by Brian Mahany
Eleven months ago, we reported on Frederick Berg and the reportedly largest Ponzi scheme in Seattle’s history. Berg was indicted at the close of 2010 after federal prosecutors say he bilked hundreds of investors out of $130 million. Much of that money was frittered away on Berg’s lavish lifestyle – the Seattle Times ran a Facebook picture of Berg standing next to a Seattle’s Best Coffee poster that said, “I’m hot and I’m rich.”
Back then we pondered how much trouble accounting giant Moss Adams might be in over the Ponzi scheme. Moss Adams was the auditing firm that reviewed Berg’s books and gave his investment fund a clean bill of health. Now the court appointed trustee overseeing the liquidation of the funds assets has sued Moss Adams for fraud, professional malpractice and negligent supervision.
The trustee believes many investors gave their hard earned money to Berg in reliance on Moss Adams – Berg frequently touted his audited financials to potential investors. Unlike the Madoff funds which were audited by a fly-by-night accountant; Moss Adams is one of the largest accounting firms in the nation. Their word carries a lot of weight.
The trustee says that Moss Adams missed several red flags and was sloppy in audit. Trustee Mark Calvert says “instead of uncovering the fraud, Moss Adams, issued year after year, false, unqualified and unjustifiable “clean” audit reports which [they] knew Berg would use to solicit additional investments…”
If the trustee wins, Moss Adams may be responsible for almost all the victim’s losses. According to the trustee, without the accounting firm on the hook, Berg’s victims may only get 10 cents on the dollar.
Accounting firms, financial planners, investment advisers and stockbrokers are often the only “deep pockets” left after a Ponzi scheme case. The fraudsters themselves usually wind up in broke and in prison. (Berg signed a plea agreement calling for a 9 year prison sentence.) Luckily for victims, the accountants and brokers can often be held responsible for the losses even if they did not directly steal from the victims.
Most investment fraud cases do not involve a court receiver. In those cases, victims must pursue not only the fraudster but those that facilitated the fraud as well. Investment fraud and Ponzi schemes are one area in which you really need professional legal assistance. Luckily, these cases can often be handled on a contingent fee basis meaning no legal bills unless the lawyer wins.
The fraud and asset recovery lawyers at Mahany & Ertl have helped many people recover their money from fraudsters. We are proud to currently be co-counsel with the U.S. government in the largest false claims mortgage fraud case in the United States – a case involving over $800 million in bad mortgages.
For a no obligation, confidential review of your case, contact attorney Brian Mahany at (414) 704-6731 (direct) or by email at
Mahany & Ertl – America’s Fraud Lawyers Offices in Milwaukee, Wisconsin; Detroit, Michigan & Portland, Maine. Services in most cities.