A federal appeals court has ruled that Ernst & Young LLP must face a lawsuit over its role in stock options backdating at Irvine chipmaker Broadcom Corp.
The move by the 9th U.S. Circuit Court of Appeals reversed a lower court ruling dismissing the suit, according to a Reuters report.
The lawsuit alleges Ernst knew of or disregarded misdated options in signing off on Broadcom’s financial statements as its outside auditor.
In early 2007, Broadcom restated several years of financial results to reflect $2.2 billion in charges for misdated stock options.
The restatement bill was the largest of any company involved in the stock options issue.
Ernst no longer serves as Broadcom’s outside auditor, a role now handled by KPMG LLP.
Ernst is being sued by the New Mexico State Investment Council, a Broadcom investor that runs funds for the state.
Broadcom has settled a Securities and Exchange Commission lawsuit over options and seen criminal charges against its founders and former executives dropped.
The company is in the process of settling a shareholder lawsuit over stock options.
