New York Attorney General and Governor-elect Andrew Cuomo filed a lawsuit against Ernst & Young. The suit charges Ernst & Young with helping Lehman Brothers engage in accounting fraud involving “the surreptitious removal of tens of billions of dollars of securities from Lehman’s balance sheet to create a false impression of Lehman’s liquidity, thereby defrauding the investing public”. Ernst & Young was Lehman’s outside auditor, and certified the Lehman’s financial statements from 2001 until Lehman filed for bankruptcy in September 2008.
The 32-page complaint, filed in New York Supreme Court, follows the more detailed claims made in a 2,200-page report by Lehman’s bankruptcy court examiner. In Examiner Fingers Lehman’s Management And Outside Auditor For Serious Accounting Misreporting, we provide a summary and analysis of the serious charges associated with Lehman’s fraudulent financial reporting and Ernst & Young’s exposure relating thereto. In light of the Examiner’s findings, this lawsuit is not really surprising.