NU Online News Service, Sept. 10, 3:36 p.m. EDT
A New York state appeals court is scheduled to hear arguments on Sept. 14 that American International Group's (AIG) auditor failed to unearth the alleged fraud the company perpetrated and should be held liable for it.
In the case, a Delaware court threw out a suit, Teachers Retirement System of Louisiana v. American International Group, because it was determined that AIG employees committed the fraud and the auditor, PricewaterhouseCoopers should not be held negligent for failing to identify the fraud.
However, the Delaware court passed the issue of auditor liability to the New York Court of Appeals to resolve questions in that state's law over whether professional malpractice/negligence suits are barred against an auditing firm under the doctrine of "in pari delicto" or at mutual fault.
The Delaware court asked the New York court to decide if a suit can be brought against an auditing firm that was not a participant in the corporation's fraud but failed "to satisfy professional standards in its audits of the corporation's financial statements."
The Supreme Court of Delaware said it would take no further action until after the New York court makes a decision.
The questions stem from illegal accounting actions taken by AIG dating back to 1999, including the company's sham reinsurance contract with Gen Re to cover-up company losses.
Stuart Grant, with the law firm Grant & Eisenhofer, will be representing the plaintiffs in the case.
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