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Ernst & Young faces US lawsuit over Lehman

Ernst & Young has been sued by New York’s attorney general over its role in the collapse of Lehman Brothers in 2008.

The accountancy firm has been accused of being complicit in a “massive accounting fraud” which Lehman ran.

Ernst & Young has said it will “vigorously defend” itself, claiming that there is no factual or legal evidence to be brought against the auditor in this context.

Ernst & Young says: “Lehman’s audited financial statement clearly portrayed Lehman as a highly leveraged entity operating in a risky and volatile industry.”

New York attorney general Andrew Cuomo says: “At a time when it was critical for investors to make informed decisions as to whether to keep or to buy Lehman, Ernst & Young assisted Lehman in defrauding the public.”

The lawsuit did not name as defendants any former top executives at the investment bank whose September 2008 collapse helped spark the global financial crisis.

According to Reuters, the lawsuit seeks more than $150 million in fees that Ernst & Young received from 2001 to 2008 as Lehman’s outside auditor as well as other unspecified damages.

The case focuses on a practice known as Repo 105, which involves removing money temporarily from the balance sheet.

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