The former Anglo Irish Bank has taken legal action against Ernst & Young, auditors to the bank before the financial crisis and until the lender was taken into State ownership in 2009.
The State-owned bank, now called Irish Bank Resolution Corporation, said the case relates to the firm’s role as auditors before the bank’s nationalisation but it would not elaborate on the details of the action. The bank issued the legal proceedings on Tuesday, according to High Court records.
This is the first time an Irish bank has taken legal action against its former auditors over their conduct in the run-up and during the financial crisis.
Ernst & Young confirmed it was aware of the legal proceedings but could not comment as it had not received the details of IBRC’s proceedings.
“Although Ernst & Young is aware of proceedings issued by IBRC [formerly Anglo Irish Bank], we have not formally been served with nor have we received a statement of claim setting out the details of IBRC’s claim,” said the firm.
Six-year limit
The timing of the action is thought to be aimed at beating a six-year legal time limit that would have blocked the action.
Ernst & Young signed off the bank’s accounts for the year to the end of September 2006 on December 5th, 2006. These accounts are believed to be crucial to the bank’s legal action.
Proceedings had to be issued against the firm before December 5th as the law bars civil cases being taken after six years.
Borrowings concealed
Ernst & Young has been criticised for failing to spot the full extent of the borrowings of Anglo chairman Seán FitzPatrick, which had been concealed by the bank for eight years.
The concealment of the loans hastened the demise of Anglo when the issue came to public light in December 2008.
IBRC said the action was part of its continuing work to wind down the former Anglo and Irish Nationwide, and deal with “legacy issues across every area of those institutions” before and after their nationalisation.
Law firm McCann FitzGerald is representing the bank.
Ernst & Young, one of the country’s “big four” accountancy firms, earned €9.1 million in fees for auditing Anglo over the decade to the bank’s nationalisation in January 2009. Deloitte replaced Ernst & Young as the auditors that year.
Ernst & Young has been criticised for failing to warn about Anglo’s sharp growth in its lending exposure to property.
