Ernst & Young LLP agreed to pay an $84 million settlement two weeks into the ongoing trial of a long pending malpractice lawsuit in Boston over its audit work more than a decade ago for the defunct Bank of New England Corp. Here is an article that set the stage for the trial.
The bank’s bankruptcy trustee filed the lawsuit in 1993 accusing Ernst of malpractice, among other claims. The bank’s demise was triggered by the January 1990 announcement that it would report more than $1 billion in previously undisclosed losses on bad loans for its 1989 fourth quarter. Just four months earlier, the bank had raised $250 million through a public debt offering. The bank filed a chapter 7 (i.e., a liquidation) bankruptcy case in January 1991.
The settlement is yet another reminder of the litigation pressures that the Big Four accounting firms are currently facing over big business failures. Here are earlier posts on Ernst’s other legal problems over the past year.