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Ernst & Young comes out fighting

Ernst & Young yesterday sought to forestall a £2.6bn legal battle with Equitable Life that could bankrupt the accountancy firm.

Equitable's new board is suing the insurer's former auditor for alleged professional negligence, claiming Ernst & Young failed to provide a full and fair view of the insurer's accounts.

Ernst & Young has applied to the high court to strike out the claim in a hearing due to start on Monday.

“We are going to fight this, we are going to fight it all the way and we are not going to settle,” said Rob Holman, head of the insurance practice.

“One of the reasons for the strike-out application is to help the Equitable policyholders understand how difficult it will be for the current board to prove their case.”

Among Equitable's allegations is that the former directors would have tried to sell the business, and received several billion pounds for it, had Ernst & Young given more information about the troublesome guaranteed annuity rates.

Ernst & Young claims directors were fully aware of the annuity issue, and there was no evidence Equitable could have been sold for several billion pounds. Halifax bought the assets for about £1bn in 2001.

The hearing is due to last about a week.

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