By Nick Brown
NEW YORK Oct 18 Ernst & Young has
agreed to pay $99 million to former Lehman Brothers
investors who have accused the auditor of helping Lehman
misstate its financial records before the investment bank's
collapse triggered a financial crisis in 2008.
The agreement, which must still get court approval, signals
the end of a massive class action against Lehman's former
directors, as well as several other financial institutions,
according to a letter filed Wednesday in federal court in
Manhattan. Lehman is accused of using the infamous "Repo 105"
accounting practice to misleadingly understate its leverage to
make itself appear more financially solvent.
The investors who brought the lawsuit asked the court to
suspend the case while the sides draft a settlement agreement.
"The settling parties are currently drafting a detailed
stipulation of settlement and anticipate" asking the court for
permission to notify class members of the deal in about 30 days,
the investors said in the letter.
Ernst & Young said it denied all liability, settling the
case "to put this matter behind us."
"Lehman's audited financial statements clearly portrayed
Lehman as what it was - a highly leveraged entity operating in a
risky and volatile industry; and Lehman's bankruptcy was not
caused by any accounting issues," Ernst & Young said in a
Ernst & Young is the last defendant still involved in the
case. Bank of America Corp, Morgan Stanley and
more than 30 other underwriters of Lehman debt reached a $417
million settlement in December 2011, while Lehman's former
officers, including ex-Chief Executive Richard Fuld, settled for
The case goes back to 2008, when Lehman's historic collapse
served as a key catalyst to the global financial crisis.
Investors filed the lawsuit that year, accusing Lehman
directors of painting a misleading picture of Lehman's health in
financial statements and securities offerings. Ernst & Young and
the underwriters contributed to the fraud by failing to
investigate and ensure the truthfulness of the statements, the
Lehman ended its three-year Chapter 11 in 2011 with a
liquidation plan slated to repay creditors about $65 billion, or
an average of about 21 cents on the dollar for allowed claims.
The case is In re Lehman Brothers Equity/Debt Securities
Litigation, U.S. District Court, Southern District of New York,
Lehman's bankruptcy is In re Lehman Brothers Holdings Inc,
U.S. Bankruptcy Court, Southern District of New York, No.