You’re never going to believe it. Sometimes I wonder if some lawyers think they should be paid based on how cute and clever they can be rather than how wise or judicious they are in their choice of arguments.
Fortunately some judges see through the act and slam their charade.
An excerpt from my latest post at Medium.com:
Neither gatekeeper thinks investors should hold them accountable anymore
…In similar fashion, Judge Shira Scheindlin of the Southern District of New York slammed auditors Ernst & Young (EY) and PricewaterhouseCoopers (PwC) who sought to dismiss claims against their firms in a class action lawsuit related to the bankruptcy of OSG. OSG is a tanker company that, on March 24, 2010, conducted a public offering of three hundred million dollars of unsecured notes. OSG filed registration statements and prospectuses for regulators and investors that included financial statements with unqualified audit opinions from EY and PwC. None of the filings or financial statements included a material tax liability that eventually drove the company to bankruptcy in November 2012.
Judge Scheindlin wrote:
“Defendants argue that the entire Audit Opinion is a statement of belief or opinion under Fait because it contains the word “opinion” in its title, and prefaces its conclusions with the phrase “in our opinion.” However, it would render Section 11 meaningless to find that an accountant’s liability turns on this semantic choice. Auditors may not shield themselves from liability under Section 11 merely by using the word “opinion” as a disclaimer…It is difficult to imagine what Congress might have meant by an accountant’s certification if not an audit affirming the accuracy of the documents in question.”
An auditor’s opinion is not just puffery about its product, the audit report, but something that investors and the capital markets count on. The auditors’ opinion is the manifestation of its public duty. This attempt by lawyers for EY and PwC ,from prestigious auditor defense firms Latham and Watkins and Mayer Brown,to weasel out of liability by claiming that an audit report with the firm’s signature is a mere “opinion” is embarrassing.
Next thing you know the auditors will be claiming the audit opinion is a protected expression of free speech under the 1st amendment.
Joshua Silverman of Pomerantz Law, who represents plaintiffs in actions against auditors and other defendants in securities class action lawsuits, had this to say about Judge Scheindlin’s decision:
“If Judge Scheindlin’s reasoning is followed by other courts in the Second Circuit, a circuit split is likely to emerge, significantly increasing the possibility that an auditor liability claim will make its way to the Supreme Court.”
Read the rest at Medium.com