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November 29, 2012

Anglo Irish to sue E&Y over auditing failures

Ernst & Young Ireland (E&Y) is being sued by Anglo Irish Bank over its alleged failure to spot the bank’s exposure to Ireland’s property bubble.

Irish Bank Resolution Corporation (IBRC) Anglo Irish’s rebranded business, said that proceedings had been issued on 27 November relating to E&Y’s role "as auditors to Anglo Irish Bank Plc pre-nationalisation".

The lawsuit, the first example of an Irish bank suing its auditor following the country’s banking crisis, has been timed to forestall the use of the state’s six year statute of limitations to prevent legal action.

The litigation follows an investigation by the Chartered Accountants Regulatory Board (CARB) former auditor general John Purcell, into E&Y’s auditing of Anglo Irish up until 2008.

The preliminary investigation found E&Y failed to detect systematic refinancing over year ends of large loans by former head of Anglo Irish Sean Fitzpatrick; it also failed to refer transactions between Anglo Irish and Irish Life and Permanent and to properly disclose a loan made to one of its own directors.

Apart from confirming the proceedings, IBRC declined to comment, saying "As this matter is now the subject of litigation, it would be inappropriate for the Bank to comment further at this time."

E&Y said in a statement that it was aware of proceedings, it had not yet received an official statement, and that "without more detail it is difficult for us to comment further." The firm said it "stood by the quality" of its auditing work for Anglo Irish, and "will vigorously defend any such proceedings."

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