Business Irish

Sunday 20 January 2019

Probe into EY's Anglo audits gets the green light to resume

Former Anglo Irish CEO David Drumm leaves the Criminal Courts of Justice after his guilty verdict. Photo: Tony Gavin
Former Anglo Irish CEO David Drumm leaves the Criminal Courts of Justice after his guilty verdict. Photo: Tony Gavin
Donal O'Donovan

Donal O'Donovan

Accountancy regulators have been given the green light to resume disciplinary investigations in relation to Anglo Irish Bank's former auditor Ernst & Young (EY) and four top bankers linked to the collapsed lender.

The move follows the prosecution of former Anglo Irish Bank chief executive David Drumm, who was sentenced in June to six years in jail for his part in a €7.2bn plot to defraud the markets during the 2008 financial crisis. That case ended a series of trials linked to the collapse of Anglo.

In 2011, the accounting standards agency - then known as the Chartered Accountants Regulatory Board (CARB) - parked its disciplinary processes, at the request of the Director of Public Prosecutions (DPP), to avoid any overlap with the criminal trials of some former bankers.

CARB, now Chartered Accountants Ireland (CAI), said yesterday that the DPP had withdrawn its ongoing request to defer the disciplinary inquiries.

"Accordingly, the Institute may proceed with its own processes in relation to the various cases," CAI said.

The statement said the investigations will be able to take account of evidence given in court in the criminal cases, including David Drumm's prosecution, in addition to an earlier investigation for CARB by former Comptroller and Auditor General John Purcell.

"The Institute will now review and consider the large body of evidence and outcomes from the recent criminal trials and other inquiries that have taken place since the Purcell Reports to assess whether and how these might impact its disciplinary process in respect of its members and the member firm."

The Purcell Reports found "certain prima facie cases of liability to disciplinary action" in respect of four individual members - David Drumm, former Anglo chairman Sean Fitzpatrick, the bank's former finance director Willie McAteer, and a former Irish Life & Permanent (IL&P) finance director Peter Fitzpatrick, who were all qualified chartered accountants.

The Purcell investigation made preliminary rather than definitive findings, but argued there was prima facie against EY in relation to three specific events at Anglo - including a claimed failure to refer in an audit report to transactions in September 2008 between Irish Life & Permanent (IL&P) and Anglo.

EY now faces the prospect of a professional disciplinary hearing which would potentially be held in public.

In 2016, during the trial of three former senior Anglo executives, Judge Martin Nolan had questioned how auditors EY had not known what was going on at the bank.

"It beggars belief that Ernst & Young signed off on the accounts," he said.

The firm has previously said it would "vigorously defend" its work, arguing that under Irish law, it was the responsibility of the bank and its then directors to ensure that financial statements met legal and accounting standards.

In 2015 a separate report commissioned by CARB exonerated all of the firms, including EY, in relation to audits of the main banks before the crash.

The research looked at audits in 2008 and 2009, judging as "satisfactory" those by KPMG of AIB, Irish Nationwide Building Society (INBS), and Irish Life and Permanent (Il&P); Ernst & Young (EY)'s audits of Anglo Irish Bank and EBS; and PwC at Bank of Ireland.

Irish Independent

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