Jury holds Ernst & Young liable for losses from Madoff’s Ponzi scheme
14 Nov 2015
A Washington state jury yesterday found Ernst & Young LLP liable for the losses of an investment firm, from the 2008 collapse of fraudster Bernard Madoff's multi-billion dollar Ponzi scheme (Read more: The Madoff case).
A jury in Seattle sided with FutureSelect Portfolio Management Inc in finding the auditing firm had been negligent in its work for funds that funneled money to Madoff.
FutureSelect's lawyer Steven Thomas confirmed the verdict.
Ernst & Young did auditing work for funds manage by Tremont Group Holdings Inc's Rye Investment Management unit.
The jury found damages of $20.3 million and held Ernst & Young liable for half of that, according to Thomas. He added, prejudgment interest could bring FutureSelect's award to $25 million.
"This jury found that Ernst & Young's job was to try to find this fraud," Thomas said in an interview.
"They were the gatekeeper and didn't do their job."
The trial comes as the first in which an auditor had been held liable for its role auditing one of Madoff's so-called feeder funds.
Madoff who pleaded guilty in 2009 (US government seeks 150-year sentence for Madoff ), is serving a 150-year prison term after he pleaded guilty in 2009 to running a scheme that cost investors an estimated $17 billion or more in principal.
According to commentators, though, negligence cases against Big Four accounting firms were rare, this one was brought under a Washington state securities law that was more protective of investors than similar state and federal statutes.
The jury finally issued mixed findings on the state securities claims while ruling in FutureSelect's favour on Ernst & Young's negligent misrepresentation.
According to Amy Call Well, a spokeswoman for Ernst & Young, the firm was pleased the jury rejected the ''vast majority'' of FutureSelect's claims.
She said Ernst & Young was considering whether to appeal.
