In an opinion last week, Judge Scheindlin denied the plaintiffs in a securities class action leave to amend their complaint to assert securities fraud claims against the company’s auditors, PriceWaterhouseCoopers and Ernst & Young. The proposed amendment would have alleged that PwC and E&Y took at face value the erroneous opinion of a third party tax preparer (referred to as “Frankel”), which the plaintiffs argued is as reckless and fraudulent as simply taking management representations as true:
Continue Reading Judge Scheindlin: Auditors’ Failure to Investigate Tax Preparer’s Opinions is Not Fraud

In an opinion dated yesterday, Judge Scheindlin denied a motion to dismiss from two auditing firms, Ernst & Young and PriceWaterhouseCoopers, in a securities class action.  The auditors had issued “opinions” certifying the financial statements of a now bankrupt securities issuer (OSG), and argued that, under the Second Circuit’s recent decision in Fait v. Regions Financial Corp. (discussed in prior posts here and here), the plaintiffs would have to allege, under Section 11 of the Securities Act, that the auditors actually disbelieved their own opinions.  Judge Scheindlin disagreed:
Continue Reading Judge Scheindlin Rules Auditors Can Be Strictly Liable for False “Opinions” in Registration Statements