A Bermuda domiciled hedge fund is at the centre of a lawsuit brought by a group of US investors against Ernst & Young (E&Y), accusing the audit firm of fraud, negligent misrepresentation, securities fraud and conspiracy, according to a report in Hedge Funds Review.

The publication reported that the five investors filed the action in Houston, Texas against Parkcentral Global, claiming to have lost more than $17 million following the collapse of the fund, which was managed by the family trust of former US presidential candidate and Bermuda resident Ross Perot.

In April, The Royal Gazette ran a report by Bloomberg detailing a lawsuit brought by Southern Avenue Partners LP against the Perot Family Trust and related entities, alleging that the Parkcentral Global Hub Ltd. lost more than $3 billion while falsely claiming it was hedged against such losses.

Southern Avenue Partners said in its complaint at the time that the defendants misrepresented the risk of the fund to attract investors and collect more than $305 million in fees.

Parkcentral Global was closed in November 2008 after its assets fell from $2.6 billion to almost zero, according to media reports. One report said the fund invested in a range of securities including mortgage-backed securities, currencies and interest swaps.

JP Morgan, the fund's prime broker, is also believed to have filed a lawsuit against the fund in the New York Sate Supreme Court, alleging it is owed more than $700 million.

Houston lawyer Demetrios Anaipakos of Ahmad, Zavitsanos & Anaipakos, representing the plaintiffs, said: "Our clients were told that an investment in Parkcentral was designed to preserve capital. Instead, they lost every penny in record time. E&Y was supposed to be auditing Parkcentral, but the audited financial statements never once warned Parkcentral's investors of their impending doom."

The lawsuit claims that E&Y falsely represented it had fairly audited Parkcentral Global and that the auditor failed in its 'watchdog' role to warn investors of the risk of fraud and non-compliance by management. Earlier this month, Brown Investment Management, one of the investors, won a ruling in the Delaware Supreme Court requiring Parkcentral Global to disclose its former investors. Those investors could be added to the new Houston lawsuit.

A separate class action case has also been filed against Parkcentral Global in the Northern District of Texas US District Court.

Parkcentral Global, which was launched in 2001 with a Delaware feeder fund, was run by Parkcentral Capital Management.

E&Y declined to comment on the case.