The sensitive nature of the work performed by accounting professionals often leaves them exposed to the threat of malpractice claims, particularly in a difficult economic climate. The MMP&S team is technically proficient and highly experienced at handling claims against accounting professionals in any venue where a defense is needed, whether in State Court, Federal Court, Surrogate’s Court or Bankruptcy Court.
The rise of lawsuits and corporate investigations has been accompanied by a concomitant increase in the number of situations where accountants are served with non-party and investigative subpoenas seeking the production of client tax records and/or demanding testimony from the accounting professional. These matters can range from a generic demand for a client’s tax records by parties to a State Court matrimonial dispute to demands for Grand Jury testimony in federal investigations by the United States Attorney’s Office, Internal Revenue Service, or the United States Department of Labor to criminal investigations by local law enforcement.
Bringing our expertise to bear in these diverse situations, we provide assistance and sound guidance to the accounting professional by: identifying potential restrictions on the disclosure of sensitive client tax information; interfacing with the various attorneys and investigative agencies seeking information from the accountant; and personally accompanying our accountant clients to investigative meetings, depositions and Grand Jury appearances to zealously represent and protect the accounting professional’s interests. Our involvement in these subpoena-related matters not only assists the accounting professional in properly addressing the information demands at hand, but it also affords our attorneys the valuable opportunity to promptly identify potential issues that may impact the accounting professional beyond the subpoena response and potentially protect the accountant from direct claims by the parties.
Our accountants’ liability attorneys have successfully represented accountants and accounting firms in claims involving:
- The failure to detect internal fraud and theft
- R.C. Section 7216 requirements and responsibilities when complying with subpoenas
- Inaccurate presentation of financial information
- Errors in tax preparation resulting in additional taxes, interest and penalties to the tax client
- Failure to comply with GAAP or other general standards of care pursuant to GAAS, SAS and other AICPA audit guidelines
- The personal responsibility of accountants for inaccurate audits
- The failure to accurately assess scope of attestation services
- The failure to accurately and properly engage or disengage in writing
- The failure to properly detect, analyze and interpret potential conflicts of interest
- Complaints before the New York State Office of Professional Discipline and Licensing Department, AICPA, and state accounting boards
- Failure to file FBARs and streamlined filing compliance procedures
- Defending claims of deepening insolvency
- Defending errors made in connection with pandemic loans
- Defending ethics complaints/violations before the New York State Society of CPAs, AICPA, and Office of Professional Discipline
- Defending against errors or omissions with respect to certain tax preparation engagements
- Defending against errors or omissions with to special elections or credits for certain income tax filings
- Disputes involving preparation of financial statements
- Defending against claims for breach of fiduciary duty and aiding and abetting a breach of fiduciary duty
- Defending against claims of conflict of interest
MMP&S Secures Voluntary Discontinuance in Complex Accounting Malpractice Action - 2019
In Knet, Inc. v. Ruocco, et al, MMP&S successfully persuaded a plaintiff to voluntarily discontinue with prejudice a complex accounting malpractice action against our client, an accounting firm that had participated and its central partner had invested in a business, which developed technology to prevent DWI’s from occurring by stopping an engine when alcohol was on a past-offender’s breath. Plaintiff had alleged accounting malpractice in the division of shares of stock, accounting, and underlying record and bookkeeping. However, with minimal discovery and prior to depositions, motion practice or trial, MMP&S persuaded plaintiffs to voluntarily discontinue the action as against the accounting firm in exchange for fully complying with all paper discovery, thereby obviating expensive and extensive motion practice.
MMP&S Obtains Court-Ordered Dismissal in Accounting Malpractice Action - 2019
In Sternklar v. Davis Realty, et al, MMP&S successfully effectuated the Court-ordered dismissal with prejudice of a U.S. District Court, Southern District of New York action against an accounting firm that involved professional malpractice, Civil RICO, fraud and breach of fiduciary duty claims. MMP&S successfully implemented its resolution management plan by leveraging a proposed pre-answer dismissal motion and the accounting firm’s providing information for a related pending Supreme Court, New York County matrimonial action to effectuate the resolution of the U.S. District Court, Southern District of New York action in favor of the accounting firm.
MMP&S Wins Second Motion to Dismiss in Accounting Malpractice Case - 2019
In Black, et al. v. Dain, et al., MMP&S successfully opposed plaintiffs’ motion to reconsider a judge’s Order, granting MMP&S’ motion to dismiss all claims against our client, an accountant. In short, plaintiffs alleged that our client, a Colorado-based forensic accountant, was involved in an alleged “scheme” to defund and misappropriate trust assets. Plaintiffs argued that, contrary to the Court’s Order, the accountant’s contacts with the State of New York were sufficient enough to subject her to litigation in the United States District Court for the Eastern District of New York. The Court agreed with MMP&S’ opposition that plaintiffs had failed to cite controlling authority that would justify reconsideration of Judge Amon’s Order and, in any event, plaintiffs had (again) failed to demonstrate that the Eastern District of New York had jurisdiction over our client under New York’s “long-arm” statute.
MMP&S Obtains Pre-Answer Dismissal in Accounting Malpractice Case Seeking Nearly $1 Million in Damages - 2019
In Leichter v. Max Kolbrenner et al, MMP&S successfully obtained a pre-answer dismissal of all claims brought by a plaintiff against our client, an accounting firm in an accounting malpractice matter that sought nearly $1 million in damages. The complaint set forth allegations against the accounting firm for tax fraud, accounting malpractice, breach of fiduciary duty and negligence, related to the filing and preparation of joint income tax returns for plaintiff and her ex-husband. The plaintiff alleged that the accountant had improperly failed to disclose her ex-husband’s income from his various business interests on their joint tax return, for a period spanning over ten years. MMP&S made its initial motion to dismiss on the grounds that proper service had not been perfected on the accounting firm, and that the complaint failed to state a cause of action upon which relief could be granted. MMP&S utilized the documentary evidence the plaintiff attached to the complaint, including the tax returns and Schedule-Cs indicating that all of the ex-husband’s business interests and income were properly claimed on the returns. Additionally, MMP&S successfully argued that the entire action was time-barred based upon the three-year statute of limitations for claims grounded in accounting malpractice. The Court granted the motion and dismissed plaintiff’s complaint. The plaintiff then moved to set aside the dismissal arguing that service on the accountant was proper, and the action was timely. MMP&S successfully opposed plaintiff’s second motion, and the Court upheld its dismissal of plaintiff’s complaint and denied plaintiffâ€™s motion to set aside the Court’s initial decision.
MMP&S Obtains Discontinuance of Complex Accounting Malpractice Action - 2019
In Argyle Funds SPC, Inc. v. BDO Cayman, Ltd, MMP&S successfully persuaded a large international hedge fund plaintiff to discontinue with prejudice a $40 million complex accounting malpractice action against our client, an accounting firm that participated in a multi-national affiliation program that involved litigation in Supreme Court, Nassau County and mandatory arbitration in the Cayman Islands construed under Cayman Islands law. MMP&S successfully endeavored to narrow the claim issues as against our client by producing dispositive supporting documentation to the plaintiff, and, as a result, ultimately convinced the plaintiff to discontinue the action as against the accounting firm only, thereby obviating expensive and extensive litigation both in Supreme Court, Nassau County and in the Cayman Islands.