AUSA Life Insurance Company and others were institutional investors in the securities of JWP, Inc., a company that went belly up, resulting in nearly a 100 percent loss of their investments. Ernst & Young served as auditor for JWP from 1985 to 1992. During most of that period, JWP was in a period of rapid expansion that was financed by private placements of debt securities, and it became increasingly leveraged. By 1991, it was losing an average of $10 million per month. Ernst & Young knew of “accounting irregularities” from at least 1988 through 1991 but did not insist on their correction. Ernst & Young issued unqualified financial opinions for all of those years. One of the irregularities was recording anticipated future tax benefits of net operating loss in violation of GAAP. AUSA and its fellow investors sued Ernst & Young for their losses. The federal district court dismissed the case and AUSA appealed. Should AUSA be able to recover? Explain your answer. [AUSA Life Insurance Co. v. Ernst & Young, 206 F.3d 202 (2d Cir. 2000), 119 F. Supp. 2d 394 (S.D.N.Y. 2000), aff’d in unpublished opinion]
Answer to relevant QuestionsFor almost 13 years, Touche Ross had prepared the annual audit of Buttes Gas and Oil Co. Buttes wanted to obtain a loan from Dimensional Credit Corp. (DCC) and showed DCC its most recent annual audit. DCC made the loan on ...In 1996, Congress offered national banks the opportunity to become Subchapter S entities. Amboy Bancorporation was a small, highly profitable New Jersey Bank that was overcapitalized. Amboy’s president and CEO utilized ...A director of a corporation cannot lend money to the corporation because that would create the danger of a conflict of interest between the director’s status as a director and as a creditor. Appraise this statement.CIT entered into a sale/leaseback contract with Condere Tire Corporation for 11 tire presses at Condere's tire plant in Natchez, Mississippi. Condere ceased making payments on these presses owned by CIT, and Condere filed ...The Eminem ad for Chrysler that ran during the Super Bowl in February 2011 was rated as one of the best ads for the game. In May 2011, Audi ran an ad at a German auto show that had the “feel” of the Eminem Chrysler ...
Post your question