Equitable Life reduces claim against Ernst & Young |
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Published
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Tue, 19 Jul 2005 19:35
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In a rather sensational turn in the Equitable Life and E&Y legal scuffle, insurer Equitable Life revoked a significant portion of its claim against its ex-auditor, Ernst & Young, cutting the negligence claim amount to £700m from £2bn.
Equitable Life annulled the £1.3bn ‘lost sale’ claim against E&Y that alleged that Equitable could have earned a considerable amount of money through a sale of the company if the auditor had informed the insurer of its dwindling financial status. The lost sale claim had been withdrawn now, supposedly because former directors of the board at Equitable gave proof that they wouldn’t have disposed off the business to earn capital, rather would’ve affected other cutbacks in bonuses and the like, to realize money.
Whatever the reason for the withdrawal may be, this dramatic twist has definitely added more spice to the story, with both parties turning more antagonistic against each other. Auditor, Ernst & Young alleged that Equitable had “poured down the drain millions of pounds of policyholders’ money” in its “speculative and irresponsible gamble that was always bound to fail.”
It added vehemently, “We have always maintained this was a case that should never have been brought. The fact that four years into this process and nearly halfway through the trial, Equitable has abandoned its £1.3bn sale claim against Ernst & Young, shows what a desperate state their case is in.”
On the other hand, insurer Equitable Life summoned E&Y to acknowledge its accounting negligence in the case, saying that Ernst & Young was bent on defending the “indefensible”. Equitable’s chairman, Vanni Treves, stated that they would hereafter concentrate on other accusations against E&Y, together with the primary allegation of E&Y’s audit failure.
Treves said, “We believe that it does not weaken the overall claim value that we expect to receive at the end of this trial.” He informed further that the lost sale claim of £1.7bn against 15 ex-Equitable directors still existed.
Equitable Life had charged its former auditor, Ernst & Young for signing and approving of Equitable’s accounts without informing the insurer of the sad state of affairs at its financial end, as a result of which policyholders with the insurer had to bear huge losses.
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