Ernst & Young, the slippery eel in the hands of the law

Business is no place for friends and it doesn’t matter if you’re in Canberra, London, New York or Moscow. Whilst Cathal Lyons as the Managing Partner of Operations and Chief Financial Officer of the Ernst & Young CIS Practice with his office in Moscow, probably knew this maxim, he learned the lesson first hand when he found himself marginalized by the Big4 accounting firm. The E&Y CIS Practice includes various branches of the Big4 accounting firm in Europe, the Middle East, India and Africa (EMEIA), controlled by an English arm of the firm known as Ernst & Young (EMEIA) Services Limited (E&Y EMEIA). As noted in Cathal Lyons’ Witness statement, ‘The E&Y CIS Practices was governed by a Definitive Agreement under English law dated 10 December 2004.’

Cathal’s nightmare began when returning from an out-of-office training day. Whilst riding his motorbike he collided with a car, striking his head and requiring the partial amputation of his right foot and shoulder. When he returned to work, it was ‘… on a very much reduced capacity …’ and has to this day, not been able to return to full-time work due to the ongoing need for pain relief and frequent physiotherapy. Cathal’s prognosis indicates that he will require further surgery to amputate more of the injured shoulder and foot. One can only expect that it will also necessitate more physiotherapy and pain relief.

It’s quite an awful scenario, but one in which Cathal should have been well cared for given that in 2005 he and other partners within Ernst & Young were briefed about a new insurance policy that included Accidental Death and Dismemberment (AD&D Insurance) and Long-Term Disability (LTD Insurance) that included full medical insurance for himself and his family.

Cathal has experienced significant difficulty in realizing the benefits of his insurance policies. At the time when he most relies upon the corporate values of Ernst & Young, values such as integrity, respect and doing the right thing, the Big4 accounting firm has demonstrated its true values of greed, one-upmanship and secrecy. Not the hallmarks you would expect of a company that prides itself on its corporate responsibility.

In early 2009, Cathal was forced to face the reality that he could not work even part time and ‘… needed to pursue … the inadequacy of their AD&D insurance.’ James Mandel, Director, In-House Legal for E&Y CIS (and a former partner of the same group) at the time Cathal negotiated his exit as partner assisted in drafting an agreement under British law that would serve to ensure that his medical costs would continue to be met. Documents were prepared only in English, as both Ernst & Young and Cathal agreed that any disputes would be resolved according to English law. Settlement provisions included ongoing medical insurance:

So long as Mr Lyons is alive, the Practice will take all such steps as are necessary to ensure that Mr Lyons is included as an individual into the CIGNA medical insurance coverage that is now currently available to partners … No change in insurance carrier for Partner medical insurance will be made unless it accepts Mr Lyons and agrees to the same or better coverage now in effect …

The settlement also included terms for an ongoing role as a consultant with Ernst & Young from which he would not be terminated ‘except by agreement with Mr Lyons or as specified in his employment agreement’. Again, documents were all, exclusively, in English. But we all know the law can be a slippery eel, especially where Ernst & Young are concerned.

It all gets sticky when, in May 2010, Cathal was alerted by James Mandel to a questionable payment of €120,000. Mr. Mandel had been asked to assist in the investigation of the large transaction seven months earlier. The payment, it seemed, had been used to bribe a Russian judge in a tax avoidance case involving Ernst & Young. Not convinced regarding the internal transparency of the investigation when it was abruptly closed, Mr. Mandel discussed the issue with Cathal, who was already aware of the investigation being undertaken by Russian authorities. As a result of Mr. Mandel’s concerns, Cathal arranged for the In-House Legal counsel to discuss the payment further with Maz Krupski under the protection of Ernst & young’s ‘ethics hotline’, put in place to protect whistleblowers. The result was that both Cathal and James Mandel wound up in the sights of the Herve Labaude, General Counsel of Ernst & Young (EMEIA) Services Limited based in London, who had closed Mr. Mandel’s investigation prematurely:

To the best of my knowledge, the only two “consultant agreements Mr. Labaude reviewed were those of Mr Lyons and mine and I believe that was in order to take reprisals against us because of our discussion with Mr Krupski … It is unlikely that Mr Labaude could have taken these actions, which clearly violated Ernst & Young’s Anti-Corruption policy, without authorization by Ernst & young (EMEIA) Services Limited.

James Mandell, Witness Statement

In a nutshell, James Mandel dismissed and on 11 August 2011, whilst Cathal was still attending physiotherapy three times per week, his health insurance was cancelled by Ernst & Young. Cathal has been stonewalled by the Big4 firm, unable to access copies of any of the policies that relate to him or his family from the accounting company itself or the insurers, who have referred him back to his former employers.

Regular readers of Blak and Black will be familiar with the transgressions Ernst & Young has wrought against ‘Pat’, the former Commissioner for ACT Revenue, an Indigenous Australian racially vilified at the hands of the Inquisitor and the ACT Department of Treasury, facilitated by the Big4 Accounting firm. This same accounting firm has been complicit in the manipulation of evidence relating to Pat and facilitated the corrupt power which the Inquisitor wields. It professes not to know Tom Payne, yet felt the need to make a public statement denouncing his racist invective on the website Big4.com in December 2011, in which they stated:

“Ernst & Young is a diverse and inclusive organisation. We do not condone discrimination of any kind, be it based on ethnicity, gender or sexual orientation.”

No mention of discrimination based upon physical limitations. It is the same type of corruption evidenced by the threats made upon Bakchos through comments and pingbacks left on the Blak and Black blog and that underpins the attempted intimidation by the KKK attack by the pillow-case wearing thugs (still subject to inquiries) just 3 ½ months ago. Such are the actions of those behind  such corporately responsible institutions, diverse employers, companies that racially vilify the black man, watch silently as the black woman is indecently assaulted and dismiss the double amputee. If that’s corporate responsibility, diversity and honesty, then tell me what constitutes discrimination and corruption?

Ernst & Young it seems pays little more than lip service to its core values, be it in Australia or elsewhere. This company that fails to note the payments made to the Indonesian soldiers progressively killing the Indigenous people of West Papua, turns a blind eye to any of it’s apparent transgressions. With the audacity to preach to others on the UK Bribery Act (2010), Ernst & Young have stated:

Despite stricter bribery laws, more than half of UK executives would not rule out unethical activities to survive a downturn according to Ernst & Young’s 2012 Global Fraud Survey.

Middle managers admit to ignorance over Bribery Act, Yorkshire Post.

One can only assume that the middle managers of Ernst & Young, under the direction of their directors and partners with such a demonstrated disregard for the rights of others and the rule of law, also fail to rule out unethical activities. It makes a farce of the Ernst & Young Hotline, which resulted in both Cathal and James Mandel being screwed over, if you will excuse my less than customary baseness.

Whilst the attack wrought upon the former Commissioner for ACT Revenue was directed from within the Department of ACT Treasury, it was facilitated and continues to be supported by Ernst & Young in their current actions and statements. If Ernst & Young are prepared to sell a middle manger, a director or a partner down the river for political or economic advantage, rather than hold true to their stated values, one must question their plaudits. The Big4 accounting firm would do well to take it’s own advice:

“The survey results should serve as a stark warning to firms that they should ramp up their compliance procedures to ensure that clear anti-bribery policies are in place.”