, compared with 43 percent for the previous 12 months, according to the analysis and SEC data, both of which exclude settled and routine cases. SEC leaders defend the fairness of using agency administrative law judges even for serious, contested cases, in accordance with powers the agency gained through the 2010 Dodd-Frank financial law.
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