A federal appeals court in San Francisco today reinstated a lawsuit filed by investors against the Ernst & Young accounting company for its alleged role in a $2.2 billion stock options backdating scheme.
The investors–a group of pension funds–sought to sue Ernst & Young LLP for having audited and approved financial statements in which Broadcom Corp. failed to record employee stock options correctly.
Broadcom, a semiconductor company based in Irvine, eventually restated its earnings in 2007 to show that it improperly accounted for $2.2 billion in income between 1998 and 2005.
The company settled a lawsuit filed by investors for $160 million in 2009.
Investors sought to continue the suit against Ernst & Young, but a federal trial judge in Los Angeles dismissed the accounting firm from the case in 2009.
But in today’s ruling, a three-judge panel of the appeals court said there was enough substance to the allegations to allow the claims against Ernst & Young to go to trial.
The court said, “The complaint is loaded with specific allegations of how and why Ernst & Young should have investigated deficient or missing documentation.”
Julia Cheever, Bay City News