(Bloomberg) Ernst & Young LLP agreed to pay $10 million to settle New York’s lawsuit accusing it of helping Lehman Brothers Holdings Inc. hide financial problems in the years leading to its 2008 collapse.

The auditing firm was accused of enabling the investment bank to temporarily remove tens of billions of dollars of securities from its balance sheet, providing an illusion of stronger financial health.

“Auditors will be held accountable when they violate the law, just as they are supposed to hold the companies they audit accountable,” New York Attorney General Eric Schneiderman said Wednesday.

Amy Call Well, an Ernst & Young spokeswoman, said in an e-mailed statement that the company is “pleased to put this matter behind us” and there were “no findings of wrongdoing” by the firm or its professionals.

Andrew Cuomo, the attorney general in 2010, accused the firm of facilitating a “major accounting fraud” by helping Lehman deceive the public about its financial condition in the lawsuit. The state had sought as much as $125 million in professional fees that Ernst & Young collected from 2001 through the 2008 bankruptcy, along with damages for Lehman shareholders, according to court filings.

With Ernst & Young’s help, Lehman purportedly used so-called Repo 105 transactions to remove the securities and help conceal debt. Repo 105 transactions are a form of short-term financing that Lehman used to temporarily move as much as $50 billion off Lehman’s balance sheet, according to a bankruptcy examiner’s report.

Investor Settlement
The firm in 2013 agreed to pay investors $99 million to settle litigation over its auditing of Lehman. Most of the money collected by New York will also be distributed to investors, Schneiderman said.

Once the fourth-largest U.S. investment bank, New York-based Lehman filed for bankruptcy after losing 94 percent of its market value in the subprime mortgage crisis. Listing more than $613 billion in debt, it was the biggest bankruptcy in U.S. history.

The case is People of the state of New York v. Ernst & Young, 451586/2010, New York State Supreme Court, New York County (Manhattan).

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