Save content
Have you found this content useful? Use the button above to save it to your profile.
AIA

Ernst & Young could face unlimited fine for Equitable Life

by
21st Jul 2008
Save content
Have you found this content useful? Use the button above to save it to your profile.

If the Accountant’s Joint Disciplinary Scheme (JDS) tribunal rules against Ernst & Young for the firm’s involvement in the Equitable Life affair, the penalties could include an unlimited fine. But the JDS’ draft report also includes the option of a severe reprimand and the order to pay costs.

The initial report is the culmination of a four year JDS investigation which focussed on the auditors’ possible negligence in the near-bankruptcy of the life insurance company, which was only saved by a cut in the pensions and retirement savings of its policyholders in 2000.

The initial Treasury report, conducted by Lord Penrose, concluded that Equitable Life had been “over-generous” in its pay-outs and was thus “the author if its own misfortunes”. The insurers subsequently lodged a £4 billion claim against the Big Four firm in the High Court, which was only abandoned in 2005. The back-down saw Equitable Life forking out for Ernst & Young’s legal fees.

Only last week the Parliamentary and Health Service Ombudsman, Ann Abraham, issued her report on the sage last week. Entitled “Equitable Life – a Decade of Regulatory Failure”, it recommended that government offer an apology and establish a compensation scheme.

The JDS’ initial draft follows hot on the heels of Abraham’s report, although the final version and any penalties issued will not be declared until December. Any monies received will go to fund the JDS itself. Ernst & Young is charged with “failing to understand key aspects of Equitable's business, failing to act with sufficient independence and objectivity, and giving the insurer's accounts a clean bill of health for several years when they did not give a true and fair view of its finances.”

The audit firm has maintained it could not have told its client anything it did not already know.

Tags:

Replies (0)

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.