Lawsuit against Ernest Young in Switzerland: Neglected and caused a corporate collapse

Ernst & Young (EY) accountants have confirmed huge payments to dubious companies in the years before one of the biggest corporate collapses in Swiss history. This is according to an article in the Financial Times.
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Zeromax, a conglomerate based in the Swiss canton of Zug, ran a business empire in Uzbekistan with interests ranging from the local textile industry to natural gas production. It has become the largest employer in the Asian country, accounting for up to 10% of its GDP.
1 View the gallery Ernest & Young Office of AccountantsErnest & Young Office of AccountantsErnest & Young (Photo: Wikipedia / Dr. avishai teicher)
The conglomerate collapsed in 2010 amid the then political struggle in the country, leaving behind debts of more than $ 6.1 billion (5.6 billion Swiss francs), which were only recently discovered. These make the collapse the second largest bankruptcy in Swiss history, following that of Swissair in 2001. At least 2.5 billion Swiss francs from the company’s assets have yet to be located, according to creditors. Thanks to the Swiss legal system notorious for its non-transparency, details about the branched structure of the conglomerate and the network of banks and tax haven companies the company has been working with are only now beginning to be exposed, while frustrated creditors are working to reclaim their property. Dozens of documents obtained by the Financial Times, including police reports, bank statements, internal documents and receipts, raise questions about Ernst & Young’s involvement in the company’s operations, after it issued positive documents to Ziromax regarding its financial strength in 2005-2007. The company continued to serve as Xeromax’s accountant for three years, until its collapse in 2010, and did not publish further financial opinions about it in those years. Ernst & Young’s affiliate in Switzerland is now being sued in the Zug district for $ 1 billion by the American hedge fund Lion Point Capital, which acquired a debt of the company in 2019. At the same time, hundreds of European creditors, including many small businesses in Germany and Central Europe, Billions of dollars are still awaited from Ziromax.Marnst & Young responded: “The 2010 Uzbekistan court decision has resulted in the de facto expropriation of Ziromax assets and its bankruptcy. “The issue is still under legal discussion, and Ernst Young Switzerland will defend her innocence against the allegations.”

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