A federal judge has signed off on a $9 million settlement against Ernst & Young over claims made by investors in PNC Financial Services Group Inc.
The accusations stem from an accounting scandal in which PNC restated nearly $155 million in earnings. The settlement wraps up litigation that has resulted in a pool of about $200 million to be divvied up among tens of thousands of PNC investors.
The Securities and Exchange Commission censured Ernst & Young last month, ordering the Big Four firm to pay $1.6 million to settle charges of compromising its independence and contributing to faulty accounting by a client in 2001 -- though the firm did not admit or deny a role in the scandal. The SEC alleged that PNC tried to conceal $762 million in bad corporate loans and investments by selling them to a trio of partnerships created with American Insurance Group Inc., which developed and marketed the special-purpose entities with Ernst & Young.
PNC investors also sued PNC, the company’s attorneys, AIG and Ernst & Young, claiming they lost as much as $1 billion. PNC, AIG and the attorneys settled most of that litigation last year for close to $125 million, and as part of the agreement, PNC assigned its legal claims against Ernst & Young to the plaintiff investors.
"We believe that this is a reasonable resolution relating to events that occurred approximately five years ago," Ernst & Young said in a statement. "It puts this matter behind us and means we will not face continuing litigation costs."
More than 20,000 investors have filed damage claims under the settled class-action litigation, and claims can still be made until mid-May.
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