E&Y investigation to continue
Accountancy firm Ernst & Young has lost its High Court bid to halt the investigation into its conduct as auditors to Anglo Irish Bank when dealing with alleged inappropriate loans to directors of the bank.
Ms Justice Mary Irvine ruled today the firm was out of time and had shown no arguable grounds entitling it to bring proceedings to "effectively torpedo and thus fatally terminate" the two year investigation by special investigator John Purcell, appointed by the Insititute of Chartered Accountants (ICAI) regulatory body (CARB) in early 2009.
She also ruled the firm had advanced no arguable case for proceedings to prevent a report by forensic accountants FTI into the conduct of Ernst & Young as auditors to Anglo being forwarded to CARB in the event of a finding by Mr Purcell of a prima facie case that Ernst & Young is liable to disciplinary action.
Among various claims in its application for leave for judicial review, the firm alleged the investigation to date is unfair because reports leading to Mr Purcell's appointment did not contain valid "complaints" as they failed to set out specific allegations, including of misconduct, or to refer to codes of conduct, rules, regulations and professional standards.
If a "complaint" had to be set out as required by Ernst & Young, the vast majority of complaints made by people, even if wholly meritorious on their facts, could never be investigated, the judge said.
Mr Purcell, she noted, was appointed by the Complaints Committee of CARB on foot of various matters in media reports, including a claim by an accountancy expert that Ernst & Young should have spotted that former Anglo Chairman Sean Fitzpatrick had engaged in a process of temporarily concealing directors loans by transferring them to another bank prior to Anglo's year end.
The bye-laws under which Mr Purcell was appointed render members of the ICAI liable to disciplinary action in a wide range of circumstances and the definition of "complaint" was drafted in wide and clear terms to include any behaviour which may be suspect, the judge said.
Any act or default likely to discredit a member of the Institute, the Institute itself or the accountancy profession, or the inefficient or incompetent performance of accountancy duties, left that member open to disciplinary action.
The firm had also made out no arguable case of breach of natural justice or fair procedures in the investigation to date, she ruled.
The investigation was at "a preliminary phase" and the firm's rights at this stage were limited, she said. It was entitled only to be notified of the complaint and given an opportunity to respond to it. It was not entitled under the bye-laws to an advance copy of Mr Purcell's proposed findings so it could make submissions on those.
The firm has had details of the issues under investigation for some two years, she noted.
If, after receipt of Mr Purcell's report, the matter proceeds via formal complaint to a disciplinary tribunal, the bye-laws provide "very significant" rights to enable Ernst & Young safeguard its interests, she added. In those circumstances, the firm would get Mr Purcell's full report and all documents being relied upon and would be entitled to call and cross-examine witnesses and make submissions.
Art all stages, Ernst & Young was advised by Mr Purcell it would get a synopsis or summary of his investigation plus relevant material so it could make, within 28 days, written submissions to him on that, she said.
After considering those submissions, Mr Purcell will present his report to the Complaints Committee of CARB, including his opinion whether there is a prima facie case that Ernst & Young is liable to disciplinary action. If he concludes there is such a prima facie case, he must stipulate the evidence on which his opinion is based. The Committee will then decide what, if any, action should be taken on foot of the investigator's report.
The synopsis was presented on February 9th last and the failure of Mr Purcell to yield to the "wide-ranging demands" made by Ernst & Young through their solicitors on March 11th led to these legal proceedings, the judge noted.
Earlier, the judge found the application for leave to bring judicial review proceedings, made last month, was made well outside the six month maximum time limit for judicial review as the appointment of Mr Purcell was in February 2009. The firm had failed to provide any cogent or meritorious explanation for its delay and its application for the court to extend time was "wholly without merit", she also ruled.
Under the instruments of appointment of Mr Purcell, reference was made to press releases concerning the resignation of some members of the board of Anglo - Sean Fitzpatrick, David Drumm and William McAteer - and to certain loans of Mr Fitzpatrick which were current during a period when Ernst & Young was auditor to the bank.
Reference was also made to press reports relating to support provided to Anglo by Irish Life & Permanent plc "during a period of unprecedented turmoil" and during which Ernst & Young were auditors to Anglo.
Ernst & Young was represented by law firm A&L Goodbody from the outset of Mr Purcell's investigation, Ms Justice Irvine noted. She said the firm had fully engaged with the investigation and delivered a "vast array" of documents to the forensic accountancy firm FTI engaged by Mr Purcell to assists his investigation.