The EY Split Is Officially DEAD

And this has nothing to do with Lehman Brothers.

Attorneys from Houston’s Ahmad, Zavitsanos & Anaipakos are representing a group of investors in a lawsuit filed against hedge fund auditors Ernst & Young after the group lost more than $17 million following the collapse of a Plano, Texas-based hedge fund that promised low-risk investments.

The lawsuit focuses on two funds sold by Plano’s Parkcentral Global and was filed on behalf of Houston financial consultant Gus H. Comiskey and four Tucson, Ariz.-based entities, including the Thomas R. Brown Family Private Foundation. The now-defunct Parkcentral Global was operated by affiliates of billionaire and former presidential candidate H. Ross Perot before closing its doors after losing a total of more than $2.6 billion.

“Our clients were told that an investment in Parkcentral was designed to preserve capital. Instead, they lost every penny in record time. E&Y was supposed to be auditing Parkcentral, but the audited financial statements never once warned Parkcentral’s investors of their impending doom,” says attorney Demetrios Anaipakos, who will try the case with Amir H. Alavi.

Did you hear that E&Y? RECORD TIME! But why the Ross Perot mention, Ahmad, Zavitsanos & Anaipakos? Got something against eccentric Texas billionaires that like explaining complex things with charts? Sadly, the BPR does not elaborate.

The lawsuit includes claims that New York-based Ernst & Young falsely represented that the company fairly audited Parkcentral Global and the auditor failed in its “watchdog” [Ed. note: These quotation marks appear to be unnecessary. Also, the “watchdog” thing, sucks as metaphor.] role to warn relying investors of the risk of fraud and noncompliance by management. The suit accuses Ernst & Young of fraud, negligent misrepresentation, securities fraud and conspiracy.

This month, Brown Investment Management, L.P., one of the plaintiffs in this suit against Ernst & Young, won a Delaware Supreme Court ruling that requires Parkcentral Global to disclose its former investors. Those investors could be added to the new Houston lawsuit.

The investments of the Brown foundation, Brown Investment Management and the two other family-related ventures totaled $16 million and were lost within 90 days despite a “worst case loss” estimate of 5 percent. Mr. Comiskey, like his fellow investors, lost 100 percent of his investment when Parkcentral Global went under.

Mr. Anaipakos and Mr. Alavi have handled disputes against hedge funds and private equity firms for more than a decade. This lawsuit is separate from a class action filed in the U.S. District Court for the Northern District of Texas against Parkcentral Global.