The suit accuses the accounting giant of misstating Superior Bank’s assets, and not reporting the misstatement because it might jeopardize an $11 billion sale of Ernst & Young’s consulting division. The lawsuit said the cost to the FDIC was $750 million.
“E&Y’s misconduct was exacerbated by rampant conflicts of interest in the valuation of Superior’s assets,” the lawsuit said.
The lawsuit also charges that Ernst & Young admitted in January 2001 that they had overvalued Superior Bank’s assets by $270 million. Once this was investigated, the asset value was reduced by another $150 million.
Federal regulators seized the Chicago-based Superior Bank in July 2001, after it lost millions on risky home loans to borrowers with imperfect credit.
The Chicago-based Pritzker family and their equal partner in Superior, New York developer Alvin Dworman, admitted no liability in Superior’s failure and no sanctions were imposed on them by thrift regulators.
Ernst & Young issued a statement saying, “Superior Bank’s failure was not caused by any action of ours and we intend to vigorously defend claims against the firm.”
The New York-based accounting company blames Superior Bank’s problems on the weakened economy and on its failure to carry out a recapitalization plan.
Superior Bank was the largest insured U.S. financial institution to fail in almost 10 years.