Battle Continues Between Ernst & Young and Anglo Incident Investigator

Lucas Gilmore, “Big 4″ observer
April 21, 2011 /

The high court in Ireland has reserved the decision on Ernst & Young’s plea to trash the investigation being aimed against it in connection with the loan misappropriation in Anglo Irish Bank to which it was the former auditor.

This comes hot on the heels of a fresh challenge facing Ernst & Young in USA where the three judges of the Court of Appeals for the Ninth Circuit has reinstated last week the options backdating charges implicating the auditors over the $2.2 billion misrepresentations in Broadcom Corporation’s financial statements.

The US appellate court claimed that Ernst & Young should have seen red flags when it privately raised the issue with Broadcom, but instead went on giving its endorsement to the semiconductors firm’s financial statements.

In Ireland, where the accounting firm has posed counter affidavit against the investigation by the Chartered Accountants Regulatory Board (CARB) into the alleged loan misappropriation in Anglo Irish Bank, Ernst & Young has been trying to undermine the investigation process by challenging the Board’s appointment of special investigator John Purcell.

Following CARB complaints committee’s meeting in 2009 that tackled the role of Ernst & Young in the questioned directors’ loans in Anglo Bank, the Board thereafter appointed Purcell to carry out an investigation.

Purcell has started his inquiry into the eight staff of Ernst & Young since July 2010 through FTI, the forensic accountancy firm.

The Irish high court found that the Board has not yet filed an actual complaint against Ernst & Young as required by the board’s process and that the Board has not established a specific issue on which to focus the investigation.

Ernst & Young clarified that it does not intend to bar the investigation of Purcell, only that the section in the complaint connected to the probe does not stand on actual complaints.

Furthermore, the accounting firm claimed that it has not been presented with a prima facie evidence related to its case until now.

Ernst & Young sought to see the full transcript filed by former Anglo director Gary McGann and former chief financial officer Matt Moran. The prima facie evidence was already forwarded to Purcell, running about 90 pages in length.

However, Ernst & Young lamented in an affidavit that Purcell has limited the prima facie case presented to the auditors to only 46 pages.

“It is impossible to evaluate the weight that should be attached to certain matters or alleged facts without a comprehensive view of the testimony of certain witnesses,” said Ernst & Young’s managing partner Michael McKerr.

In the period leading up to 2009 when Ernst & Young was still the auditor to Anglo Irish Bank, a certain Sean FitzPatrick allegedly concealed the directors’ loans from investors.

In September 2008, the Irish Life & Permanent allegedly participated in a ‘back-to-back” deposit transaction with Anglo Bank.

 

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