Merry-Go-Round talks said in final stages

Settlement reportedly near in trustee's suit against accountants


April 23, 1999|By Scott Shane | Scott Shane,SUN STAFF

Settlement talks continued yesterday between attorneys for Ernst & Young LLP and lawyers representing Deborah Hunt Devan, the bankruptcy trustee for Merry-Go-Round Enterprises, who sued the accounting giant, alleging fraud and incompetence in advising the now-defunct clothing chain.

"The parties have not reached an agreement," said Don Howarth, an Ernst & Young spokesman in New York. "Therefore we do not have anything further to say."

Devan, a Baltimore attorney, said this week that a tentative settlement in the case has been reached. She declined to discuss the size of the settlement, but sources said it is likely to exceed $150 million, ranking it among the biggest cases in Maryland history.

Sources familiar with the talks said the parties are negotiating details of the language of the settlement agreement. They said they expect the case to be settled in a few days.

Ernst & Young, a global accounting and consulting firm, was hired in late 1993 to advise Merry-Go-Round on its failing business. Merry-Go-Round, a Joppa-based chain founded by Harold Goldsmith and Leonard "Boogie" Weinglass, had more than 1,500 stores at its peak but faltered in the face of changing teen fashions.

Merry-Go-Round sought protection from creditors under Chapter 11 of the U.S. bankruptcy code in 1994. After the company closed its doors in 1996, Devan was appointed by the U.S. Bankruptcy Court to oversee liquidation of the company.

Devan sued in December 1997, accusing Ernst & Young of deception in winning the contract as turnaround adviser and of assigning inexperienced employees to the case. The suit seeks $800 million in compensatory damages and $3 billion in punitive damages. Ernst & Young lawyers say losing the case could threaten the firm's future.

Pub Date: 4/23/99

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