Southern District of New York
G&E represented a foreign institutional investor as lead plaintiff in a class action arising out of a multi-billion dollar fraud at Parmalat, which the Securities and Exchange Commission described as “one of the largest and most brazen corporate financial frauds in history.” The suit alleged that Parmalat’s accounting firms (Grant Thornton and Deloitte & Touche) engaged in a sham audit that concealed the company’s true financial condition and contributed to the company’s bankruptcy status. Deloitte and Grant Thornton advanced an argument, successful in many other cases, that they had no responsibility for the deficient audit (and resulting securities fraud liability) conducted by their foreign member firms. However, G&E won a ground-breaking ruling rejecting Deloitte and Grant Thornton’s attempt to deny responsibility for the misdeeds of their foreign “affiliates.” The Parmalat decision, the first of its kind, held that global accounting firms, through their U.S. parents, could be vicariously liable for the actions of their foreign member firms. Ultimately, settlements were reached with Parmalat, two investment banks, auditors, and other defendants totaling over $110 million.