Public Funds Sue Lehman and Auditor

April 26, 2010 ( - Lehman Brothers Holdings Inc.’s auditor Ernst & Young LLP was added as a defendant in a lawsuit seeking to recover money from former executives and underwriters.

Bloomberg reports the lawsuit was amended to add findings contained in a 2,200-page report published March 11 by Lehman bankruptcy examiner Anton Valukus. The amended complaint was filed yesterday on behalf of a group of retirement funds including the Alameda County Employees’ Retirement Association in Oakland, California, and the Government of Guam Retirement Fund.  

The lawsuit, originally filed in June 2008, claimed that New York-based Lehman made false statements about liquidity, failed to take timely writedowns of its positions on mortgage-backed securities, and overstated their value. The defendants in the case include former Lehman Chief Executive Officer Richard Fuld.  

Lehman filed for bankruptcy in September 2008 with $639 billion in assets, and has said it will spend five years liquidating to pay unsecured creditors as little as 14.7 cents on the dollar.  

In an e-mailed statement to Bloomberg, Charlie Perkins, an Ernst & Young spokesman, said: “Throughout our period as the auditor of Lehman, we firmly believe our work met all applicable professional standards, applying the rules that existed at the time.”  

The case is In re Lehman Brothers Equity/Debt Securities Litigation, 08-cv-05523, U.S. District Court, Southern District of New York.