Deloitte Is Protected in “Insolvency” Ruling
A Pennsylvania judge says that a firm that improperly keeps a company out of bankruptcy may not be liable, unless it is negligent in other ways, too.
A recent Pennsylvania Court ruling favoring Deloitte & Touche seems to restrict a company’s ability to win a case against an accountantcy for actions that lead to the company’s “deepening insolvency,” unless the accountant is negligent in other ways as well.
The issue arose in a lawsuit that Reliance Insurance Co. filed in the state’s Commonwealth Court against Deloitte & Touche, over allegations that the accountancy improperly certified that the insurer’s loss reserves in 1999 was reasonable. That caused Reliance to take underwriting losses on payments that it could not really make, to avoid the wrath of regulators, and to go deeper into debt when it should have declared bankruptcy, according to The Legal Intelligencer newspaper.
The report said that so far 88 percent of the bond-holders, mostly members of the Sanpaolo Committee, accepted the settlement and will receive some 14 million euros, while another two million euros will be paid to bond-holders belonging to other associations. Deloitte has already paid an additional 8.9 million euros on the bank accounts of 11,179 investors who have filed a civil claim.
Looking to milk more from the Italian dairy’s accounting scandal, investors also eye Citi and Bank of America, as well as the two auditors
In another round of lawsuits stemming from the Parmalat accounting scandal, individual investors claiming losses from the Italian dairy giant’s 2003 collapse plan to sue Deloitte & Touche and Grant Thornton, along with Citigroup and Bank of America. The plaintiffs will probably demand more than $77 million in damages in litigation filed in Milan, according to a Reuters report quoting Vincenzo Somma, head of legal and economic studies at Altroconsumo, an independent consumer protection association. A majority of the more than 6,000 retail investors are Italian, but they will be joined in the suit by a number of European institutional investors based outside Italy, according to Somma.