2010 Year in Review: Securities Enforcement, Litigation & Compliance

By • Jan 1st, 2011 • Category: Where I've Been

Bruce Carton over at Securities Docket hosted a webcast on Wednesday, December 29th, “2010 Year-End Review – Securities Litigation and Enforcement”.

I talked about auditor litigation but, even though I ran over time, I couldn’t get it all in.  This has been a busy year for the auditors and their lawyers, capped off by the December 21st announcement of the New York Attorney General’s charges against Ernst & Young for its role in the Lehman failure.

Some of the topics I did not get a chance to discuss:

  • There are still several active Madoff feeder fund cases against auditors including
    • Tremont cases naming KPMG filed before their deadline.
    • A case against PwC related to Greenwich Sentry.
    • In the big Banco Santander/Optimal case against PwC, two accompanying orders were issued by the court on July 30, 2010 dismissing the case based on lack of personal jurisdiction and forum non conveniens. On August 25, 2010, a Notice of Appeal was filed by the plaintiffs.
    • The recent Assured Guaranty case in the NY 1st Department significantly changes the landscape on the Martin Act preemption issue in favor of plaintiffs, which may revive some of the dismissed auditor claims.
  • Big 4 audit firms are subject to class action wage/overtime suits in the US.  In the California suit still pending against PwC they’re expecting a final decision from the 9th circuit appeals court early this year. In arguing their case for exempt status for staff, firms shoot themselves in the foot by claiming:

–Unlicensed staff, with 0-3 years of experience, many of who have not even passed the CPA exam, or have taken but failed sections of the test (including having failed the Audit section), are independently making decisions about matters of significance on the audits on which they’re working.

–Unlicensed staff are spending more than 50% of their time on independent audits performing administrative work for the audit clients.

–Unlicensed staff are working on audits while under only general supervision..

Are the PCAOB, SEC, and plaintiffs lawyers watching these cases?

I was joined for the webcast by several thought leaders and bloggers in the securities litigation, fraud and SEC enforcement world — including Kevin LaCroix (The D&O Diary), Compliance Week editor Matt Kelly, Mike Koehler (aka the “FCPA Professor“), Francis Pileggi (Delaware corporate law guru), Tracy Coenen (The Fraud Files) and Lyle Roberts (The 10b-5 Daily).

Here’s a replay of the webcast and a link to archived version.

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  1. […] written extensively about the litigation risks of the largest global audit firms. The risk of failure of a large member firm outside of the United States is especially acute. There […]

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