Ernst & Young has agreed to a record-setting $109 million nationwide settlement for failing to uncover the financial problems at health care giant HealthSouth.
The settlement, announced by Michigan Attorney General Mike Cox and Treasurer Robert Kleine, was the largest ever obtained against an outside auditor in a class-action securities fraud case, according to Coxs office. The settlement is expected to benefit Michigans pension fund, as well as members of the class-action suit.
Retirees and pensioners lost millions of dollars in their hard-earned investments as a result of Ernst & Youngs actions, said Cox in a statement. I will continue to stand up for Michigan pensioners and retirees and fight to recover their hard-earned funds.
The class-action case alleged accounting errors and irregularities against Ernst & Young, including overstating financial statements and failing to conduct audits that were in compliance with generally accepted auditing standards. HealthSouth has admitted to overstating its income by more than $2.8 billion, wiping out every dollar of profit it ever reported as a public company. After disclosure of the wrongdoing, HealthSouth dismissed Ernst & Young and advised investors not to rely on any of the firms audited financial statements that HealthSouth issued as a public company. An Ernst & Young spokesman declined to comment on the settlement.
In 2006, the attorney general announced a $445 million settlement with HealthSouth as a result of the fraud and losses to pensioners and investors nationwide. The State of Michigan Retirement Systems allegedly lost an estimated $33 million in connection with the case.
The Michigan Attorney Generals office is currently pursuing cases against Bear Stearns and AIG on behalf of its $43.3 billion pension system.
