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Suit against E&Y ruled to be without merit

A three-judge panel in Chicago, USA has ruled that a $2 billion federal lawsuit against Ernst & Young in connection with the failure of a Chicago savings and loan in 2001 is without merit.

The lawsuit, brought by the Federal Deposit Insurance Corporation, accused accounting giant Ernst & Young of fraud and negligence in misstating Superior Bank's assets.

The FDIC sought $2 billion from Ernst & Young for the more than $500 million lost to the agency's insurance fund plus triple damages.

New York-based Ernst & Young, one of the nation's largest accounting firms, blamed Superior's collapse on its board of directors and the slumping economy in 2001.

Superior Bank, based in the Chicago suburb of Oakbrook Terrace, was seized by federal regulators in July 2001. The thrift was the biggest insured U.S. financial institution to fail in nearly a decade, and had lost millions on risky home loans to borrowers with tarnished credit.

The Chicago-based Pritzker family and their equal partner in Superior, New York developer Alvin Dworman, admitted no liability in Superior's failure and no sanctions were imposed on them in an agreement with the FDIC and the Office of Thrift Supervision.

The Pritzkers paid $400 million in December 2002 in return for a guarantee that the government would not sue or fine them in connection with Superior.

The FDIC was reviewing the decision by the 7th Circuit U.S. Court of Appeals, released Thursday, and considering its options, said Will F. Kroener III, counsel for the FDIC.

A spokesman for Ernst & Young said the accounting firm was pleased with the decision.

A lawsuit brought by uninsured depositors is still active. About 1,400 customers had more than $100,000 in the bank when it failed.

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