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. Following last week's out-of-court settlement Dang, the partner arrested yesterday, was suspended by Ernst & Young in connection with the doctored evidence. Ting was convicted of false accounting and imprisoned in 2005, but two years later the Court of Appeal quashed his conviction because of errors by the prosecution, and ordered him released. In their negligence case, the liquidators alleged Ting siphoned off more than US$800 million from Akai, then covered his tracks with fabricated investments and fake bank accounts. Following yesterday's raids, Ernst & Young Hong Kong said: 'As we have stated previously, it is our intention to engage with and support further investigations into the Akai matter. Consistent with that approach, when our offices in Hong Kong were visited today by the police, we lent them every assistance.' The firm declined to comment on Dang's arrest. Dang was released on police bail and has not been charged. Borrelli Walsh launched its negligence case in 2002, but only received the originals of Ernst & Young's Akai files the weekend before the court began hearing the case. On his first day in court Leslie Kosmin QC, for the liquidators, said they had found more than 80 falsified or doctored documents. On the second day, Kosmin said they had found many more. White correcting fluid had been applied to some files, then written over by hand, the barrister said. A batch of electronic files relating to Akai audits between 1994 and 1998 had all been modified on a single day in January 2000, he told the court. Other documents appeared to be outright fabrications, he said. Dang's handwriting was on some of the suspect files, he claimed. Dang was a mid-ranking audit manager on Akai's account from December 1997. Kosmin said the suspicious documents ran back to 1994. 'This is not the case of Mr Dang. This is the case of Ernst &Young, because people don't volunteer to tidy up things from four years before they became employed,' he said. David Sun Tak-kei, now Ernst & Young's co-managing partner for the region, was the independent partner in charge of the Akai account from 1991-99. Francis Wong, now Ernst & Young's head of audit for China, was a senior member of the audit team.