The Alameda County Employees’ Retirement Association asked a judge to certify a class-action lawsuit against Lehman Brothers Holdings Inc.’s former auditor Ernst & Young LLP over investment losses.
The retirement system is seeking to lead the group suit on behalf of investors who lost money on bankrupt Lehman’s common stock and options, it said in a court filing. Ernst & Young helped to mislead investors by making false and misleading statements in regulatory reports about Lehman’s finances before its 2008 bankruptcy, the retirement system alleged in the Feb. 3 filing.
The investors originally sued Lehman, former executives including ex-Chief Executive Officer Richard Fuld and underwriters, adding Ernst & Young as a defendant in 2010. Since then, they have settled with many defendants -- Fuld and other Lehman executives used a $90 million insurance payment to pay for the accord -- while continuing to litigate against Ernst & Young and a UBS AG unit that sold Lehman structured products, according to the filing.
Charlie Perkins, an Ernst & Young spokesman, declined to comment on the Oakland, California, retirement system’s filing. The auditing firm has said its work for Lehman met all applicable professional standards and applied rules that existed at the time. It also is fighting a lawsuit over Lehman’s collapse by the New York attorney general.
Alameda County and other pension funds amended their lawsuit in 2010 to add findings contained in a 2,200-page report published by Lehman bankruptcy examiner Anton Valukus.
According to Valukas, Lehman used balance-sheet devices such as so-called Repo 105 transactions to make its debt load look lighter than it was.
Lehman filed for bankruptcy in September 2008 with $639 billion in assets. It has said it will spend the next few years completing a liquidation to pay unsecured creditors less than 18 cents on the dollar.
The case is In re Lehman Brothers Equity/Debt Securities Litigation, 08-cv-05523, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Linda Sandler in New York at firstname.lastname@example.org.