In accountants going to jail news, E&Y partner Robert Coplan was sentenced to three years in prison for his role in creating tax shelters for wealthy clients from 1998 to 2006. In addition to the jumpsuit (denim?), Mr. Coplan was ordered to pay a $75,000 fine and peform 120 hours of community service, half of which must be counseling of tax professionals about his time as a scofflaw. Judge Sidney Stein said that while Mr. Coplan was an otherwise all right guy, the sentence was for 'general deterrence' and that he understood that 'there was pressure coming from higher-ups at Ernst & Young'. Judge Stein is scheduled to hand out more prison time to former E&Y partner Martin Nissenbaum today, while former partners Richard Shapiro and Brian Vaughn tomorrow. Presumably all the men have access to a toilet without too much hassle.
UPDATE, Friday 8 am: Martin Nissenbaum was sentenced to two-and-a-half years. Not sure why he got 6 months less than Coplan but we're sure he's thrilled with the outcome.
Ernst & Young’s Response to New York Attorney General’s Complaint
New York, 21 December 2010 – We intend to vigorously defend against the civil claims alleged by the New York Attorney General.
There is no factual or legal basis for a claim to be brought against an auditor in this context where the accounting for the underlying transaction is in accordance with the Generally Accepted Accounting Principles (GAAP). Lehman’s audited financial statements clearly portrayed Lehman as a highly leveraged entity operating in a risky and volatile industry.
Lehman’s bankruptcy occurred in the midst of a global financial crisis triggered by dramatic increases in mortgage defaults, associated losses in mortgage and real estate portfolios, and a severe tightening of liquidity. Lehman’s bankruptcy was preceded and followed by other bankruptcies, distressed mergers, restructurings, and government bailouts of all of the other major investment banks, as well as other major financial institutions. In short, Lehman’s bankruptcy was not caused by any accounting issues.
What we have here is a significant expansion of the Martin Act. Although the Martin Act is almost 90 years old, we believe this is the first time that an Attorney General is attempting to use this law to assert claims against an accounting firm, rather than the company that took the alleged actions.
We look forward to presenting the facts in a court of law.
In other words, Andy – get lost; drop dead; suck it. AM Law Daily reports that E&Y has big guns on the case:
Miles Ruthberg, a former global litigation chair at Latham & Watkins, confirmed, via an e-mail to The Am Law Daily, that he’s representing E&Y in the suit along with Latham securities litigation and professional liability cochair Jamie Wine and Kramer Levin Naftalis & Frankel white-collar defense and SEC regulatory cochair Barry Berke. Latham, which has previously represented E&Y, has been handling securities litigation against the accounting firm stemming from Lehman’s failure.
To mark this occasion, we present an appropriate video (BL-inspired):
