Bain Capital Partners Sues Ernst & Young

Bain Capital Partners is suing Ernst & Young (EY) after losing $60 million following the Big 4 firm’s advice to back Lilliput Kidswear, a children’s clothing company in India.

The lawsuit contends that its 2010 Lilliput investment is now “rendered useless,” the International Business Times reported. Bain and 10 of its subsidiaries have sued EY Global Limited and New York-based EY LLP (FY12 net revenue of $8.2 billion). The investment was made for a 30.9% stake in Lilliput, but the decision was made on the basis of false financial statements that EY had audited and certified.

In reality, Lilliput had deliberately falsified its financial statements to conceal its true poor performance. Court papers say EY continued to certify Lilliput’s financial statements, “even as Lilliput’s fraud grew with EY’s active assistance.”

Courthouse News reported, “After a whistleblower alerted Bain to the fraud, Bain stopped a planned initial public offering of Lilliput’s stock and confirmed that Lilliput’s financial statements were fraudulent.”

EY said in a statement, “These allegations of wrongdoing are baseless and EY will vigorously defend this matter.”

Bain Capital, the Boston-based alternative asset management company, which is not a party to the lawsuit, acquires, manages, monitors and provides investment advice to private equity funds through Bain Capital Partners and other subsidiaries. Bain was founded by former presidential candidate Mitt Romney. Bain refused comment.