Ernst & Young may face suit on Lehman role

A possible civil fraud case against Ernst & Young Llc over its role in the collapse of Lehman Brothers could be the biggest government attack on an accounting firm since the collapse of Arthur Andersen over the Enron scandal.

New York prosecutors are close to filing civil fraud charges against Ernst & Young, The Wall Street Journal said Monday, citing people familiar with the matter. If a case is brought, it would be one of the first government lawsuits targeting practices that some claim Lehman and other financial firms used to mask debt.

The lawsuit, led by outgoing New York Attorney General Andrew Cuomo, could come as early as this week and might seek to impose fines and other penalties, the Journal said.

Experts said Ernst & Young likely would try to settle any lawsuit because damages sought by Cuomo's office are bound to be among the biggest of any of the lawsuits stemming from the financial crisis. Lehman had well over $600 billion in assets when it filed the biggest bankruptcy in history, about 10 times the assets that Enron did when it filed for bankruptcy, according to Bankruptcydata .com.

A spokeswoman for Ernst & Young said the company did not comment on speculation, and repeated a previous statement made by the firm about its dealings with Lehman Brothers.

"Throughout our period as the auditor of Lehman, we firmly believe our work met all applicable professional standards, applying the rules that existed at the time," the statement said.

Cuomo's office did not respond to requests for comment. The Securities and Exchange Commission declined to comment but said previously that it is looking at a number of firms involved with Lehman at the time of its collapse. - Reuters