The Securities and Exchange Commission said Thursday that it filed suit against Ernst & Young, one of the nation's top accounting firms, saying it helped two clients file false and misleading financial reports.
The SEC accused the accountants of not acting as independently as auditors should because of certain loans, real estate partnerships and other financial arrangements between the clients and some partners in the accounting firm.
Ernst & Young is charged in the suit with helping RepublicBank Corp. and its successor, First RepublicBank Corp., file false and misleading annual financial reports from 1983 to 1988 and a 1987 proxy statement.
In questioning the accounting firm's independence, the SEC said there were, among other things, loans of more than $5 million from RepublicBank to certain partners of what was, before a 1989 merger, Arthur Young & Co.
There also were loans of at least $15.8 million to tax shelter and real estate partnerships involving some of the firm's partners, the SEC said.
Ernst & Young issued a statement answering the SEC charges. The loans cited by the SEC complied with all regulatory and professional requirements, it said.
The lawsuit was filed in a federal court in the District of Columbia, naming both Ernst & Young and its predecessor, Arthur Young.
The SEC asked the court for a permanent injunction against further violations of its regulations by Ernst & Young.