Ernst & Young could face probe over Equitable crisis

Accountancy group Ernst & Young could be subject to a professional investigation over its role in the crisis at Equitable Life, it emerged today.

The group has until the end of this week to respond to allegations of failure put to it by the accountants’ disciplinary board the Joint Disciplinary Scheme (JDS).

The exact nature of the allegations is not known but they are thought to revolve around technical accounting and auditing issues.

Once the firm has responded the JDS will decide whether to lay a complaint to its executive committee, which would then appoint a tribunal to look into the matter.

If the tribunal found against E&Y penalties could range from a reprimand or severe reprimand, to an unlimited fine or the recommendation that its registration as an auditor should be removed.

The JDS is understood to have been looking into the issue since mid 2001, around six months after Equitable was forced to close to new business after failing to find a buyer.

Kevin Russell, director of communications at Ernst & Young, said: “We believe the allegations are misguided and we will vigorously defend them.”

The JDS declined to comment at this stage.

E&Y acted as auditor to Equitable until 2001. It is currently being sued by the society for £2.05bn (€3.1bn) for failing to make sure Equitable made sufficient provisions to meet its liabilities to Guaranteed Annuity Rate policyholders.

Equitable was plunged into difficulties after losing a House of Lords ruling over the rights of these policyholders, leaving it with a £1.5bn (€2.3bn) liability and forcing it to close to new business and slash the value of members’ policies.

An Equitable spokesman said today: “We have got a strong case against our former auditors. As we are in litigation it is not appropriate to make any further comment.”