March 16, 2005

Bankrupt Airline Sues Ernst & Young for Accounting Fraud

Ernst & Young defrauded creditors of bankrupt airline Tower Air by helping the airline inflate profits and understate losses, a lawsuit claims. The creditors are seeking more than $380 million in damages. Professor Peter Henning says it is common for investors to sue a company\'s auditors if they believe they were defrauded by too-optimistic financial projections - especially when the company has no money to pay claims. But it is very rare for such cases to go to trial. "Most such cases settle," Henning says.

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