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E&Y May Soon Face Civil Charges in New York

Tammy Whitehouse | December 20, 2010

Ernst & Young is close to facing civil fraud charges in New York for its part in the collapse of Lehman Brothers, according to published reports.

New York Attorney General Andrew Cuomo is reportedly preparing to file charges alleging that Ernst & Young had a hand in deceiving investors about how leveraged Lehman actually was as it marched toward bankruptcy in 2007 and 2008. According to Lehman's bankruptcy examiner, the firm hid up to $50 billion in debt by classifying repurchase agreements as asset sales around key financial reporting dates.

Ernst & Young audited Lehman's financial statements from 2001 through 2007, the last full year that Lehman remained in business. The Big 4 firm gave clean audit opinions to Lehman's financial reports, including those where Lehman's now infamous “Repo 105” transactions were described in financial statements as true sales of assets. Repo 105 is the term Lehman used to...

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