A lawsuit charging Big Four accounting firm Ernst & Young with fraud and negligence in relation to the 2001 failure of a Chicago savings and loan has been ruled to be without merit by a three-judge panel in Chicago, the Associated Press reported.
The $2 billion lawsuit, brought by the Federal Deposit Insurance Corporation, sought damages from Ernst & Young for the more than $500 million lost by the agency's insurance fund, plus triple damages, the AP reported. The FDIC accused Ernst & Young of misstating Superior Bank's assets.
Ernst & Young claimed that the bank's failure was the result of shoddy management by the board of directors as well as the poor economy in 2001.
The bank, headquartered in the Chicago suburb of Oakbrook Terrace, was seized by federal regulators in July 2001, the AP reported, making it the largest insured U.S. financial institution to fail in nearly a decade. It was later learned that the bank had lost millions on risky home loans to borrowers with tarnished credit.
The bank was owned by the Chicago-based Pritzker family and their equal partner, New York developer Alvin Dworman. The Pritzkers and Dworman admitted no liability in Superior's failure and no sanctions were imposed on them in an agreement with the FDIC and the Office of Thrift Supervision, the AP reported.
In December of 2002, the Pritzkers paid $400 million and were guaranteed by the government that they would not be sued or fined in connection to Superior, the AP reported.
FDIC counsel Will F. Kroener III told the AP that the agency is reviewing Thursday's decision by the 7th Circuit Court of Appeals and is considering its options.
Counsel for Ernst & Young told the AP that the firm is pleased with the decision. The company still faces a lawsuit brought by about 1,400 uninsured depositors who had more than $100,000 in the bank when it failed, the AP reported.