Ernst & Young Sued for $900M Over Madoff Audits

By and | December 6, 2011

Ernst & Young LLP has been sued for $900 million by the liquidators of a fund that once funneled money to the now-imprisoned swindler Bernard Madoff.

The lawsuit, filed on behalf of M-Invest Ltd, accused Ernst & Young of negligence, professional malpractice and breach of contract over its audits for the Cayman Islands-based fund from 2003 to 2007.

Union Bancaire Privee, a private Swiss bank, created the M-Invest “feeder fund” solely to invest client assets with Madoff’s firm, Bernard L. Madoff Investment Securities LLC.

The bank and M-Invest agreed last December to pay as much as $500 million to settle claims by Irving Picard, the trustee liquidating Madoff’s firm and seeking money for his victims, that they profited improperly from Madoff’s Ponzi scheme.

Neither admitted wrongdoing in agreeing to settle, and the accord won bankruptcy court approval in January. Picard had sued for $1 billion.

Ernst & Young spokesman Charles Perkins in an emailed statement said the lawsuit has no merit, and the auditor will defend itself vigorously.

Eric Seiler, a lawyer for the liquidators of M-Invest, did not immediately return calls seeking comment.

The liquidators did not in a brief court filing elaborate on their allegations. They filed their case on Sunday in the New York State Supreme Court in Manhattan.

Ernst & Young has also been sued by investors and the office of New York’s attorney general over its work for the investment bank Lehman Brothers Holdings Inc., which went bankrupt three months before Madoff’s Dec. 2008 arrest.

Madoff, 73, is serving a 150-year prison sentence.

The case is M-Invest Ltd. v. Ernst & Young LLP, New York State Supreme Court, New York County, No. 653353/2011.

(Reporting by Jonathan Stempel and Karen Freifeld in New York; editing by John Wallace and Matthew Lewis)

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