Auditors found liable for over $10 million in Madoff losses

17 Nov 2015 | Author: | No comments yet »

Ernst & Young Loses Trial Over Audits Linked to Madoff.

SEATTLE – A jury in King County Superior Court has found the firm of Ernst & Young negligent and liable for half of more than $20 million lost by a Washington state investment company in the wake of Bernie Madoff’s multi-decade investment scam.Ernst & Young’s failure to vet financial audits backed by con man Bernie Madoff’s accountant may cost the consulting firm $25 million based on the verdict in the first trial of an auditor over losses tied to the biggest Ponzi scheme in U.S. history. Thomas, attorney for FutureSelect Portfolio Management Inc., said the jury found the Big Four auditing firm was negligent in its work as auditor for a feeder fund that pooled investors’ cash and funneled it Mr.

The accounting firm audited Rye from 2000 to 2003 and performed surprise audits of Tremont during that period until 2008, FutureSelect said in court documents. In the end, the jury issued mixed findings on the state securities claims while ruling in FutureSelect’s favor on Ernst & Young’s negligent misrepresentation. Officials at the firm are reviewing whether to appeal. “EY was not the auditor of any Madoff entity; we were among the many auditors of funds that chose to use Madoff as their investment advisor,” she said. “While we regret the investors’ losses, no audit of a Madoff-advised fund could have detected this Ponzi scheme.” Madoff revealed his scheme in December 2008 amid a collapsing economy, admitting that account statements showing clients held nearly $68 billion were a sham. The roughly $17.5 billion in principal invested by retirees, charities and other clients over decades was mostly gone — paid out as fake profits or raided by Madoff’s family and cronies. The case was the first suit against an auditor of one of the Madoff feeder funds, which funneled billions of dollars from investors all over the world to Mr.

David Friehling, Madoff’s accountant for more than 20 years, pleaded guilty to fraud in 2009 and was sentenced to two years’ probation after cooperating with prosecutors. Madoff is currently serving a 150-year prison sentence, and his investment firm is liquidating. “They are the first auditor to be found liable in the Madoff case,” Mr.

Thomas said. “We are incredibly grateful to this jury for listening to the evidence and finding that auditors are the gatekeepers, and where the financial statements are fraudulent, it’s their job to say whether they’re real or fake before they get to investors.” At the start of the trial last month, Mr. Madoff’s firm offered “were too good to be true.” The jury has been deliberating since Tuesday, although court wasn’t in session on Wednesday, following a trial that stretched over several weeks.

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