The former Anglo Irish Bank has sued the one-time auditors to the bank, the blue-chip accountancy firm Ernst & Young, over its conduct in the years leading up to the collapse of the bank in 2009.
Legal proceedings were issued against the firm, one of the country’s so-called “Big Four” accountancy practices on Tuesday by State-owned Irish Bank Resolution Corporation, the new name for Anglo, High Court records show.
This is the first time an Irish bank has taken legal action against its former auditors over their role before and during the financial crisis.
The bank confirmed the legal proceedings.
“These proceedings relate to the role of Ernst & Young as auditors to Anglo Irish Bank pre-nationalisation,” the bank said but declined to elaborate on the nature of the action.
“As this matter is now the subject of litigation, it would be inappropriate for the bank to comment further at this time,” the bank said.
Ernst & Young said that it was unable to comment on details of the bank’s action as it had not been served with the statement of claim, the legal document outlining the bank’s case against the firm.
“Although Ernst & Young is aware of proceedings issued on Tuesday evening 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.
The accountants were replaced as the long-time auditors to the bank by Deloitte in 2009. The firm earned €9.1 million in audit fees from the bank over a 10-year period.
The legal action is believed to be timed to beat a six-year legal time limit falling next week that would have blocked legal proceedings being taken by the bank.
The proceedings are the latest blow to the accountancy firm over its involvement with Anglo, which has cost the State €29.3 billion as a result of the property crash.
Ernst & Young was criticised by a special investigator appointed by the regulatory body for the chartered accountancy profession over its conduct in the events surrounding the nationalisation of Anglo in January 2009.
The former Comptroller & Auditor General John Purcell said in a report following a two-year investigation that the firm had failed to detect the scale of the bank’s loans to former Anglo chairman Sean FitzPatrick.
Mr FitzPatrick had temporarily moved loans of up to €122 million off the books of the bank over its financial year-ends every September for eight years to conceal them.
Mr Purcell said that Ernst & Young also had a case to answer over its failure to refer to the September 2008 window-dressing transactions between Anglo and Irish Life & Permanent in the firm’s audit report on the first set of Anglo’s financial statements for the year to September 2008.
The accountancy firm contested Mr Purcell’s claims last year, saying that it “fundamentally disagrees” with his view that it had a case to answer in three areas under his investigation.
The cases were referred to the disciplinary process of the Chartered Accountants Regulatory Board but the disciplinary hearings have been postponed at the request of the Director of Public Prosecutions pending the outcome of criminal cases against Mr FitzPatrick and two other former Anglo executives.
