Police raided offices of accounting giant Ernst & Young and arrested one of its Hong Kong partners yesterday as part of a fraud investigation linked to a court case over the collapse of electronics firm Akai Holdings.
The partner, Edmund Dang, was arrested at his home on suspicion of forgery.
Police launched their investigation after Ernst & Young was accused in court of falsifying and doctoring scores of documents it presented to defend itself against a claim for negligence by the liquidators for Hong Kong-listed Akai, which went bust in 2000 with debts of US$1.1 billion in the city's biggest corporate collapse.
An officer from the police commercial crime bureau (CCB) said colleagues raided Ernst & Young's offices in Central and Quarry Bay. CCB officers also visited the Admiralty offices of the liquidators, Borrelli Walsh, and their solicitors, Lovells. The officers took from Borrelli Walsh's office nearly 200 boxes of documents connected with the firm's negligence claim against Ernst & Young Hong Kong. From Lovells they removed the originals of Ernst & Young's suspicious Akai audit files, which the solicitors have been keeping under lock and key.
'Our investigation is at an early stage,' the officer said.
Last week Ernst & Young - one of the world's Big Four accounting firms, with over 135,000 employees - paid hundreds of millions of dollars to settle the negligence case.
Lawyers for the liquidators had accused the firm of failing to spot theft on a grand scale by Akai's chairman, James Ting. When the Court of First Instance began hearing the case, the lawyers alleged Ernst & Young staff had tampered with old files from its time as Akai's auditor and falsified documents. The accounting firm had relied on the suspicious documents for its witness statements, court pleadings and expert reports, they told Mr Justice William Stone.