Conflict of Interest: Ernst & Young’s Role in Telecommunications Company Facing Probe
Amid fresh controversies that recently confronted the global auditing firm Ernst & Young, a new investigation over its role as administrators of the failed telecommunications company Wind Hellas has been launched by the Institute of Chartered Accountants in England and Wales (ICAEW) for possible conflict of interest, The Telegraph reports.
Hard on the heels of a lawsuit filed by New York State Attorney General Andrew Cuomo against Ernst & Young on December 2010 over the collapse of Lehman Brothers that had injured its investors, which followed an inquiry launched by the House of Lords Economic Affairs Committee on the auditors’ role in the 2008 crisis, the auditing firm is now on fire again.
The telecommunications company went bust in 2009 amid economic crisis in Greece which pushed its owner, Naguib Sawiris, to sell the assets of Weather Finance III, a holding company to Wind Hellas, to creditors SSN Ad-Hoc Committee. The sale of assets eventually led to the full control of a new holding company established by majority of the bondholders.
However, Bertrand des Pallières, one of the telecommunications company’s creditors, alleged that Ernst & Young accepted the role as Wind Hellas’s administrators despite its long-standing connection with the firm. The administration had cost investors of Wind Hellas more than £1 billion.
John Morton, ICAEW’s investigation manager, has written to Ernst & Young’s partner that administered the telecommunications company, Maggie Mills, telling her that she should have declined the appointment considering a potential conflict of interest.
Ernst & Young will probably pay roughly 150 percent more than what it received from the telecommunications company in payments if the investigators would find out that the auditing firm had breached ICAEW’s code of ethics.