22 December 2010
The attorney general of New York is suing accountants Ernst and Young over fraud linked to the collapsed investment bank Lehman Brothers. The state's prosecutor is seeking at least $150 million dollars in damages from the accountants. Caroline Hepker reports.
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New York's attorney general, Andrew Cuomo, has accused one of America's leading accounting firms of helping to hide massive accounting fraud at Lehman Brothers in the years before the bank collapsed in September 2008.
Mr Cuomo says the accounting giant advised Lehman Brothers on obscuring US$50 billion through so-called Repo 105 transactions, which temporarily move liabilities off balance sheet. Ernst and Young has made no comment on the case, but the attorney general wants the firm to repay fees it received, totalling US$150 million, plus damages to investors.
Ernst and Young was the outside auditor for Lehmans from 2001 until the firm's bankruptcy in September 2008. The failure of what had been a leading global financial firm triggered a crisis on Wall Street that tipped the world into deep recession.
Caroline Hepker, BBC News
Click to hear the vocabulary:
- accounting firms
companies that prepare and check accounts for businesses
here, hiding or preventing the discovery of some financial information
money that a person or business owes
- balance sheet
financial list to show what a company owns, owes and what money or income it received in a specific year
- made no comment
did not say anything in public
financial expert who checks accounts are completed correctly
money ran out