Jury finds Ernst & Young liable over investor's Madoff losses

[Lodestar]

Source: Reuters

Ernst & Young LLP was found liable on Friday by a Washington state jury for the losses of an investment firm from the collapse in 2008 of fraudster Bernard Madoff's multibillion dollar Ponzi scheme.

A jury in Seattle sided with FutureSelect Portfolio Management Inc in finding the auditing firm was negligent in its work for funds that funneled money to Madoff.

Steven Thomas, FutureSelect's lawyer, confirmed the verdict. Ernst & Young did auditing work for funds managed by Tremont Group Holdings Inc's Rye Investment Management unit.

The jury found damages of $20.3 million and found Ernst & Young liable for half of that, Thomas said. Prejudgment interest could bring FutureSelect's award to $25 million, he said.

"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."


Read more: http://www.reuters.com/article/2015/11/13/us-madoff-trial-ernstyoung-idUSKCN0T22RF20151113#WJECgSfQ9zHd9SiR.97

[LiberalArkie]

1. Did not expect that, but appeals may change it.

[Travis_0004]

2. I think this ruling makes sense

One major red flag was the auditor madoff used.

A small unknown firm with one accountant can not conduct a proper audit on a firm the size of madoffs. Plus, no multimillion dollar company uses small auditing firms. (literally one accountant)

I work in accounting, and we want people to trust any audits we do. We use one of the big 4 accounting firms for that reason. Everybody has heard of them, and everybody knows who they are. If we were to switch, I could see going outside of the big 4 but it would have to be a very large firm.

To put it another way. I will deposit 1,000 dollars at 5/3rd bank. I'll deposit it at a small credit union. I will not deposit it with David on 5th ave. Madoff was essentially having David on 5th ave audit the books.

This should have been discovered within an hour of looking into madoff, and should have been a major red flag.

[Jim Lane]

6. You're right that it should have been discovered. IIRC it was.

I vaguely recall reading of some financial advisor who had a client who had heard about Madoff's fantastic success and suggested that he (the client) should get in on it. The advisor's initial inquiry uncovered that Madoff was using a very small accounting firm that derived all or nearly all its revenue from providing Madoff with the statements he wanted. On that basis alone, the advisor advised his client to steer clear.

It is surprising, though, that this wasn't a much more common reaction. It is, as you say, a major red flag.

[Kali]

3. I remember them from Charles Keating days.

I was a juror on his civil trial in Tucson.

I found this.

http://www.nytimes.com/1992/07/15/business/company-news-ernst-young-settles-lincoln-savings-case.html

[marble falls]

5. Jack D. Atchison is an author now!

https://www.goodreads.com/author/show/1071850.Jack_D_Atchison

Jack D. Atchison's Books
Average rating: 4.00 · 2 ratings · 1 review · 3 distinct works · Similar authors

Simpler Times; Better Times... Simpler Times; Better Times: Growing up in the 1940s and 1950s
5.0 of 5 stars
5.00 avg rating — 1 rating — published 2013

Legal Extortion: The War Ag... Legal Extortion: The War Against Lincoln Savings and Charlie Keating
3.0 of 5 stars
3.00 avg rating — 1 rating — published 1995

Circling The Drain: America... Circling The Drain: America's Middle-class
by Michael D. Atchison, Jack D. Atchison
0.0 of 5 stars
0.00 avg rating — 0 ratings — published 2012

[JudyM]

4. Yes! Nt