Saturday, January 22, 2011

Big Wins Elude Investors in Auditor Lawsuits

Via Reuters (H/T Going Concern).
All of the "Big Four" auditors have been sued by investors who collectively seek to recoup billions of dollars lost in the financial meltdown. But while some key cases are yet to be resolved -- and a recent civil fraud lawsuit against Ernst & Young by New York prosecutors potentially opens a new front -- auditors so far have scored some significant court victories.
Lawsuits have been dismissed against Deloitte & Touche over its audits of mortgage financier Fannie Mae, as well as a case against PricewaterhouseCoopers accusing it of helping hide risks at insurer American International Group.
KPMG settled a lawsuit stemming from its audits of mortgage lender Countrywide Financial Corp, now part of Bank of America, for a relatively modest amount.
"Every time somebody comes up with a new fraudulent scheme, auditors miss it," said Andrea Kim, a partner at law firm Diamond McCarthy LLP in Houston who represents plaintiffs in auditor lawsuits. "The historical pattern is that they find a way to manage the litigation to limit their liability."
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