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TheStreet Open House

Cuomo Sues Ernst & Young Over Lehman

NEW YORK ( TheStreet) -- Andrew Cuomo, the New York State Attorney General who will move into the Governor's mansion at the start of the year, has sued Lehman Brothers' auditor Ernst & Young.

The lawsuit, which was leaked to the media Monday, charges Ernst & Young with helping Lehman "engage in an accounting fraud involving the surreptitious removal of tens of billions of dollars of fixed income securities from Lehman's balance sheet in order to deceive the public about Lehman's true liquidity condition," according to a press release from Cuomo's office Tuesday.

A call to an Ernst & Young spokesman was not immediately returned.

The controversial practice alluded to, known as Repo 105, was exposed to the public in a report published in March by Anton Valukas, Lehman's bankruptcy examiner and chairman of the law firm Jenner & Block. Experts have differed over whether the practice is illegal.

The suit caps an active three-year stint for Cuomo as attorney general. The son of former New York Governor Mario Cuomo and former husband of Kerry Kennedy followed the lead of his predecessor Eliot Spitzer, proving more aggressive in many ways than federal regulators in bringing big cases against Wall Street.

Cuomo investigated Wall Street's sale of investments known as auction rate securities, which were marketed to investors as safe but dropped sharply in value during the crisis. Eleven companies, including UBS (UBS), Goldman Sachs (GS), Bank of America (BAC), JPMorgan Chase (JPM), Morgan Stanley (MS), Deutsche Bank (DB) and Citigroup (C) eventually settled with Cuomo's office, agreeing to various fines and penalties.

Cuomo also targeted big banks over foreclosures and won settlements with several student lenders, including Wells Fargo (WFC), who he accused of deceptive marketing practices.

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