Grant Thornton LLP said that a Chicago judge has recommended that a case brought against the law firm regarding its bank auditing work be dismissed.

Administrative Law Judge Ann Z. Cook, of the Office of the Comptroller of the Currency, a division of the U.S. Department of the Treasury, recommended that all charges brought by the office against Grant Thornton pertaining to First National Bank of Keystone, W. Va., be dismissed.

"We are delighted with this opinion, as it is clearly well-reasoned and correct," said Grant Thornton's Margaret Zagel, national managing principal of the accounting firm's risk, regulatory and legal affairs, in a statement.  In the ruling, Cook wrote, "Senior management, now convicted felons [referring to executives at the bank], purposefully falsified bank records and carefully manipulated the flow of information, so as to thwart and the confuse the work of Keystone's auditors, examiners and even third parties." The OCC was seeking a cease-and-desist order that would require Grant Thornton to perform various enhanced auditing practices and procedures whenever it audits insured depository institutions, as well as pay a $300,000 fine. Federal banking regulators discovered internal control and audit deficiencies at First National Bank of Keystone in the early 1990s, which eventually led to the loss of hundreds of millions. Bank officials were later convicted of faking documents to hide the embezzlement of funds.

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