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Thursday, 24 September 2009
Ernst & Young settles Akai case, suspends audit partner
Ernst & Young admitted one of its Hong Kong partners may have tampered with evidence the firm provided to the court in defence of the case. The partner in question, Edmund Dang, has been suspended pending further inquiries.
Ernst & Young settles Akai case, suspends audit partner
Naomi Rovnick 23 September 2009
Accounting firm Ernst & Young on Wednesday settled the US$1 billion negligence claim brought against it by the liquidators of its insolvent former client, Akai Holdings.
Ernst & Young admitted one of its Hong Kong partners may have tampered with evidence the firm provided to the court in defence of the case. The partner in question, Edmund Dang, has been suspended pending further inquiries.
The settlement, for an undisclosed sum, followed explosive allegations last week from the liquidators’ legal team that Ernst & Young staff had falsified and doctored key evidence in the trial. The settlement deal, struck in the early hours of Wednesday, is believed to run into hundreds of millions of US dollars.
Akai was a global consumer electronics giant, listed in Hong Kong, which collapsed in 1999 in suspicious circumstances after reporting a US$1.8 billion loss. Its founder, James Ting, was jailed in 2005 for false accounting but released in 2007 after the Court of Appeal found errors in the prosecution’s case.
Ernst & Young, which was Akai’s auditor, had been accused of negligence by the liquidators for failing to avert Akai’s spectacular collapse.
In a statement released Wednesday morning, Ernst & Young said one of its partners had been suspended following internal inquiries.
“After allegations of document alterations were made by the liquidator’s counsel last week, Ernst & Young began an internal investigation. This investigation has made clear that certain documents produced for the audits in 1998 and 1999 could no longer be relied on due to the action of the audit manager in early 2000,” the statement said.
“That individual, who is now a partner with the firm, has been suspended from his duties, pending the completion of the internal disciplinary process. In addition, a former Ernst & Young Hong Kong professional may have been involved. The firm has informed the relevant regulatory body and will continue to engage with it.”
When the trial opened last Wednesday, Leslie Kosmin QC, for the liquidators, identified Akai’s audit manager as Dang, who is an audit partner in Ernst & Young’s Hong Kong office now.
Kosmin claimed Dang back-annotated Ernst & Young’s files relating to Akai after the company folded. Kosmin claimed the effect of this was to “create a false audit trail by inserting annotations, [after the fact]”.
Kosmin also claimed that over 80 of Ernst & Young’s documents relating to Akai had been falsified or tampered with. He said the suspect papers had found their way into Ernst & Young’s witness statements, expert reports and court pleadings.
The High Court trial was adjourned last Friday so Ernst & Young’s lawyers could quiz members of the firm’s staff who had been involved in auditing Akai.
Included in those interviews, carried out by Ernst & Young’s law firm Barlow Lyde & Gilbert, was David Sun Tak-kei, Ernst & Young’s co-managing partner for the Far East and chairman for China.
Sun, the liquidators had alleged in court, was involved in the firm’s auditing of Akai as an independent partner between 1997-99. In accounting firms, independent partners are senior staff who review the quality of audit teams’ work.
Ernst & Young has not suspended or taken any action against Sun, who gave a comment in the firm’s post-settlement statement.
“We are dismayed by the unexpected circumstances that have arisen,” Sun said in Ernst & Young’s statement. “While we do everything we can to live our values, no global organisation of more than 135,000 people can be totally insulated from the risk of one or more individuals not upholding these values.”
In a short speech in court this morning Kosmin, for the liquidators, called the settlement a “landmark” result for Akai’s creditors.
The creditors are mainly multinational and Asian banks, including HSBC.
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Ernst & Young settles Akai case, suspends audit partner
Naomi Rovnick
23 September 2009
Accounting firm Ernst & Young on Wednesday settled the US$1 billion negligence claim brought against it by the liquidators of its insolvent former client, Akai Holdings.
Ernst & Young admitted one of its Hong Kong partners may have tampered with evidence the firm provided to the court in defence of the case. The partner in question, Edmund Dang, has been suspended pending further inquiries.
The settlement, for an undisclosed sum, followed explosive allegations last week from the liquidators’ legal team that Ernst & Young staff had falsified and doctored key evidence in the trial. The settlement deal, struck in the early hours of Wednesday, is believed to run into hundreds of millions of US dollars.
Akai was a global consumer electronics giant, listed in Hong Kong, which collapsed in 1999 in suspicious circumstances after reporting a US$1.8 billion loss. Its founder, James Ting, was jailed in 2005 for false accounting but released in 2007 after the Court of Appeal found errors in the prosecution’s case.
Ernst & Young, which was Akai’s auditor, had been accused of negligence by the liquidators for failing to avert Akai’s spectacular collapse.
In a statement released Wednesday morning, Ernst & Young said one of its partners had been suspended following internal inquiries.
“After allegations of document alterations were made by the liquidator’s counsel last week, Ernst & Young began an internal investigation. This investigation has made clear that certain documents produced for the audits in 1998 and 1999 could no longer be relied on due to the action of the audit manager in early 2000,” the statement said.
“That individual, who is now a partner with the firm, has been suspended from his duties, pending the completion of the internal disciplinary process. In addition, a former Ernst & Young Hong Kong professional may have been involved. The firm has informed the relevant regulatory body and will continue to engage with it.”
When the trial opened last Wednesday, Leslie Kosmin QC, for the liquidators, identified Akai’s audit manager as Dang, who is an audit partner in Ernst & Young’s Hong Kong office now.
Kosmin claimed Dang back-annotated Ernst & Young’s files relating to Akai after the company folded. Kosmin claimed the effect of this was to “create a false audit trail by inserting annotations, [after the fact]”.
Kosmin also claimed that over 80 of Ernst & Young’s documents relating to Akai had been falsified or tampered with. He said the suspect papers had found their way into Ernst & Young’s witness statements, expert reports and court pleadings.
The High Court trial was adjourned last Friday so Ernst & Young’s lawyers could quiz members of the firm’s staff who had been involved in auditing Akai.
Included in those interviews, carried out by Ernst & Young’s law firm Barlow Lyde & Gilbert, was David Sun Tak-kei, Ernst & Young’s co-managing partner for the Far East and chairman for China.
Sun, the liquidators had alleged in court, was involved in the firm’s auditing of Akai as an independent partner between 1997-99. In accounting firms, independent partners are senior staff who review the quality of audit teams’ work.
Ernst & Young has not suspended or taken any action against Sun, who gave a comment in the firm’s post-settlement statement.
“We are dismayed by the unexpected circumstances that have arisen,” Sun said in Ernst & Young’s statement. “While we do everything we can to live our values, no global organisation of more than 135,000 people can be totally insulated from the risk of one or more individuals not upholding these values.”
In a short speech in court this morning Kosmin, for the liquidators, called the settlement a “landmark” result for Akai’s creditors.
The creditors are mainly multinational and Asian banks, including HSBC.
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