Equitable 'wasting money on damages claim'

Ernst & Young has accused executives at Equitable Life of "pouring policyholders' money down the drain" as the two companies prepared for what is expected to be the most expensive battle in British legal history.

Ernst & Young has accused executives at Equitable Life of "pouring policyholders' money down the drain" as the two companies prepared for what is expected to be the most expensive battle in British legal history.

In a bitter outburst, Nick Land, the chairman of the accountant and auditor, said the case, which begins in the High Court today, should never have been brought.

Equitable is suing E&Y for £2.05bn, claiming that its former auditor acted negligently in preparing the troubled insurer's 1999 and 2000 annual accounts.

Last night, Mr Land launched a scathing attack on Equitable's chairman, Vanni Treves, and its chief executive, Charles Thomson, who have been at the forefront of the insurer's bid to secure damages through various legal actions.

"We have heard Equitable's chairman make misguided threats in the media and its chief executive declare that they can afford to lose the trial and £100m of policyholders' money," Mr Land said. "These type of remarks underline their approach to this litigation: nothing more than an irresponsible attempt to offload the blame for the society's past commercial problems."

Equitable's legal team will claim E&Y should have given clearer warnings that litigation over guaranteed pensions in the late Nineties could lead to a serious financial crisis at the insurer, as it subsequently did.

Equitable also claims it could have sold off the business if E&Y had warned its directors about the potential cost of the dispute.

However, Mr Land said: "We believe that by bringing this action, Equitable is pouring its policyholders' money down the drain. Nothing that Ernst & Young did caused Equitable's problems - there is nothing we could have told them that they did not already know; there was no black hole, no fraud and no money lost."

A spokesman for Equitable last night accused Mr Land of indulging "in last-minute macho behaviour".

He said: "The board has been advised by leading counsel that it has a duty to bring this case on behalf of policyholders and we will now do our talking in court."

Earlier this month, Equitable said it would consider any "serious" settlement offer made by E&Y. But although the two sides' lawyers have been in talks in recent weeks, E&Y has so far made no attempt to prevent the case coming to court by offering a substantial out-of-court payment.

In a separate case beginning today, which will be heard alongside the E&Y action, Equitable is also suing 15 of its former directors for up to £1.7bn. Both cases are expected to last until at least the end of the year.