The Irish Bank Resolution Corporation (IBRC) has reportedly sued its one-time auditors, the blue-chip accountancy firm Ernst & Young, over its conduct in the years leading up to the collapse of the bank in 2009.
Formerly Anglo Irish Bank, the IBRC launched its legal proceedings against the firm, one of Ireland's so-called 'Big Four' accountancy practices on Tuesday, The Irish Times reports.
It is reportedly the first time an Irish bank has taken legal action against its former auditors over their role before and during the financial crisis.
'These proceedings relate to the role of Ernst & Young as auditors to Anglo Irish Bank pre-nationalization,' an IBRC spokesperson said but declined to give details of the nature of the action.
'As this matter is now the subject of litigation, it would be inappropriate for the bank to comment further at this time,' the spokesperson added.
Ernst & Young replied that it could not comment on details of the bank’s action as it had not been served with the statement of claim, the legal document outlining the bank’s case against the firm.
'Although Ernst & Young is aware of proceedings issued on Tuesday evening by IBRC, we have not formally been served with nor have we received a statement of claim setting out the details of IBRC’s claim,' said the firm.
The accountants were replaced as the long-time auditors to the bank by Deloitte in 2009. The firm reportedly earned around $11 million in audit fees from the bank over a 10-year period.
The legal action by the IBRC is believed to be timed to meet a six-year legal time limit falling next week that would have blocked legal proceedings being taken by the bank.
The new proceedings follow a string of woes for the accountancy firm over its involvement with Anglo (now IBRC) which has cost the State $38 billion as a result of the property crash.
Ernst & Young was previously criticized by a special investigator over its conduct in the events surrounding the nationalization of Anglo in January 2009.
The former Comptroller & Auditor General John Purcell conducted a two-year investigation that saif the firm had failed to detect the scale of the bank’s loans to former Anglo chairman Sean FitzPatrick.
FitzPatrick had temporarily moved loans of up to $158 million off the books of the bank over its financial year-ends every September for eight years to conceal them.
Purcell said that Ernst & Young needs to answer its failure to refer to the September 2008 window-dressing transactions between Anglo and Irish Life & Permanent in the firm’s audit report on the first set of Anglo’s financial statements for the year to September 2008.
The accountancy firm contested Mr Purcell’s claims last year, saying that it 'fundamentally disagrees' with his view that it had a case to answer in three areas under his investigation.
The cases were reportedly referred to the disciplinary process of the Chartered Accountants Regulatory Board, but have been postponed at the request of the Director of Public Prosecutions pending the outcome of criminal cases against FitzPatrick and two other former Anglo executives.