Archives: Accountant Liability

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Failed Colonial Bank’s Accountants Lose Bid to Dismiss FDIC’s Suit Against Them

A federal court has denied the motion of the accountants of the failed Colonial Bank’s holding company to dismiss the claims the FDIC, in its capacity as the failed bank’s receiver, had filed against them. As discussed here, the FDIC’s November 2012 lawsuit was the first the agency had filed against a failed bank’s accounting … Continue Reading

E&Y Settles Ontario Sino-Forest Securities Suit for $117 Million

In what is by far the largest settlement in the current wave of securities litigation involving Chinese companies, Ernst &Young, which served as the outside auditor for Sino-Forest, has agreed to pay C$117 million to settle the securities suit that  Sino-Forest investors filed  in Ontario against the accounting firm. (At current exchange rates, the Canadian … Continue Reading

Audit Firms’ Litigation Woes Mount, Report Shows

As reflected in a recently released and detailed analysis of audit firms’ current litigation and prior lawsuit settlements, the audit firs’ litigation challenges are a serious and growing problem. The July 2009 presentation by Mark Cheffers, the CEO of Audit Analytics, is entitled "Accounting Professional Liability: Scorecards and Commentary" and can be found here. According … Continue Reading

KPMG Settles Options Backdating Gatekeeper Claim for $22.5 Million

In the latest twist in the long-running options backdating saga, and in what appears to be a significant milestone in the options backdating-related gatekeeper claims, on June 15, 2009, Vitesse Semiconductor announced (here) that it had reached a settlement with its former auditor, KPMG LLP, in connection with the option backdating related allegations. In the … Continue Reading

New Century Trustee Sues KPMG; Will Other Gatekeeper Claims Follow?

In a development that may foreshadow further "gatekeeper" claims as part of the current credit crisis litigation wave, on April 1, 2009, the trustee for the New Century Financial Corp. liquidation initiated lawsuits in California and New York against KPMG and its international parent, seeking to recover $1 billion in damages for negligence and for … Continue Reading

So What About Auditor Liability Caps?

One of the recurring suggestions in would-be reformers’ standard litany of proposed changes for litigation relief is the introduction of auditor liability caps. For example, the Committee on Capital Markets Regulation interim report (about which refer here) proposed the “elimination or reduction of gatekeeper litigation, either through a cap on auditor liability or creation of a … Continue Reading

New Century Examiner’s Report Faults KPMG, Company Officials

In a sweeping 581-page report (here), the examiner appointed in connection with the New Century Financial Corporation bankruptcy found that New Century “engaged in a number of significant improper and imprudent practices related to its loan originations” that “created a ticking time bomb that detonated in 2007.” Bankruptcy examiner Michael J. Missal issued his report … Continue Reading

An Alternative to Auditor Liability Caps?

As the various blue-ribbon panels studying the competitiveness of the U.S. financial markets have proposed various regulatory reforms, one recurring theme has been the proposal for auditor liability caps (refer here), a topic that is also under study by the European Commission (refer here). A 2007 paper by Professor Lawrence Cunningham of the George Washington … Continue Reading

Looking at Auditor Liability Caps

When the Committee on Capital Markets Regulation (popularly known as the Paulson Committee) in its Interim Report (here) recommended "setting a cap on auditor liability," the Committee relied for support on the steps in that direction that have been taken by the European Commission. In its latest effort along those lines, the European Commission on … Continue Reading