New York prosecutors accused Ernst & Young of helping Lehman Brothers engage in a “massive accounting fraud” by approving a move that temporarily reduced the brokerage firm’s debt and gave investors an impression it was in a stronger financial condition.
The civil lawsuit, filed in a New York state court, alleges the auditing firm “substantially” helped Lehman mislead investors from 2001 until the brokerage firm’s 2008 bankruptcy filing by signing off on the accounting sleight of hand.
The strongly worded lawsuit goes further than accusing Ernst & Young of misconduct. It alleges Lehman engaged in a “massive accounting fraud” by using the accounting treatment, known as Repo 105.
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