Equitable Abandons Key Claim Against Ernst & Young

by Robin Pilgrim, LawAndTax-News.com, London

21 July 2005

It emerged on Monday that Equitable Life has dropped the 'lost sale' portion of its claim against its former auditor, Ernst & Young.

52 days into the negligence case brought by the insurer against E&Y, Equitable revealed that it was dropping its claim by £1.3 billion to £700 million.

Equitable Life was brought to its knees in 2000 by an unexpected £1.5 billion liability on guaranteed annuity rate (GAR) pensions, and argued that E&Y should have warned the previous management team of the potential size of the GAR liability, which the organisation was unable to pay.

The 'lost sale' argument claimed that if Equitable's former board had known the true state of the firm's finances, they would have tried to sell it in order to raise capital. However, the claim has reportedly been dropped on the grounds of evidence given by former directors, which appeared to indicate that they would have taken other actions to raise cash, such as cutting bonuses.

Responding to the news this week, Ernst & Young announced that:

"We have always maintained this was a case that should never have been brought. The fact that four years into this process and nearly halfway through the trial, Equitable has abandoned its £1.3 billion sale claim against Ernst & Young, shows what a desperate state their case is in."

Recommended