Ernst & Young To Face Legal Action

Ernst & Young To Face Legal ActionOne of the UK’s biggest accountancy firms Ernst & Young are facing legal action after being accused of conducting defective audits for Weavering Capital, the investment firm at the centre of an investigation by the Serious Fraud Office. The collapse of Mayfair-based Weavering during the financial crisis is currently the subject of a criminal investigation by the SFO and Ernst & Young are accused of deceit and negligence in connection to the fund’s demise.

Weavering Capital are accused of entering into “sham” transactions,  used to hide losses from investors. The fund’s founder Magnus Peterson is being investigated for using bogus interest rate swaps to artificially inflate the fund’s value in order to continue to attract millions of pounds from investors.

Earlier this year, the directors of Weavering Capital were found guilty of committing fraud by a court in the US and were ordered to pay $450 million.

Although the first UK based investigation into the Weavering Capital case was dropped by former SFO director Richard Alderman in 2011 after it was decided there was no hope of a conviction, the fund’s founder Magnus Peterson was charged with six offences this week. The Swedish financier faces two charges of false accounting, two of forgery, one count of fraudulent trading and one of fraud by abuse of position.

According to The Times, court papers have been filed against Ernst & Young by Weavering’s liquidators Grant Thornton. The firm are reportedly seeking damages against E & Y’s Cayman Island and Irish divisions for breach of contract and negligence on audits conducted between 2005 and 2007.

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