Big Four firm Ernst & Young could be hit with fraud charges stemming from its alleged role in the collapse of banker Lehman Brothers, the Wall Street Journal reported.
Prosecutors in the office of New York State Attorney General and Governor-elect Andrew Cuomo could file charges this week according to unnamed sources familiar with the matter.
Lehman Brothers had been on of E&Y's marquee clients, amassing roughly $100 million in auditing fees from 2001 through 2008, the year the bank collapsed amidst the financial crisis.
Both E&Y and the AG's office declined comment on the matter
At the heart of the suit, are transactions known as Repo 105, which involve repurchase agreements, a form of short-term borrowing that allows banks to assume bigger trading risks. The Repo 105 surfaced back in March when a bankruptcy examiner investigating Lehman's collapse discovered that it moved some $50 billion in assets off its balance sheet. Lehman labeled those transactions as securities sales instead of loans, leading investors to believe the firm was more financially stable than it was.
Ernst had given Lehman a clean audit opinion through the year 2007.
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