What to Do When Your Accountant Steals
An Oregon CPA pleaded guilty to charges that he conspired to commit wire fraud and money laundering. Brian Stevens of Bend, Oregon entered the guilty at his arraignment. According to the government’s complaint, Stevens misused $44 million of his client’s money. When his business collapsed, 91 customers lost $13.7 million.
In May 2012, Stevens was sentenced to 48 months in a federal prison.
At sentencing, several victims presented letters to the court while two testified. One victim described how she and her husband worked for years to improve their small cattle ranch so they could sell it and buy their dream ranch; how they entrusted Summit with the proceeds of the sale, all of which were lost when Summit declared bankruptcy; and how they have never been able to recover financially.
Another victim described how he and his business partner had entrusted Summit with the proceeds from the sale of their business headquarters, and how the loss of those funds stopped their plans to expand this local small business.
A second CPA, Mark Neuman, was also been charged and later convicted by a jury. In 2013 he began serving a 78 month sentence. After the sentencings, Portland, Oregon’s United States Attorney released a statement saying,
“Attorneys, certified public accountants, and business executives who, motivated by greed, lie to clients to gain use of their money for personal purposes are especially deserving of prosecution and punishment. This office and our federal and state partners will do whatever it takes to bring dishonest professionals to justice. Besides seeking tough sentences for white-collar fraudsters, we will continue to go after their ill-begotten assets to compensate victims of these schemes.”
Stevens created a company called Summit Accommodators (also known as Summit 1031). Summit acted as a qualified intermediary meaning it assisted customers in tax deferral transactions commonly called “like-kind exchanges” or “1031 exchanges.” The term 1031 refers to a section of the Internal Revenue Code that permits owners of income producing property to defer tax otherwise due on the sale of the property by using the proceeds to purchase a replacement investment property.
Instead of holding the customers money in a bank like advertised to clients, Stevens used the money to fund personal real estate investments. When the real estate market began to collapse, so did Steven’s scheme.
According to the U.S. Attorney, Stevens was so skilled at hiding the paper trail that many employees of his company did not even know the monies were not properly deposited.
During its prime, Summit had branch offices in Texas, Washington, Oregon, Utah, Montana, Wyoming and Nevada. The scheme ultimately collapsed on December 19th, 2008 when Summit was forced into bankruptcy.
What Should I Do if My Accountant Steals from Me?
Licensed financial professionals such as accountants rarely commit such blatant fraud. Lawyers, CPA’s, insurance agents, financial planners and stockbrokers do make mistakes however. Sometimes intentional ones. Whereas pure theft is rare, instances of negligence and sloppy work are unfortunately common however.
Although most CPAs are insured, malpractice insurance almost never covers criminal behavior. It is one thing if your accountant gives you bad tax advice but something quite different if he or she steal. Unfortunately, theft isn’t covered by malpractice.
Whether or not there is insurance available, you can still sue. Assuming the lawsuit is successful, whatever assets he or she has can be seized and sold. Depending on what state you are in, some property is exempt from sale even in fraud cases.
The bankruptcy code probably won’t help the accountant since fraud claims are not normally dischargeable.
Another remedy is to report the accountant to the state licensing board. Tax preparers generally aren’t regulated much (if at all) but CPAs are. The state licensing agency can take the accountants license to ensure that no one else is victimized.
Finally, get the police involved. Although restitution is not the first priority of prosecutors and police, often criminals will pay up before sentencing in the hopes of getting a lighter sentence. Plus professionals that steal should account for their crimes. Simply because someone wears a suit doesn’t mean they can’t be held accountable.