Ernst & Young to pay $99 mln to end Lehman investor lawsuit

Reuters

By Nick Brown

NEW YORK, Oct 18 (Reuters) - Former Lehman Brothers investors have reached a $99 million settlement with Ernst &Young, the defunct financial firm's erstwhile auditor,over allegations it helped Lehman misstate its financialrecords.

In a letter filed this week in federal court in Manhattan,lawyers for the plaintiffs (the investors) in the case said theyhad reached a preliminary deal on which they will seek courtapproval.

The agreement, under which Ernst & Young would pay theinvestors $99 million, signals the end of a massive class actionagainst Lehman's former directors, as well as several otherfinancial institutions, over the infamous "Repo 105" accountingpractice Lehman is accused of using to misleadingly understateits leverage.

The plaintiffs asked the court to suspend the case while thesides draft a settlement agreement.

"The settling parties are currently drafting a detailedstipulation of settlement and anticipate" asking the court forpermission to notify class members of the deal in "approximately30 days," the plaintiffs said in the letter.

Lawyers for Ernst & Young did not immediately respond to arequest for comment.

Ernst & Young is the last defendant still involved in thecase. Bank of America Corp, Morgan Stanley andmore than 30 other underwriters of Lehman debt reached a $417million settlement in December 2011, while Lehman's formerofficers, including ex-Chief Executive Richard Fuld, settled for$90 million.

The case goes back to 2008, when Lehman's historic collapseserved as a key catalyst to the global financial crisis.

Investors filed the lawsuit that year, accusing Lehmandirectors of painting a misleading picture of Lehman's health infinancial statements and securities offerings. Ernst & Young andthe underwriters contributed to the fraud by failing toinvestigate and ensure the truthfulness of the statements, theinvestors alleged.

Lehman ended its three-year Chapter 11 in 2011 with aliquidation plan slated to repay creditors about $65 billion, oran average of about 21 cents on the dollar for allowed claims.

The case is In re Lehman Brothers Equity/Debt SecuritiesLitigation, U.S. District Court, Southern District of New York,No. 08-cv-05523.

Lehman's bankruptcy is In re Lehman Brothers Holdings Inc,U.S. Bankruptcy Court, Southern District of New York, No.08-13555.

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