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New York Files Charges Against Ernst & Young

Tammy Whitehouse | December 22, 2010

The state of New York has filed a civil lawsuit charging Ernst & Young with helping Lehman Brothers commit accounting fraud by concealing the investment bank's liquidity crisis as it spiraled into collapse.

Attorney General Andrew Cuomo alleges the Big 4 firm approved Lehman's notorious “Repo 105” transactions to remove liquid, fixed-income securities off the balance sheet for the sole purpose of reducing leverage that would be reported to investors, analysts, lenders, and anyone else interested in Lehman's financial condition. Cuomo is seeking the return of $150 million in audit fees paid by Lehman to E&Y from 2001 to 2008, plus unspecified investor damages and other relief.

Cuomo filed the complaint in New York Supreme Court under the state's Martin Act, which gives the attorney general's office broad powers to...

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