Collective Lawsuit Against Ernst & Young S.p.A
ERNST & YOUNG
On April 21st, 2011, EY S.p.A. ("EY", Italian entity previously Reconta Ernst & Young S.p.A ) initiated their engagement to perform auditing services on the financial statements of Banca Monte dei Paschi di Siena S.p.A (“MPS”). EY has since issued a positive opinion on the audits performed for the years between 2011-2019.
Starting from their 2012 semi-annual report, MPS has systematically incorrectly booked its receivables. MPS used an allegedly incorrect booking method in terms of the appropriate classification of its loans (as performing rather than impaired) and in terms of unjustified delays in making the necessary adjustments for the impairments present in their financial statements.
The Bank of Italy (2013) and the European Central Bank (2014, 2015 and 2016) had repeatedly, through spot checks, raised reasonable doubts about MPS's classification, management and valuation of impaired loans. Despite this, EY continued over time to certify the compliance of the financial statements with the necessary international accounting standards (IAS).
The Legislative Decree 39/2010 assigned the function of legal audit of the financial statements to professionals in the sector: Auditors and Auditing Companies, initially the responsibility of the Board of Statutory Auditors (Article 2409 of the Italian Civil Code).
In light of the above, auditors have obligations of "professional ethics and skepticism" (art. 9, Legislative Decree 39/2010) as well as "independence and objectivity" (art. 10) to ensure that the legal audit leads to an opinion on the financial statements that certifies their reliability allowing investors to make a risk-informed investment choice.
Martingale Risk is preparing to file a collective lawsuit as well as individual suits on the investors' behalf against EY, which will be held at the Court of Rome. We are representing global institutional investors for an undisclosed amount.