Auditing

Suit Against E&Y Is Ruled Meritless

The FDIC had alleged that Ernst & Young committed fraud and was negligent in misstating the assets of a failed savings and loan.
Stephen TaubJuly 15, 2004

Finally, some good news for Ernst & Young.

A three-judge panel in Chicago ruled that a federal lawsuit against the Big Four accounting firm, related to the failure of a Chicago savings and loan in 2001, is without merit, according to the Associated Press.

The Federal Deposit Insurance Corp. had alleged that Ernst & Young committed fraud and was negligent in misstating Superior Bank’s assets, according to the report. The FDIC was seeking $2 billion from E&Y for the more than $500 million lost to the agency’s insurance fund, plus triple damages, said the wire service.

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Ernst & Young blamed Superior’s collapse on its board of directors and the poor economy in 2001, said the report. Superior Bank, the largest insured U.S. financial institution to fail in nearly a decade, was seized by federal regulators in July of that year.

The Chicago-based Pritzker family and their partner, New York developer Alvin Dworman, admitted no liability in Superior’s failure and no sanctions were imposed on them in an agreement with the FDIC and the Office of Thrift Supervision, according to the AP. The Pritzkers paid $400 million in December 2002 in return for a guarantee that the government would not sue or fine them in connection with Superior.