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EY found liable for investor's Madoff losses

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27th Nov 2015
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A US jury has found EY liable for the losses of an investment firm from the collapse in 2008 of fraudster Bernard Madoff's multi-billion dollar Ponzi scheme.

A jury in Seattle agreed with FutureSelect Portfolio Management Inc that the accounting firm was negligent in its work for funds that funneled money to Madoff, who is serving a 150-year prison sentence, Reuters reported.

EY did auditing work for funds managed by Tremont Group Holdings Inc's Rye Investment Management unit, Reuters reported.

The jury found damages of $20.3m (£13m) and said that EY was liable for half of that, Steven Thomas, FutureSelect's lawyer told Reuters. Prejudgment interest could bring FutureSelect's award to $25m, he said.

"This jury found that Ernst & Young's job was to try to find this fraud," Thomas told Reuters. "They were the gatekeeper and didn't do their job."

A spokeswoman for EY said in a statement to Reuters that the jury rejected the "vast majority" of FutureSelect's claims. The investment firm had been seeking $112m, she told Reuters.

She said that EY continues to believe it was not responsible for any of these investors’ losses and that it was among many other auditors of funds that used Madoff as their investment adviser.

"While we regret the investors' losses, no audit of a Madoff-advised fund could have detected this Ponzi scheme," she said. "We are reviewing filing an appeal."

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paddle steamer
By DJKL
27th Nov 2015 10:09

Fairly onerous

"This jury found that Ernst & Young's job was to try to find this fraud," Thomas told Reuters.

Whatever happened to watchdog not bloodhound?

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By The Innkeeper
27th Nov 2015 11:44

perhaps

the law is different in the usa

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Replying to Barbara G:
paddle steamer
By DJKL
27th Nov 2015 14:40

Given their

The Innkeeper wrote:

the law is different in the usa

Given their litigation culture one presumes lion taming is a safer career choice in the USA.

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Chris M
By mr. mischief
28th Nov 2015 14:08

Quite right Yankees !

I think we are way too lax on our auditing in Europe.  For a start, auditing tests should pick up on material frauds, so presumably E&Y must have argued this was immaterial?

Beyond that, most auditors turn up and pick up the fee, stuff the shareholders.  In Europe, not only should the likes of Fred the Shred taken up residence at HMP somewhere, so should some bank auditors.

Instead of hauling a few little guys over the coals for not signing documents right and so on, ICAEW and similar bodies should be removing the bank auditors who failed in their duties from membership.  Of course this can never happen because everyone in ICAEW and so forth spends all their time toadying up to the Big 4.

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By DeathandTaxes222
30th Nov 2015 12:22

Expectation gap

The public everywhere think auditors are the fraud catchers in chief and if they arn't, what's the point of them?

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