Fraud Charges Loom for Ernst & Young

Ernst & Young is poised to become the first major accounting firm charged for having a hand in the financial crisis. New York prosecutors are planning to file civil fraud charges against the firm for the role it allegedly played in the collapse of Lehman Brothers, one of its biggest clients, the Wall Street Journal reports. Sources say Ernst & Young earned about $100 million for auditing Lehman Brothers between 2001 and 2008; now the firm is accused of standing by while the bank duped investors.

The charges are part of an investigation into banks that misled investors by making their risk look lower than it really was at the end of each quarter. Other banks and firms are also being targeted in the investigation, but the Ernst & Young probe is the most advanced, says a source. The accounting firm is accused of approving Lehman Brothers’ use of misleading “Repo 105” transactions as well as ignoring a whistle-blower who was concerned about the trades. Click for more on the shady practices at Lehman Brothers.
(More Ernst & Young stories.)