American Home sues Deloitte for $75 million over audit mistakes

By Caroline Salls

Pittsburgh, June 11 - American Home Mortgage Holdings, Inc.'s official unsecured creditors committee filed a lawsuit Friday against auditor Deloitte & Touche LLP seeking $75 million in damages in connection with Deloitte's alleged failure to audit American Home's balance sheets "with professional care and in accordance with professional standards," according to a filing with the U.S. Bankruptcy Court for the District of Delaware.

The audit in question was conducted for the year ended Dec. 31, 2006.

The committee said Deloitte "was well aware of the debtors' explosive growth and changing loan products, having lived through it during the years it audited the debtors."

However, the creditor group said Deloitte failed to alter or adjust its audit approach or testing procedures, "and the result was disastrous."

As a result of Deloitte's failure to adequately plan, design and implement its audit of American Home's 2006 financial statements, the committee said the statements contained more than $177 million of misstatements.

Relying on Deloitte's "unqualified opinion," the committee said the company declared and paid bonuses and dividends that were substantially in excess of what should have been paid.

American Home, a Melville, N.Y.-based real estate investment trust focused on residential mortgage loans, filed for bankruptcy on Aug. 6, 2007. Its Chapter 11 case number is 07-11047.

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