Jury finds Ernst & Young liable over investor’s Madoff losses

14 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. 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. 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.

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