Best Buy Parts with Ernst & Young

In a separate matter, the Big Four firm agreed to pay $125 million to the FDIC to resolve charges stemming from its role as the former independent ...
Stephen TaubJanuary 5, 2005

Best Buy Co. Inc. dismissed Ernst &Young as its independent auditor, stemming from conflict-of-interest issues regarding a former director at the electronics retailer.

E&Y will stay on to conclude its audit of Best Buy’s February 26, 2005, fiscal year. The company has not yet named a new independent auditor.

According to Best Buy regulatory filing this week, the change of auditors is directly related to last May’s resignation of former director Mark C. Thompson, who also served on the audit committee from March 2000 to August 2003. In a filing at the time, Best Buy disclosed that Thompson entered into a personal service agreement with Ernst & Young that was not disclosed by either party until May 4, 2004. From December 2002 to April 2004, the audit firm paid Thompson $377,500 plus reimbursement of expenses, the retailer added.

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In a separate matter, on Christmas Eve Ernst & Young agreed to pay $125 million to the Federal Deposit Insurance Corporation (FDIC) to resolve charges stemming from its role as the former independent auditor of Superior Bank. The bank was closed down by the Office of Thrift Supervision (OTS) in 2001.

According to the OTS, under a consent order the audit firm will pay $85 million to the FDIC as receiver for Superior Bank. E&Y will pay an additional $40 million in restitution to the FDIC, which insures deposits for more than 9,025 banks and savings and loans, reported Reuters. The consent order also requires that E&Y adopt and implement specific internal controls and policies concerning its audits of federally insured savings associations, and that it provide periodic reports concerning the audits to the OTS.

In July an FDIC lawsuit against Ernst & Young, which sought $2 billion in damages, was deemed without merit. The firm agreed to the current order without admitting or denying that its conduct in auditing Superior Bank did not comply with professional accounting standards.