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By Lauren Couillard
HONG KONG—Ernst & Young has settled with the liquidators of Akai Holdings Limited and suspended a partner after an internal investigation found that audit documents “could no longer be relied on,” Ernst & Young announced Sept. 23.
The agreement settles a long-running negligence suit that questioned Ernst & Young's audits of Akai for the years ending Jan. 31, 1997, 1998, and 1999. Liquidators Borrelli Walsh had argued in the High Court of Hong Kong that damages exceeded US $500 million.
The terms of the settlement are confidential. However, Borrelli Walsh's Managing Director Cosimo Borrelli said Sept. 23 that the settlement involves “a substantial sum of money.”
In the trial that began Sept. 16 before Justice William Stone, Borrelli Walsh alleged that documents had been changed to hide wrongdoing before the collapse of Akai in 2000.
Ernst & Young said its own investigation into these allegations “made clear that certain documents produced for the audits in 1998 and 1999 could no longer be relied on due to the action of the Audit Manager in early 2000.”
Ernst & Young has suspended this individual, who is now a firm partner, pending the completion of an internal disciplinary process. A former Ernst & Young Hong Kong professional may have also been involved, the firm said.
“This settlement means that we can now put this old matter behind us,” said Jim Hassett, Ernst & Young Co-Area Managing Partner for the Far East Area. “This eliminates any uncertainty or future burden on our business, allowing us to focus all our efforts on our people and our clients.” Neither Ernst & Young nor Borrelli would comment further on the settlement.
Once a consumer electronic products manufacturer, Akai controlled listed groups in Hong Kong, Japan, the United States, and Mainland China. The company's failure was Hong Kong's largest corporate collapse and resulted in losses of approximately US $1.8 billion.
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