Posted Dec 22, 2010 05:14 pm CST
The accounting firm Ernst &Young is being targeted in a lawsuit for its work for Lehman Brothers before the investment bank’s collapse in 2008.
The suit by outgoing New York Attorney General Andrew Cuomo claims the accounting firm helped Lehman hide billions of dollars in debt, according to the Associated Press and the Wall Street Journal (sub. req.). Cuomo filed the suit days before his move into the governor’s office.
The Wall Street Journal calls the accusations “the most sweeping allegations against an accounting firm in nearly a decade.”
Lehman is accused of using an accounting maneuver called a “Repo 105” to temporarily sell assets and pay off debts with the money, often before the end of the quarter. The assets were then repurchased, usually at a premium.
In a statement, Ernst & Young said it would vigorously defend itself. “There is no factual or legal basis for a claim to be brought against an auditor in this context where the accounting for the underlying transaction is in accordance with the Generally Accepted Accounting Principles,” the statement said.
ABAJournal.com: “Lehman Used Linklaters Opinion to Justify Aggressive Accounting, Report Says”