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E&Y Sued Over Hedge Fund Bailout

by Philip Morton, Investors Offshore.com

16 December 2002


The Bermuda Sun newspaper reported last week that accounting firm, Ernst & Young is being sued by several large international investors for its failure to alert them to the unauthorized activities of Sloane Robinson Investment Ltd some five years ago.

According to the Bermuda Sun, in 1997, qualified investors from New York, Bermuda and the Isle of Man sank more than $27 million into the S.R. Global International Fund LP.

In a suit filed in Delaware Chancery Court, and made public last week, Anglo American Security Fund, Sterling Grace Capital Management, and the Lorraine and Oliver Grace Trusts alleged that Ernst & Young failed to inform them in good time that Sloane Robinson had secretly withdrawn nearly all of the funds from its capital account, despite its obligation to keep a portion of investments in the fund.

The auditor's inaction deprived investors of the chance to decide 'whether to withdraw some or all of the funds' in their accounts, the Bermuda Sun quoted court papers as observing.

A spokesman for Ernst & Young informed the newspaper that the company is not yet aware of all of the details of the $9.5 million lawsuit, but that: 'We believe the case has no merit and we will defend ourselves accordingly.'

http://bermudasun.bm/archives/2002-12-11/03Business03/

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