Jury finds Ernst & Young liable over investor's Madoff losses

Fri Nov 13, 2015 6:32pm EST
 
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By Nate Raymond

(Reuters) - Ernst & Young LLP was found liable on Friday by a Washington state jury for the losses of an investment firm from the collapse in 2008 of fraudster Bernard Madoff's multibillion dollar Ponzi scheme.

A jury in Seattle sided with FutureSelect Portfolio Management Inc in finding the auditing firm was negligent in its work for funds that funneled money to Madoff.

Steven Thomas, FutureSelect's lawyer, confirmed the verdict. Ernst & Young did auditing work for funds managed by Tremont Group Holdings Inc's Rye Investment Management unit.

The jury found damages of $20.3 million and found Ernst & Young liable for half of that, Thomas said. Prejudgment interest could bring FutureSelect's award to $25 million, he said.

"This jury found that Ernst & Young's job was to try to find this fraud," Thomas said in an interview. "They were the gatekeeper and didn't do their job."

The trial was the first in which an auditor had been held liable for its role auditing one of Madoff's so-called feeder funds.

Madoff, 77, is serving a 150-year prison term after pleading guilty in 2009 to running a scheme that cost investors an estimated $17 billion or more in principal.

Ernst & Young spokeswoman Amy Well said in a statement that the jury rejected the "vast majority" of FutureSelect's claims. The investment firm had been seeking $112 million.   Continued...

 
The Ernst & Young building rises above Times Square in New York June 18, 2014.  REUTERS/Lucas Jackson