June 15, 2009
LANSING- Attorney
General Mike Cox and Treasurer Robert Kleine today announced a $109 million
national settlement with Ernst & Young resulting from audits it conducted that
failed to expose massive fraud taking place when serving as HealthSouth
Corporation's auditing firm. The settlement is one of the largest ever obtained
against an outside auditor in a class-action securities fraud case and will
benefit the State of Michigan's pension fund and members of the class action
against Ernst & Young.
"Retirees and
pensioners lost millions of dollars in their hard earned investments as a result
of Ernst & Young's actions," said Cox. "I will continue to stand up for
Michigan pensioners and retirees and fight to recover their hard earned funds."
The class
action case alleged accounting errors and irregularities against Ernst & Young,
including overstating financial statements and failing to conduct audits that
were in compliance to generally accepted auditing standards for HealthSouth.
HealthSouth has admitted to overstating its income by more than $2.8 billion,
wiping out every dollar of profit it ever reported as a public company. After
disclosure of the wrongdoing, HealthSouth dismissed Ernst & Young and advised
investors not to rely on any of Ernst & Young's audited financial statements
that HealthSouth issued as a public company.
In 2006, the
Attorney General announced a $445 million settlement with HealthSouth as a
result of the fraud and losses to pensioners and investors nationwide. It is
alleged that the State of Michigan Retirement Systems lost an estimated $33 million as a result
of Ernst & Young and HealthSouth.
Cox has won
other settlements for pensioners in Michigan, including a $24.5 million
settlement against Tyco in May. In 2008, Cox negotiated a settlement with
Comerica Bank to release more than $1.4 billion in investments that were frozen
due to the financial market troubles. The Attorney General's office is
currently pursuing cases against BearSterns and AIG. The State of Michigan's
pension system is one of the largest pension systems in the country, with
combined assets of approximately $43.3 billion and representing 574,000 citizens
and retirees.
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