Ernst & Young will pay $10 million for its role in assisting failed bank Lehman Brothers in concealing its amount of debt and is financial problems, according to the Financial Times. The Lehman collapse in 2008 led to a wave of bank failures and falling stock prices that coincided with the worst financial crisis in the U.S. since the Great Depression.
Ernst & Young approved of Lehman’s accounting for financing, allowed it to keep billions off its balance sheets and stood by while management made misleading statements to analysts. It also failed to inform an audit committee about problems. NY attorney general Eric Schneiderman told the Financial Times, “If auditors issue opinions that are unreliable or provide cover for their clients by helping to hide material information, that harms the investing public, our economy and our country.”
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Schneiderman intended to sue for $150 million, to be distributed among former shareholders of Lehman Brothers, but had to settle for $10 million after it paid a $99 million settlement last year.
This is the first time legal action by U.S. authorities to punish those responsible for the financial crisis, even though the Department of Justice and SEC investigated the matters previously. Senator Elizabeth Warren has expressed disapproval of the lack of action from authorities to penalize companies involved in bringing about the financial crisis.
