14 Feb 2012

Feltex liquidator takes action against Ernst and Young

10:10 am on 14 February 2012

The liquidator of failed carpet maker Feltex has launched court action against accountancy firm Ernst & Young.

Feltex - a publicly-listed company - collapsed in late 2006, wiping out shareholder investments of $250 million.

Liquidator McDonald Vague says the court action relates to an incorrect half-year financial statement of 30 December 2005 prepared by Ernst & Young.

McDonald Vague holds that the financial statement significantly impacted on a claim the liquidator had filed against Feltex's former directors.

The liquidator announced in May last year it had made a final confidential settlement of the claim against the five directors.

Several months afterwards, in early December, the liquidator issued proceedings against Ernst & Young.

The liquidator says the accountancy firm has failed to engage in any dialogue towards a resolution.

Ernst & Young says the claims are baseless and will be vigourously defended. It says the accounts in question did not involve an audit.

It says a Securities Commission report into the failure of Feltex concluded that the financial reporting had not impacted in the demise of the company.

McDonald Vague says it is expecting a response from Ernst & Young by the middle of this week.