EY settled IBRC's Anglo Irish audit suit for a multimillion-euro sum

For years, Anglo Irish Bank chairman Seán FitzPatrick temporarily refinanced tens of millions of euro of personal loans with Irish Nationwide Building Society at the end of Anglo's financial year, moving them off the bank's books before they reappeared — the 'bed-and-breakfast' transactions. Over a nine-year period the refinanced facilities amounted to more than €122 million in 2007 alone. The practice surfaced in 2008 when market turmoil left him unable to refinance 'as had become usual'; he resigned as chairman in December 2008 and was declared bankrupt in 2010.

IBRC, as Anglo was renamed in 2011, sued EY in 2012, claiming more than €50 million in damages over losses it expected to suffer from the bank's former auditor's 'repeated failure' to uncover the transactions. EY — whose Anglo work was worth about €1 million a year — defended its audits, but after a mediation on January 23, 2023 the parties agreed to compromise the proceedings on confidential terms, without admission of liability. The Irish Times established that the settlement ran to a multimillion-euro amount.

FitzPatrick's own criminal case over the transactions never produced a conviction: the retrial collapsed in May 2017 with the judge directing a not guilty verdict, after strong criticism of the investigation, including 'extraordinary' shredding of documents by the corporate-enforcement investigator. Separately, a 2011 preliminary report for the accountants' professional-standards watchdog had found 'prima facie' evidence that EY had a case to answer on major errors in the bank's 2008 accounts.

The year-end loan shuffles were designed to defeat exactly the snapshot an auditor certifies, and EY's audits never caught them.

IBRC claimed the failures would cost it 'well over €50 million' — losses it pinned on the audit.

A preliminary report had already found 'prima facie' evidence EY had a case to answer on the 2008 accounts, yet the civil claim ran another twelve years.

Year-end balances tell an auditor nothing if everyone knows the snapshot is staged — auditing a date instead of a flow invites exactly this.

The 11-year case ended without a court ruling on the audits' adequacy: mediation closed it on confidential terms in January 2023, and the amount was never disclosed. The Chartered Accountants Ireland professional-standards inquiry into EY's pre-crash Anglo work — about €1 million a year in fees — was still continuing.